In a big relief to investors and Indian companies, the Central Board of Direct Taxes (CBDT) yesterday clarified that, it has removed Cyprus from the list of ‘notified jurisdictional area’ with retrospective effect from November 1, 2013.
“For removal of doubts, it is hereby clarified that Notification No. g6/2013 has been rescinded with effect from the date of issue of the said notification, thereby, removing Cyprus as a notified jurisdictional area with retrospective effect from 01.11.2013”, the Circular stated.
The CBDT had classified the island nation as a notified jurisdictional area (NJA) by way of Notification 86/2013 on grounds that Cyprus was not providing information requested by tax authorities under the taxation treaty.
Following the notification, all payments made to Cyprus attracted a 30 per cent withholding tax and Indian entities receiving money from there were required to disclose the source of funds.
The said Notification No. 86/2013 was subsequently rescinded vide Notification No. 114 dated 14.12.2016 and Notification No. 119 dated 16.12.2016 with effect from the date of issue of the notification.
In some cases a view has been taken by the Income-tax authorities that the rescission of Notification No. 86/2013 was not with retrospective effect from November 1, 2013, the CBDT circular also stated.
Recently Finance Ministry has notified 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. The revised DTAA will enable source based taxation of capital gains on shares, except in respect of investments made prior to 1st April, 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.
Read the full text of the Circular below.