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… apart from the five jewels of the economy

Apart from the five jewels of the economy the government has identified, policy interventions have been considered to promote financial inclusion through rules and regulations on fiscal incentives that was launched yesterday.

For instance, exemption of sales tax and customs duty has been granted for purchases made with point of sale (PoS) machines and ATMs to all business entities such as authorised PoS dealers and financial institutions.

Exemption on sales tax and customs duty has also been extended for import of electronic cash registers.

“This is an effort to go cashless and promote financial inclusiveness,“ economic affairs minister Lekey Dorji said during the launch.

This new rules and regulations on fiscal incentives will supersede all the previous tax incentives and is applied retrospectively with effect from January 1 last year.

To complement the effort of providing employment to all, the fiscal incentive has also a provision granting a waiver of income tax on interest income earned by the financial institutions through preferential lending for education and skills development programmes and overseas employment.

The condition for such lending is such that the financial institutions providing loan must lend at a preferential rate to individuals who have letters of recommendation from the labour ministry. The preferential rate however must be lower than the commercial borrowing rate.

Preferential lending to cottage and small industries (CSI) and cooperatives would also prove beneficial to the financial institutions as taxes on interest income for such lending would be waived.

In addition, the CSIs would also be eligible for an additional 10 percent deductible expenditure for sourcing locally produced raw materials for manufacturing purposes.

Further, the cooperatives and CSIs registered with the revenue and customs department are also granted exemptions for purchase of plant and machinery, permissible raw materials and primary packaging materials. The same is also granted for artisans and craftsmen in rural areas.

While vehicle taxes are still a concern, the fiscal incentive grants exemptions on sales tax and customs duty for import of buses and trucks used by passenger transport entities.

A tax rebate of 10 percent is also allowed to business entities employing 100 percent Bhutanese nationals with a workforce of at least 20 employees.

In the interest of developing the capital market, an income tax holiday of five years has been extended to companies going for initial public offering (IPO). There is also sales tax and customs duty exemption on games and sports equipment imported by BOC and its federations, government agencies and licensed business entities providing games and sports services. The exemptions will however not be applicable for resale and trading purposes.

The rules and regulation on the fiscal incentives will be valid until 2020.

Direct Tax Incentives

Income tax exemption on convertible currency earnings from export excluding INR earnings

Reinvestment Allowance of 20 percent to manufacturing and service industries

Tax rebate up to 15 percent of the up-gradation expenses for adopting modern environmentally-friendly technologies

Tax rebate up to 10 percent to businesses employing 100 percent Bhutanese nationals with no less than 20 employees

Income tax holiday of 5 years to companies going for an IPO

Waiver of income tax on interest income earned by financial institutions through preferential lending for education and skills development programs and overseas employment

Income tax holiday of 10 years to CSIs and co-operatives

Waiver of income tax on interest income earned by financial institutions through preferential lending to CSIs and co-operatives

An additional 10 percent deductible expenditure for use of locally produced products

Income tax holiday of 10 years for newly established domestically sourced mineral based industries

Income tax holiday of 10 years to newly established tourist standard hotels and 5 years to existing hotels upgraded to tourist standard

Income tax holiday of 5 years to farm houses and home stays

Income tax holiday of 10 years to businesses engaged in agriculture and RNR activities

Income tax holiday of 5 years to newly established educational and vocational institutes outside Thimphu and Phuentsholing

Income tax holiday of 5 years to newly established music schools, games and sports schools

Income tax holiday of 5 years to newly established selective private health services

Income tax holiday of 5 years to newly established IT/ITES businesses

Income tax holiday of 5 years to newly established businesses in production of films, documentaries and serials for public broadcasting

Income tax holiday of 5 years  on animated films produced by newly established businesses

Income tax holiday of 5 years to newly established media service providers

Income tax holiday of 5 years to taxi/car-hire service providers

Income tax holiday of 5 years to newly established waste management/ recycling entities including scrap dealers

Income tax holiday of 10 years to newly established infrastructure developers

Note: There are more than 30 incentive provisions through indirect taxes (sales tax and customs duty) 

Tshering Dorji

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