Cyprus - India Tax Relations Update

A number of news sources have recently reported that the Indian tax authorities have taken the decision to designate Cyprus as a notified jurisdictional area under section 94A of the Indian Income-tax Act of 1961. This means that transactions carried out by Indian taxpayers with entities based in Cyprus will now come under increased scrutiny from the Indian tax authorities and a withholding tax will be imposed on payments by Indian taxpayers to recipients in Cyprus.

It is understood that the Indian decision to designate Cyprus as a notified jurisdictional area arises from a disagreement over the interpretation of the exchange of information provisions in the double taxation convention between the two countries, with the Cyprus authorities having declined to respond to certain requests for information on the grounds that they did not meet the requirements of the convention, and the Indian authorities having imposed the designation in order to apply pressure to Cyprus