Cyprus-India double tax treaty developments
Contact Us
Costas Christoforou
Dir: +357 22 474000
Email: costas.christoforou@cpm.com.cy
Rodoula Demetriades
Dir: +357 22 474814
Email: rodoula.demetriades@cpm.com.cy
Cyproman Services Ltd
12 Esperidon Street
4th Floor, 1087 Nicosia
Cyprus

Phone: +357 22 474000
Fax: +357 22 474808
Email: info@cpm.com.cy

The amended Double Tax treaty between Cyprus and India is coming into effect on 1 April 2017.

Key changes

The amended  treaty allows for a source based taxation of gains derived from the alienation of shares. As a result, gains derived by a Cyprus tax resident company from the disposal of shares held in an Indian tax resident company may be taxed in India.  

Grandfathering provisions

The amended treaty includes grandfathering provisions based on which gains from the alienation of shares will be taxable only in the State where alienator is a tax resident, provided that the investment in such shares was concluded prior to 1st April 2017. In this respect, any gains derived by a Cyprus tax resident company, at any future date, from the disposal of shares held in an Indian tax resident company, will continue to be taxable only in Cyprus, provided that such shares were acquired prior to 1st April 2017.  

Cyprus retrospectively removed from the Indian list of "Notified Jurisdictions"

Based on an announcement of the Indian Ministry of Finance dated 16th December 2016, Cyprus has been retrospectively removed from the list of" Notified Jurisdictions" with effect as from 1st November 2013.

The following withholding tax rates will continue to apply

  • Dividend payments: Subject to a 15% withholding tax rate in India. The withholding tax is reduced to 10%, if the recipient is a company which holds at least 10% of the share capital of the dividend paying company.
  • Interest payments: Subject to a 10% withholding tax rate in India.
  • Royalty and service fees payments: Subject to a 15% withholding tax rate in India. Payments of a technical, managerial or consulting nature are subject to a 10% withholding tax rate in India.