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Cyprus Confidential, a global offshore investigation of 3.6 million documents, lays bare a paper trail of entities incorporated by the rich and powerful in tax haven Cyprus.
The investigation reveals how entities with offshore residency were controlled from India and instructions for financial transactions in these entities were given by individuals in India.
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It is not illegal to set up an offshore company in Cyprus — India signed a revised Double Taxation Avoidance Agreement (DTAA) with Cyprus in December 2016. But Indian companies use their Cyprus tax residency certificates to avoid paying tax.
The DTAA allows Cyprus, a low tax regime, to be used as a jurisdiction for tax planning. Many foreign investors set up investment firms in Cyprus to invest in India, and the country is now an alternative to Mauritius.
But the DTAA does not stop the I-T department from denying tax treaty benefits if it is established that a company has been inserted as the owner of shares in India at the time of disposal of the shares to a third party solely with a view to avoid tax.
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