 "I-T department corrects notification on Cyprus")
The income tax department has corrected its earlier notification to remove Cyprus from its 'black list'.
Both governments had said the withdrawal of the tag on Cyprus would be with retrospective effect from November 1, 2013, when it took effect. However, the formal I-T notification did not say so. The revised one does.
Cyprus was declared a 'non-cooperative jurisdiction' on taxes by the government at that date for not sharing information on Indian account holders. It was the first tax jurisdiction to be so labelled by India.
Due to this, a number of taxes were increased on payments made to investors of that country. After signing a double taxation avoidance agreement between the two nations, the department withdrew the non-cooperative tag.
Rahul Jain, partner, Nangia & Co, said with removal with retrospective effect, tax deducted at source at the rate of 30% could be claimed as a refund. However, as the procedure for claiming a refund of TDS is rather complicated, the deductors are likely to ask entities in Cyprus to do so on their tax returns.
Also, since 2013, any entity dealing with one in Cyprus was deemed an associate enterprise, necessitating compliance with transfer pricing regulations in India. With the retrospective removal, such a deemed inference has been nullified and the risk of an unnecessary transfer pricing audit is ruled out. Also, any non-compliance with the transfer pricing regulations for such transactions will no longer lead to penalisation, Jain said.
