Cyprus gets 3 more tax treaties as of January 1
taxable in the country of investment (except gains relating to immovable property and gains from the alienation of movable property of a permanent establishment). In particular, any gains arising from the sale of shares will only be taxed in the country of residence of the seller of the shares. providing information requested by tax authorities under the taxation 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.
India and Cyprus had entered into an agreement 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 early December, Ukraine’s Prime Minister Arseniy Yatseniuk said that his country was losing about $300 mln a year to tax-free investments in Cyprus, an argument he used to justify the abolition of the present double-taxation avoidance treaty. This followed Russia’s President Vladimir Putin’s introduction of a bill that aims to repatriate Russian-owned investments on the island as of January 1, 2015, within the context of the “deoffshorisation” plan. Ukraine’s Yatseniuk has had his sights on Cyprus for quite some time, alleging that cronies and relatives of ousted President Viktor Yanukovych, as well as pro-Russia oligarchs had set up companies on the island used for capital flight.
Yatseniuk said that when this convention was signed in 2012, it was meant to protect the wealthiest part of the population, since it included a 0% tax rate on the sale of property.
“Since the property was sold via offshore companies, tax was paid neither in Ukraine, nor in Cyprus. That’s why the government is addressing parliament to back the denunciation of this document,” he said.
However, toning down his rhetoric, Yatseniuk said that the Ukrainian government wants to renegotiate a new treaty with Cyprus, something which government officials in Nicosia have confirmed. The government in Kiev said it will immediately start negotiations with Cyprus on a new treaty that will comply with the standards of the OECD, a benchmark already used by Cyprus for other treaties.