Cyprus successfully concluded another pending issue, namely the new Cyprus – India Double Taxation Avoidance agreement.
According to an official source “An official level meeting between India and Cyprus took place in New Delhi on June 28 and 29, 2016, to finalize the new India Cyprus Double Taxation Avoidance Agreement, wherein all pending issues, including taxation of capital gains, were discussed, and in-principle agreement was reached on all pending issues,”.
The development is another welcome step for the business community as following the entry into force of the amending agreement, Cyprus will be retrospectively removed from the list of the Indian Notified Jurisdictional areas, the so called “Indian black list”, on which it has been placed as of November 2013.
Although full details of the amended agreement have not been communicated yet, under the new agreement, both countries agreed to source-based taxation of capital gains. However, similar to the provision made in the India – Mauritius treaty, there will be a grandfathering clause wherein capital gains on investments made prior to April 1, 2017 will be taxed in the country of which the taxpayer is a resident. The statement didn’t say whether investors would be offered a transitional period like the one provided by the India – Mauritius treaty, under which only half the capital gains tax rate will be applicable between 2017 and 2019.