Cyprus notified as a non cooperative country

The Central Board of Direct Taxes (CBDT) has said that since Cyprus has not been providing the
information requested by the Indian tax Authorities under the exchange of information provisions of
the agreement, it has been decided to notify Cyprus as a notified jurisdictional area under Section 94A of the Income Tax Act, 1961 through Notification No. 86/2013 dated 1st November, 2013 published in the official Gazette through SO 4625 GI/13. The implications of such a Notification are
summarized as under: -

• If an assessee enters into a transaction with a  person in Cyprus, then all the parties to the transaction shall be treated as associated enterprises.
• No deduction in respect of any other  expenditure or allowance arising from the transaction with a person located in Cyprus shall be allowed unless the assessee maintains and furnishes the prescribed information.
• If any sum is received from a person located  in Cyprus, then the onus is on the assessee to satisfactorily explain the source of such money in the hands of such person or in the hands of the beneficial owner.
• Any payment made to a person located in  Cyprus shall be liable for withholding tax at 30 % or a rate prescribed, whichever is higher.