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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Rakesh Nangia, Managing Partner, Nangia & Co, a CA firm, said: “As awaited, the government has rescinded the notification issued under Section 94A treating Cyprus as a non-cooperative jurisdiction”.
Interestingly, the notification has been withdrawn prospectively, keeping the actions taken under the notification till December 14, 2016 unaffected, Nangia said.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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