How to sql-sync database between two remotes which share the same host?
Here is how drush sql-sync works between two remotes:


Logs into remote @destination via SSH and creates destination database if needed via sql-create.
Backs up database on @sourceby performing sql-dump on source unless told otherwise and saves it into drush-backups folder.
Logs into @destination remote via SSH and executes rsync to transfer database from Source to Destination.

Example: rsync @source:drush-backups/db.sql.gz @destination:/tmp/db.sql.gz


To make this work, you have to make sure that:


both local and remote drush have the same version (either 6.x or 7.x),
on Destination the @source alias should be accessible for drush,
rsync tool doesn't support two remotes, so only one may be remote.


Based on above it seems you can't use sql-sync drush command to transfer the database between two remotes in drush 7.x (see: #161).

As for workaround, first dump the database from your source onto your local and transfer back to the destination, in example:

drush @source sql-dump | drush @destination sql-cli


This should transfer the database between two remotes without sql-sync limitation.