Cabinet approves revised Indo-Cyprus tax treaty

The Dollar Business Bureau

The Union Cabinet headed by the Prime Minister Narendra Modi has approved an agreement and a protocol between India and Cyprus to avoid double taxation and prevent fiscal evasion related to the taxes on income.

The signing of the Indo-Cyprus tax treaty is considered to be another major step in the fight against tax evasion, round-tripping and base erosion or profit shifting, the Cabinet said in a statement on Wednesday.

According to it, the government has recently amended a similar agreement with Mauritius to avoid double taxation. As provided in the treaty of Mauritius, the agreement with Cyprus was also amended for residence-based capital gains taxation.

With Cabinet approving the revised tax treaty, capital gains of companies residing in Cyprus would be taxed in the country. India will have all the rights for levying tax on capital gains arising within the country, the statement said.

An earlier treaty for residence-based taxation had certain provisions which resulted in distortion of real investments and financial flow due to artificial diversion of several investments from the countries of origin in order to avoid tax.

As amended in the treaty of Mauritius, the revised agreement will deter such tax avoidance.

India is negotiating with Singapore to sign a similar agreement to avoid double taxation, the Cabinet said in the news release.