Comparative Chart – Foreign Investment Sector – India and Bhutan

Invest India was set up in 2009 as a non-profit venture under the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India.

1. As an incorporated entity by incorporating a company under the Companies Act, 2013 through a:

– Joint Venture; or

– Wholly Owned Subsidiary

2. As an office of a foreign entity through:

– Liaison Office / 

  Representative Office

– Project Office

– Branch Office

3. As a Limited Liability Partnership

FDI in an existing domestic entity is allowed subject to the same terms and conditions as applicable to the new entities incorporated in Bhutan with maximum foreign investor’s shareholding of 74 %. 

FDI Company:

An FDI company shall be a business incorporated or registered in the country for the purpose of undertaking commercial activity in which 20% or more of the equity in the business is owned by foreign investors. An individual foreign investor shall own a minimum of 10 % of the equity.

Notwithstanding the above, in case of foreign institutional investors, a FDI company shall be one in which 10% or more of the equity is owned by foreign institutional investor. 

The domestic companies are given with an option to pay tax at a reduced rate of 22% (plus surcharge and cess), provided they do not claim certain deductions under the Income Tax Act.  The effective tax rate will be 25.17% including surcharge and cess. The rate is to be effective from Financial Year i.e. 2019-20.

New local manufacturing companies (those incorporating after 1st October 2019 and commencing manufacturing before 1st April 2023) will be eligible to opt for special corporate tax @ 15% (plus surcharge and cess), provided that the company does not claim other deductions or exemptions under Income Tax Act. The effective tax rate will be 17.01%, inclusive of surcharge and cess. 

The companies registered under Companies Act of Bhutan are chargeable with Corporate Income Tax.  It is levied @ of 30% on net profit

Key  Incentives

1. Export Promotion

Applicability: SEZ units operational before 1st April 2020

Incentive: Deduction of 100% of profits and gains derived from export business for first 5 years of commencement, 50% of profits and gains derived from export business for next 5 years, 50% of ploughed-back profits and gains from export business for next 5 years. 

2. Research & Development

Applicability: Companies in respect of any expenditure on R&D in an approved in-house facility

Incentive: Weighted tax deduction of 200% granted to companies

Validity: 31st March 2020

3. Investment-linked

Incentive: To incentivize investment in certain sectors, any capital expenditure incurred for specified businesses is allowed as a deduction in the year in which it is incurred. 

4. Startup India Scheme

Incentive: Tax incentives granted to eligible start-ups are the tax holiday for any consecutive 3 years (from initial 5 years) in respect to 100% of their profits, including fast-tracking of patent applications with 80% rebate.

5. International Financial Services Centre

Applicability: Caters to customers outside the jurisdiction of the domestic economy. Such centers deal with flows of finance, financial products and services across borders.

Incentives: Tax concessions on capital gains, Minimum Alternate Tax and Dividend Distribution Tax.

The incentives provided by the Bhutan government are – 

Income tax exemption of 10 years on convertible currency earnings from export by newly established manufacturing and IT service industries.

2. Reinvestment Allowance (RA) of 25% to Manufacturing and Service industries.

3. Tax rebate of up to 15% of the up-gradation expenses for adopting modern environmentally – friendly technologies.

4. Income tax holiday to Small and Micro businesses

5. Tax rebate of 10% shall be allowed to business employing 100% Bhutanese nationals with no less than 20 employees.

6. Income tax holiday of 5 years to companies going for an Initial Public Offer

There are other Sector Specific Incentives provided by the government as per the provisions and rules of Fiscal Incentive Act of Bhutan. 

Foreign nationals of non-Indian origin resident outside India are not permitted to acquire any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India.

A person (RoI) who has established in India, a branch/project office or other place of business (excluding a liaison office) in accordance with the provisions of FEMA and rules thereunder, for carrying on in India any activity can acquire any immovable property in India that is necessary for or incidental to carrying on such activity, subject to compliance with other applicable laws and RBI reporting in a prescribed format.

Lease – A foreign national of non-Indian origin can acquire or transfer immovable property in India, on lease, not exceeding 5 (five) years with the prior permission of the RBI.

Companies incorporated in Bhutan: The land of a corporation shall be registered, in the name of a corporation registered under the prevailing Company’s Act of the Kingdom of Bhutan, or, in the name of the body corporate established under the relevant law. 

Business started in partnership with local entities: 

Local partners of the foreign business shall be allowed to capitalize freehold land as their equity contribution.

industries

1.Lottery Business including Government/private lottery, online lotteries, etc.*

2.Gambling and Betting including casinos*

3.Chit Funds

4.Nidhi Company

5.Trading in Transferable Development Rights (TDR)

6.Real Estate Business or Construction of farmhouses **

7.Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

8.Sectors not open to private sector investment- atomic energy, railway operations (other than permitted activities mentioned under the Consolidated FDI policy)