The Cypriot Ministry of Finance confirmed the successful completion of the negotiation on the double taxation agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income between Cyprus and India.
The agreement reached provides for source based taxation for gains from the alienation of shares; investment made before 1.4.2017 are "grandfathered" with the view that taxation of disposal of such shares at any future date remains with the contracting state of residence of the seller.
Dividends
Dividends paid from an Indian tax resident company to a Cypriot tax resident company are subject to 10% withholding tax in India, save in cases where the Cypriot company controls less than 10% of voting power in the Indian Company in which case the rate of taxation is 15%.
Interest
As per the DTAA, interest paid from an Indian tax resident company to a Cypriot tax resident company is subject to 10% withholding tax in India, save in cases where the payments are made to a government or financial institution.
Capital Gains
Capital gains are not subject to any tax in Cyprus. The India-Cyprus DTAA provides exemption from capital gains tax on proceeds from the sale of shares in an Indian Company by a Cyprus Tax Resident which does not have a permanent establishment in India.
Royalties
Royalties and fees arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other state.
If you wish to know more about the Cyprus India double tax treaty and how it may affect you, please contact our director, George Hadjipavlou at
ghadjipavlou@oneworldweb.net for a complimentary consultation.