India has given Cyprus two months to provide information on certain funds flowing from the island before deciding whether to rescind suspension of tax benefits on investments made from there, according to a top Indian finance ministry official.
“We have sought information on some investments made from Cyprus to India under the double taxation avoidance agreement and given them two months time,” the official was quoted as saying on Tuesday by the Press Trust of India.
Depending on the information, the government “will take a decision on suspension of tax pact with Cyprus”.
India and Cyprus signed a double taxation avoidance agreement in 1994 but in November, the Asian nation classified Cyprus as a notified jurisdictional area and suspended the tax benefits.
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.
India said it took the decision because Cyprus was not providing information requested by tax authorities under the agreement.
“Cyprus was not cooperating till we classified them as notified jurisdiction. They came running. Now we have given them the long end of the rope. Let us wait and watch,” the official said according to the Press Trust.
In a recent statement on renegotiation of the existing agreement, Cyprus also said a new tax treaty is expected to be finalised soon. Cyprus also said it would adopt provisions of Article 26 of the OECD Model Tax Convention relating to exchange of information in a new DTA between the two countries.