New Delhi :  Terming decision of India to investments from Cyprus under tax lens a ‘unilateral measure’, the island nation said that it will soon hold talks with Indian authorities to sort out the taxation issue.

“The Ministry of Finance of the Republic of India has taken the unilateral measure…,” Finance Ministry of Cyprus said. A spokesperson of Cyprus government said, “concerned competent authorities of India and Cyprus are in direct contact and will soon decide when to meet in order to discuss the points that need to be clarified.”

In a notification on November 1, the Finance Ministry said that since Cyprus has not been providing the information requested by tax authorities under exchange of information provisions of the double taxation avoidance pact, it has been decided to classify it as a notified jurisdictional area.

Following the notification, all payments made to Cyprus will attract 30% withholding tax and Indian entities receiving money from there will be required to disclose the source of funds.

“Low tax jurisdictions have been coming under increasing pressure from cash strapped countries across the world for encouraging tax base erosion and profit shifting. Cyprus has been used by investors for doing structured debt-equity deals and this is bound to soothe  investors’ nerves,” said Amit Maheshwari, Ashok Maheshwary & Associates.

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