Cyprus was blacklisted by the Indian tax authorities in 2013 for not providing important tax information requested by the Indian tax authorities under the Double Taxation Treaty. Cyprus was classified as a 'notified jurisdictional area'. As a result of this, all payments made to Cyprus attracted 30% withholding tax (previously 15%) and those receiving money in India from a person or entity located in Cyprus were required to disclose adequate information regarding the source of funds.
The above measures made investments between the two countries limited.
The removal of Cyprus from India's blacklist came after both countries agreed to changes in the Double Taxation Avoidance Agreement.
On the 18th of November 2016 India and Cyprus have signed the amended bilateral tax treaty under which capital gains arising from sale of shares on investments made by Cyprus companies will be taxable at the applicable domestic tax rate.
With the signing of the amended Double Taxation Agreement, the Indian Tax Department made a decision to rescind the three year old order blacklisting Cyprus as a notified jurisdictional area with effect from the date of issue, thus removing Cyprus from its blacklist of countries with insufficient information exchange.
H.E. Mr. Nicos Anastasiades, President of the Republic of Cyprus is currently on a State Visit in India. During his official visit he will meet with the President of India, with ministers and other highly ranked government officials and will sign a number of bilateral agreements and Memorandum of Understandings in diverse fields.
Cyprus and India enjoy strong economic ties. Cyprus is the 8th largest foreign investor in India (with cumulative foreign direct investment of above USD 9 billion) having invested in manufacturing industries, cargo handling, shipping and logistics, financial leasing, stock exchange and real estate.
The new double tax avoidance treaty will further strengthen the economic ties between the two countries and open the door for substantial business development and cooperation in diverse fields.