News › Weekly Alert Article
Cyprus & India to renegotiate their Double Tax Treaty
On 3 December 2013, The Ministry of Finance of Cyprus published a press release regarding the consultations between Cyprus and India on the issue of effective exchange of information and the renegotiation of the Double Tax Treaty held at New Delhi on 26-28 November 2013. Taxand Cyprus investigates how the blacklist issue will be resolved.
Accordingly it is stated that the consultation between Cyprus and India is aimed at addressing the issues of an effective exchange of information between the 2 countries, and the long pending renegotiation of their Double Tax Treaty (DTT), which is in force since 21 December 1994.
It has been agreed that the circumstances which have caused India to notify Cyprus as a “notified jurisdictional area” (under section 94A of the Income-tax Act 1961) on 1 November 2013, are immediately to be solved by:
- Agreeing to adopt the provisions of the new Article 26 of the OECD Model Tax Convention (approved by the OECD Council on 17 July 2012) relating to Exchange of Information in a new DTT between the 2 countries
- Improving the channels of communication and exerting every effort in facilitating each other in processing requests and responses in a swift and effective manner.
Since the above mentioned measures concerns the renegotiation of the existing DTT between Cyprus and India, the new DTT is expected to be progressed swiftly.
Finally, based on the discussions held, it was agreed that once the notification of Cyprus as a “notified jurisdictional area” under section 94A of the Indian Income-tax Act 1961 is withdrawn, it will be with retrospective effect from 1 November 2013, the date when the notification of India was issued.
These developments are very positive showing the determination of both countries to solve the issue and continue their good bilateral relations. Multinationals with operations in these jurisdictions should keep abreast of all developments in order to remain compliant.