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Cabinet revises DTAA between India-Cyprus
Aug-25-2016

Indian government has approved a revised double tax avoidance agreement (DTAA) between India and Cyprus for the prevention of fiscal evasion with respect to Taxes on Income. India and Cyprus have a DTAA since 1994. The revised agreement is expected to contribute to further develop the trade and economic links between Cyprus and India and also with other countries.

The new Cyprus DTAA, which has been agreed upon by both the countries which would provide for source-based taxation of capital gains on transfer of shares. However, a grandfathering clause would be provided for investments made prior to April 1, 2017, in respect of which capital gains would be taxed in the country of which taxpayer is a resident. An official-level meeting between India and Cyprus was held in June to finalise the new India-Cyprus DTAA wherein all pending issues, including taxation of capital gains, were discussed and an in-principle agreement was reached on all pending issues.

Upgrading and expanding the network of Double Tax Conventions, is of high economic and political importance and aims to further strengthen and attract foreign investment in Cyprus as its standing an international business centre is elevated. These steps will bring certainty for FDI investors. Cyprus is a major source of foreign funds flows into the country. From April 2000 till March 2016, India received foreign direct investment to the tune of Rs 42,680.76 crore from Cyprus. The completion of negotiation on avoidance of double taxation and prevention of fiscal evasion has paved the way for removal of Cyprus from the list of 'Notified Jurisdictional Areas' retrospectively from November 2013. 

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