Cyprus law firm Michael Kyprianou & Co has set up an India desk headed by advocate Ilias Tsintavis, who is joined by managing partner Menelaos Kyprianou and advocate Despina Mavridou. The desk was established earlier this year in response to increasing demand for Cyprus-related services from Indian law firms and businesses.
Cyprus and India share a double tax avoidance agreement (DTAA), which exempts a Cyprus tax resident from paying capital gains tax on the proceeds of shares it transfers to an Indian company, providing the Cypriot entity does not have a permanent establishment in India.
Although the percentage of Indian investments through Cyprus is modest when compared with Mauritius and Singapore, Tsintavis expects this to increase steadily. “Cyprus has established one of the most beneficial DTAAs with India,” he said. “With only a 5% difference to Mauritius on dividends, Cyprus still maintains a highly competitive dividend taxation rate of 10%.”
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He added that Cyprus is more advantageous than Mauritius and Singapore when it comes to interest payments. “Additionally, Cyprus enjoys the same exemption from capital gains tax as Mauritius and with lighter criteria to satisfy than those of Singapore.”
Over the past year, there has been talk about amending India’s DTAAs with Cyprus and Mauritius. Investors have been alarmed by threats to remove the capital gains tax exemptions. Tsintavis believes that any changes will be minor and create little impact on the way investments are structured.
“Cyprus is for Russia what Mauritius is for India,” Tsintavis told India Business Law Journal. “And the threat for removal of the capital gains exemption was there as well. Correspondingly, the business community was alarmed.”
He said changes were made but “investments were not adversely affected. A very small number of investments needed minor restructuring which were tax-free and had negligible costs and they were given ample time to prepare for the new regime. We firmly believe that this will be the case with India as well.”
Tsintavis added that the Cyprus-India DTAA has received less criticism than the Mauritius-India DTAA and Cyprus could therefore emerge as the stronger and more preferred route once the treaties have been renegotiated. Cyprus is a member of the European Union and all companies resident in Cyprus are tax resident rather than offshore entities, which are additional advantages.
Michael Kyprianou has offices in Nicosia, Limassol and Paphos. It also has a presence in Athens and representative offices in Dublin, Dubai, Lugano and the British Virgin Islands. The firm has advised UK retailer Debenhams, The Benetton Group, BNP Paribas, Merrill Lynch Mortgage Lending, and Royal Bank of Canada, among others.
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