Cyprus set to ink new tax treaty with India

India and Cyprus are poised to sign a new tax treaty which, like in the case of a similar pact with Mauritius, will shut the doors on investors using loopholes in the bilateral agreement to avoid paying taxes in India. The new agreement will enable Indian authorities to tax capital gains on investments routed through Cyprus; it will also lead to the removal of the Mediterranean island nation from an Indian government blacklist on which it was placed for not providing financial information sought by India. The renegotiated tax treaties are part of an effort by the National Democratic Alliance (NDA) government to curb treaty abuse, tax evasion and round-tripping of funds—the practice of money stashed overseas by Indians returning home through countries such as Mauritius in the garb of foreign capital. India will get the right to tax capital gains from sale of shares on investments made by Cyprus-based companies after 1 April 2017. But this will be effective prospectively. Consequently, all investments made earlier have been protected, similar to the provision made in the India-Mauritius treaty. “On June 29th, 2016, the negotiation on the Double Taxation Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income between Cyprus and India has been successfully completed, in New Delhi. The completion of the negotiation and the agreement reached on all pending issues will pave the way for the removal of Cyprus from the list of notified jurisdictional areas place in November 2013,” said a statement put up on the Cypriot finance ministry’s website late on Thursday.