Centre issues notification for revised double taxation avoidance agreement between India, Cyprus

A revised agreement between India and Cyprus for the avoidance of double taxation and the prevention of fiscal evasion (DTAA) with respect to taxes on income, along with its protocol, was signed last month in Nicosia, which will replace the existing DTAA that was signed by the two countries on June 13, 1994.

The November 18, 2016 protocol was signed by Ravi Bangar, High Commissioner of India to Cyprus on behalf of India and Harris Georgiades, the Minister of Finance on behalf of Cyprus.

Both sides have now exchanged notifications intimating the completion of their respective internal procedures for the entry into force of the DTAA, with which the revised DTAA shall come into effect in India in the fiscal years beginning on or after April 1, 2017.

The revised DTAA will enable source based taxation of capital gains on shares, except in respect of investments made prior to April 1, 2017. In addition, the DTAA will also bring into effect updated provisions as per international standards and in accordance with the consistent position of India.

In a separate development, the notification of Cyprus under section 94A of the Income Tax Act, 1961, as a notified jurisdictional area for lack of effective exchange of information, has been rescinded with effect from 1.11.2013 [Notification No. 114/2016 dated 14.12.2016]. The bilateral economic ties between the two countries are expected to be further strengthened by these measures.