Cyprus blacklisted for not sharing tax info

The Centre has blacklisted Cyprus for not sharing information about tax evaders. This would make it difficult for Indian residents to do business with the tax haven. Also, they might not get many tax benefits provided otherwise to Indian businessmen.

India and Cyprus had signed a pact to prevent double taxation and fiscal evasion in 1994. Under the agreement, both countries have a legal obligation to exchange such information.

“Since Cyprus has not been providing the information sought by the Indian tax authorities agreement, it has been decided to declare Cyprus a ‘Notified Jurisdictional Area’ under Section 94A of the Income Tax Act,” the  ministry said.

India introduced this section, which allows the government to so categorise a  country to check tax avoidance.

“All parties to the transaction with a person in Cyprus shall be treated as associated enterprises and the transaction shall be treated as an international transaction resulting in application of transfer-pricing regulations, including maintenance of documentations,” the ministry said.

Any payment made to a person in Cyprus shall be liable for withholding tax at 30 per cent or a rate prescribed in the Act, whichever is higher. If any sum is received from a person located in Cyprus, then the onus is on the assessee to satisfactorily explain the source of such money in the hands of such person or in the hands of the beneficial owner, and in case of his failure to do so, the amount shall be deemed to be the income of the assessee.

No deduction in respect of any payment made to any financial institution in Cyprus would be allowed unless the assessee furnishes an authorisation, allowing for seeking relevant information from the said financial institution.

No deduction in respect of any other expenditure or allowance arising from the transaction with a person located in Cyprus would be allowed unless the assessee maintains and furnishes the prescribed information.