The Income Tax Treaty between Cyprus and India signed on 18 November 2016, have become available the treaty’s details. Both countries generally provide for the credit method to avoid double taxation.

This treaty gives the following withholding tax rates:

10% for Dividends; 10% for Interest (subject to an exemption for interest derived and beneficially owned by the government of a state, a political subdivision or a local authority or, in the case of India, the Reserve Bank of India, the Export-Import Bank of India or the National Housing Bank); and 10% for the Royalties and fees for technical services.

However, following deviations are found from the OECD Model:

• Article 4 (resident)- provides that cases of dual-residence of a person, other than an individual, for which the place of effective management cannot be determined, are resolved by the competent authorities of the two states by mutual agreement;
• Article 5 (permanent establishment)- provides for a 6-month period that a building site or construction, installation or assembly project or connected supervisory activity must exist in order to constitute a permanent establishment;
• Article 5 (permanent establishment) extends the definition of a permanent establishment (PE) to the furnishing of services, including consultancy services, where such activities continue for a period or periods aggregating more than 90 days within any 12-month period; moreover, a PE also includes a sales outlet, a warehouse in relation to a person providing storage facilities for others, and a farm, plantation or other places where agricultural, forestry, plantation or related activities are carried on;
• Article 5 (permanent establishment) extends the definition of a dependent agent to an agent that habitually maintains in the other state a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise, or habitually secures orders in the other state, wholly or almost wholly for the enterprise itself;
• Article 7 (business profits) follows the UN Model (2011), except for the limited force of attraction provision;
• Article 12 (royalties) extends the definition of royalties to payments for the use of, or the right to use industrial, commercial or scientific equipment;
• Article 13 (capital gains) provides for source taxation of gains from the alienation of shares; the provision does not apply to gains from the alienation of shares acquired prior to 1 April 2017, which are taxable only in the state of the alienator;
• The treaty also includes an article on independent personal services (article 14) in line with the UN Model (2011); and
• The treaty further includes an article on assistance in the collection of taxes (article 27).

The treaty was concluded in the Greek, Hindi and English languages, each text having equal authenticity. In the case of deviation, however, the English text prevails. The treaty generally follows the OECD Model.