It is reported in the Indian financial press that Cyprus and India will finalise the amendments to their double taxation avoidance agreement in the next few weeks. The Indian High Commissioner to Cyprus has said that a team from the Indian ministry of finance is expected to visit Cyprus in the next few days to carry forward the negotiations to finalise the revised DTAA, and that the matter is being followed at the highest level in the government of Cyprus. The existing DTAA between India and Cyprus was signed in 1994, and it is understood that the amendments will incorporate the provisions of Article 26 of the Organization of Economic Cooperation and Development’s model tax convention relating to exchange of information.
The conclusion of the agreement will resolve differences between the two countries’ tax authorities that led to Cyprus being declared a notified jurisdiction under Section 94A of the Indian Income Tax Act of 1961, making it more cumbersome for Indian taxpayers to claim deductions on transactions with entities based in Cyprus, and increasing reporting requirements. Both Cyprus and India have agreed that the classification of Cyprus as a notified jurisdictional area will be rescinded with retrospective effect from 1 November 2013, the date when the notification was first issued. The rescission will remove bureaucratic obstacles and reduce compliance costs.
According to Indian government estimates, Cyprus is the seventh largest investor in India with cumulative investments of US$7.2 billion between April 2000 and December 2013.