In­dia con­sid­ers re­mov­ing Cyprus from black­list

Financial Mirror (Cyprus) - - FRONT PAGE -

In­dia is con­sid­er­ing re­mov­ing Cyprus from the black­list of coun­tries that do not share de­tails about tax evaders after ex­am­in­ing in­for­ma­tion given the is­land na­tion, re­ports from New Delhi have sug­gested.

In­dia had black­listed Cyprus in­for­ma­tion about tax evaders.

“They (Cyprus) have given some in­for­ma­tion. We are just ex­am­in­ing whether in­for­ma­tion given by them is sub­stan­tive ... if we are sat­is­fied that the in­for­ma­tion pro­vided is sub­stan­tive, then mat­ter (of re­mov­ing Cyprus from In­dian gov­ern­ment’s black­list) will be looked at,” a top of­fi­cial said in New Delhi.

The In­dian Fi­nance Min­istry had clas­si­fied Cyprus as a no­ti­fied ju­ris­dic­tional area on grounds that it was not pro­vid­ing in­for­ma­tion re­quested by tax au­thor­i­ties un­der the tax­a­tion





shar­ing treaty. Fol­low­ing the no­ti­fi­ca­tion, all pay­ments made to Cyprus at­tracted a 30% with­hold­ing tax and In­dian en­ti­ties re­ceiv­ing money from there were re­quired to dis­close the source of funds.

The no­ti­fi­ca­tion also meant that “no de­duc­tion in re­spect of any other ex­pen­di­ture or al­lowance aris­ing from the trans­ac­tion with a per­son lo­cated in Cyprus shall be al­lowed un­less the as­sessee main­tains and fur­nishes the pre­scribed in­for­ma­tion”.

It had also added that 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”.

In­dia and Cyprus had





for avoid­ance of dou­ble tax­a­tion of in­come and preven­tion of fis­cal eva­sion in De­cem­ber 1994. Un­der the agree­ment, both coun­tries have a le­gal obli­ga­tion to ex­change such in­for­ma­tion.

In the 2011-2012 Bud­get, the In­dian Fi­nance Min­istry had in­serted a clause - Sec­tion 94A - in the In­come Tax Act to no­tify and guard against coun­tries that do not co­op­er­ate in the ex­change of in­for­ma­tion pro­to­col.

The In­dian Cen­tral Board of Di­rect Taxes (CBDT) in June last year had no­ti­fied rules un­der which an en­tity based in a “no­ti­fied ju­ris­dic­tional area” will have to give an un­der­tak­ing to share in­for­ma­tion in a pre­scribed for­mat as part of le­gal agree­ments such as the Dou­ble Tax­a­tion Avoid­ance Agree­ment (DTAA) and Tax In­for­ma­tion Ex­change Agree­ment (TIEA) with other coun­tries.

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