On February 6, 2014, Bhutan’s National Council approved a law to ratify the Double Taxation Avoidance Agreement (DTA) signed with India.

The DTA will provide tax stability to the residents of India and Bhutan and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between the two countries. Under the agreement business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment there.

Dividends, interest, royalty income and fees for technical or professional services will be taxed both in the country of residence and in the country of source of income. The maximum rate of tax to be charged in the country of source will not exceed 10 per cent on dividends, interest, royalties and fees for technical services.

Capital gains from the sale of shares will be taxable in the country of source. Profits derived by an enterprise from the operation of aircraft in international traffic shall be taxable in the country of effective management of the enterprise.