New Delhi: India, which blacklisted Cyprusin 2013 for not sharing tax information under the treaty, is in dialogue with the island nation to resolve the issue, a top finance ministry official said on June 16.
"It's not only exchange of information but it is also the quality of exchange of information and how they are operating internationally on their behaviour on exchange on information. The dialogue is on with Cyprus," Central Board of Direct Taxes (CBDT) Chairperson Anita Kapur told reporters here.
India blacklisted Cyprus in 2013 for not sharing tax information. The Finance Ministry classified the island nation as a notified jurisdictional area on grounds that Cyprus was not providing information requested by tax authorities under the taxation treaty.
Following the notification, all payments made to Cyprus attracted a 30 per cent withholding tax and Indian entities receiving money from there were required to disclose the source of funds. The notification also meant that 'no deduction in respect of any other expenditure or allowance arising from the transaction with a person located in Cyprus shall be allowed unless the assessee maintains and furnishes the prescribed information'.
It had also added that if "any sum is received from a person located in Cyprus, then the onus is on the assessee to satisfactorily explain the source of such money in the hands of such person or in the hands of the beneficial owner, and in case of his failure to do so, the amount shall be deemed to be the income of the assessee".
India and Cyprus had entered into an agreement for avoidance of double taxation of income and prevention of fiscal evasion in December 1994. Under the agreement, both countries have a legal obligation to exchange such information. In Budget of 2011-12, the Finance Ministry had inserted a clause — Section 94A — in the Income Tax Act to notify and guard against countries that do not cooperate in the exchange of information protocol. On long pending revision of Double Taxation Avoidance Treaty (DTAT) with Mauritius, Kapur said, "We will have another round of talks with Mauritius shortly. Dates are not finalised yet."...