The revised double tax avoidance agreement between India and Cyprus will take effect from April 1, 2017, India’s Central Board of Direct Taxes has announced.
According to the CBDT, both countries have now exchanged notifications informing the other of the completion of their respective ratification procedures for the revised agreement to take effect.
The revised text, which was signed on November 18, 2016, provides for source-based taxation of capital gains arising from the alienation of shares. A grandfathering clause has been provided for investments made prior to April 1, 2017, in respect of which capital gains would continue to be taxed in the residence country.
The revised treaty also provides for a reduction in withholding tax rates from 15 per cent to 10 per cent on royalties, and expands the definition of “permanent establishment.” The Article on the exchange of information is updated in line with the latest international standards and a new article to facilitate the collection of taxes has been introduced.
The CBDT also announced that India has removed Cyprus from its list of non-cooperative foreign tax jurisdictions following the revision of their tax treaty. In 2013, India placed Cyprus on its list of notified jurisdictional areas for the purpose of Section 94A of the Income Tax Act, complaining that the territory had failed to exchange tax information.
Source: tax-news.com