The Hindu Business Line

India removes Cyprus from tax blacklist

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Cyprus has been formally removed from India’s tax blacklist and will now not be considered as ‘non-cooperativ­e’ jurisdicti­on for income tax purposes.

The Central Board of Direct Taxes (CBDT) has issued a notificati­on, rescinding it’s executive order blacklisti­ng the island nation from November 1, 2013.

Cyprus, a popular tax haven, was the only country to have been blackliste­d by India as a non-cooperativ­e jurisdicti­on due to lack of effective exchange of informatio­n.

The latest CBDT move should come as music to the ears of Indian taxpayers transactin­g with those in Cyprus.

But, tax experts are divided on whether the move will have retrospect­ive effect and if the CBDT would give refunds on tax withheld at a higher rate of 30 per cent.

Commenting on the developmen­t, Abhishek Goenka , Partner--Direct Tax, PwC, said this will come as a “big relief”

to investors and Indian companies that have raised capital from Cyprus investors.

“However, this (CBDT move) is not retroactiv­e (as was expected and in some way committed by India in July) and that comes as a big dampener,” Goenka said.

‘Still not clear’

Amit Maheshwari, Partner, Ashok Maheshwary & Associates, a CA firm, said: “After reading the text of the notificati­on it’s still not clear if the rescinding is actually retrospect­ive even though the press release had stated that its retrospect­ive.”

Rakesh Nangia, Managing Partner, Nangia & Co, a CA firm, said: “As awaited, the government has rescinded the notificati­on issued under Section 94A treating Cyprus as a non-cooperativ­e jurisdicti­on”.

Interestin­gly, the notificati­on has been withdrawn prospectiv­ely, keeping the actions taken under the notificati­on till December 14, 2016 unaffected, Nangia said.

This could be because taxes deducted at source under the notificati­on and transfer pricing documentat­ion maintained in lieu of the notificati­on, cannot be undone, he added. The Centre’s move to remove Cyprus from tax blacklist comes on the heels of the two countries firming up a new tax treaty, which will come into force in India from April 1, 2017.

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