NEW DELHI: The government on Friday announced that it had reached an in-principle agreement with the government of Cyprus to resolve all pending issues in order to negotiate a new Double Taxation Avoidance Agreement (DTAA) between the two countries.
“An official level meeting between India and Cyprus took place in New Delhi on June 28 and 29, 2016, to finalise the new India Cyprus Double Taxation Avoidance Agreement, wherein all pending issues, including taxation of capital gains, were discussed, and in-principle agreement was reached on all pending issues,” the Indian government said in a statement on Friday.
“The development on the India-Cyprus tax treaty is another welcome step towards providing certainty in tax,” Gautam Mehra, Leader - Tax, PwC India said. “The intent to grandfather existing investments, which is in line with a similar change proposed in the tax treaty with Mauritius, should provide comfort to existing investors. Further, the proposal to rescind the notification under section 94A with effect from November 1, 2013 is another positive resolution.”
ADVERTISEMENT
Under the new system, both countries agreed to source-based taxation of capital gains. However, there will be a grandfathering clause wherein capital gains on investments made prior to April 1, 2017 will be taxed in the country of which the taxpayer is a resident.