mumbaibangalore indias recent decision to blacklist cyprus for not providing tax data will hit developers and realty funds investors who have routed their funds through cyprus are likely to face a big decline in returns as developers will now be expected to withhold higher tax amounts so far these investments were structured around 10 withholding tax which is likely to jump to 30 cyprus which ranks seventh on the list of fdi destinations for india has so far been used extensively for raising debt and quasidebt but given the possibility of higher tax incidence and lack of clarity on policy pe firms are now routing their offshore funds through destinations such as singapore giving cyprus the short shrift the move could significantly impact current structures that have made investments through cyprus with the arms length pricing requirements between unrelated entities withholding rate being increased and the possibility of expense disallowance there could potentially be serious cash flow issues said ruchir sinha head private debt and private equity at legal firm nishith desai associates given the possible impact of this decision on private equity funds returns they are considering other destinations around 85 of the private equity funds inflow into indian real estate came through cyprus and mauritius together as these destinations are considered as tax havens but the scenario is going to change now people have started looking at singapore as a possible route due to a new guideline that says we need to have substance singapore can attract talent and has defined substance it is an attractive destination as attracting manpower will not be difficult mauritius as a country will be difficult to attract substance said vishakha mulye managing director and ceo of icici venture funds ask group a diversified financial services group has recently taken the singapore route and has routed its 200 million offshore real estatefocused fund through that jurisdiction this was managed by ask capital pte the singaporebased subsidiary cyprus and mauritius have been the most preferred and efficient routes that fund houses have been using to raise capital today global investors s like india but do not want the policy regime to come in their way says sunil rohokale md ceo ask group according to rohokale singapore is much transparent and regulated substance is an important aspect in singapore and funds with longterm plan will go to a geography thats regulated substance compliance for attracting lower taxes in singapore mandates the company to spend at least singapore 250000 annually on company related expenditures and also have a minimum three employees with two local directors navin kumar executive director fund raising at milestone capital advisors also echoed rohokales view that singapore is now emerging as a destination for these fund houses singapore is emerging as the next destination due to brand singapore that is associated with credibility and transparency and therefore has larger acceptance from the investor community netherlands is another emerging destination that is replacing cyprus navin kumar said typically funds use the mauritius