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Foreign Direct Investment Rules
and Regulations 2019
Royal Government of Bhutan
FOREIGN DIRECT INVESTMENT RULES AND REGULATIONS 2019
Table of Contents Short Title and Commencement ....................................................................................... 1 General ................................................................................................................................ 1 Sectors and Size of Investment ......................................................................................... 1 Currency of Investment .................................................................................................... 2 Collaboration and Franchise ............................................................................................. 2 Company Incorporation .................................................................................................... 2 Subscription ....................................................................................................................... 2 Debt Equity Ratio ............................................................................................................... 2 Lock-in-Period .................................................................................................................... 2 Foreign Exchange and Borrowing ................................................................................... 3 Repatriation of Capital ...................................................................................................... 4 Repatriation of Dividend .................................................................................................. 4 Payments for Collaborative Agreements ........................................................................ 4 Entry and Employment of Expatriate Personnel ............................................................ 5 Visas .................................................................................................................................... 5 Permits ............................................................................................................................... 5 Dependent Permits ........................................................................................................... 5 Skills Development ............................................................................................................ 6 Investor Cards .................................................................................................................... 6 Taxation.............................................................................................................................. 6 Land .................................................................................................................................... 6 Incentives and Exemptions ............................................................................................... 6 Protection of Intellectual Property Rights ...................................................................... 6 Eligibility for Registration as FDI Business .......................................................................7 FDI Registration ..................................................................................................................7 FDI Registration Certificate (FDIRC) .................................................................................7 Refusal of FDIRC ................................................................................................................ 8 Validity of FDIRC ................................................................................................................ 8 Amendment of FDIRC........................................................................................................ 8 Business Approval ............................................................................................................. 8 Rejection of Proposed Business ....................................................................................... 9 Amendment ....................................................................................................................... 9 Suspension and Cancellation of a Business License ....................................................... 9 Suspension of Business ..................................................................................................... 9 Cancellation of a FDI Business License ........................................................................... 10 FDI FACILITATION ............................................................................................................. 10 FDI Facilitation Committee .............................................................................................. 10 FDI Focal Officials .............................................................................................................. 11 Single Window Services ................................................................................................... 12
Project Approval Committee ........................................................................................... 12 Department ....................................................................................................................... 12 FDI Division ....................................................................................................................... 13 Disposal of Investment .................................................................................................... 14 Transfer of Shares ............................................................................................................ 14 Disposal by Winding up/Liquidation ............................................................................... 15 Dispute Settlement .......................................................................................................... 15 Appeals .............................................................................................................................. 16 Monitoring ........................................................................................................................ 16 Reporting .......................................................................................................................... 16 Penalties ............................................................................................................................ 17 Delegation of Authority ................................................................................................... 17 Interpretation ................................................................................................................... 17 Definitions ......................................................................................................................... 17
Schedule - I .................................................................................................................................. 19
Schedule - II ................................................................................................................................ 20
Schedule - III ................................................................................................................................22
Schedule – IV ...............................................................................................................................23
Schedule - V ................................................................................................................................ 24
1
FDI RULES & REGULATIONS 2019
Short Title and Commencement
1. These Rules & Regulations shall be called the Foreign Direct Investment
Rules and Regulations 2019 and shall come into force on ………;
2. From the date of coming into force of these Rules and Regulations, the FDI
Rules and Regulations 2012 (Amended December 30, 2014) shall stand
repealed;
3. Any action taken or process initiated under the FDI Rules and Regulations
2012 (Amended December 30, 2014) shall be governed by these Rules and
Regulations.
General
4. The Ministry shall be responsible for the overall implementation of the FDI Policy
2019 and amendments thereto.
5. The Department under the Ministry shall be the implementing agency.
Sectors and Size of Investment
6. All activities are open for FDI except for those activities listed in the Schedule IV. The
activities open for FDI are grouped into three, namely Priority Activities, Small Scale
Activities and Other Activities.
(a) The priority sector activities in the manufacturing and service sectors are listed
in Schedule I & Schedule II respectively.
(b) Small scale activities are listed in Schedule III.
(c) Other Activities comprise of those activities that are open to FDI but not listed
in the Schedules.
7. The minimum project cost, equity and specific conditions for activities in Schedules
I, II and III shall be as specified therein.
8. For Other Activities, the minimum project cost shall be Nu 50 million in the
manufacturing sector and Nu 25 million in the service sector. The maximum foreign
investor’s shareholding for Other Activities shall be 74%.
9. FDI in an existing domestic entity
FDI in existing domestic entity shall be allowed subject to same terms and
conditions as applicable to new entities with maximum foreign investor’s
shareholding of 74%.
2
Currency of Investment
10. FDI shall be made in convertible currency. However, Indian investors may invest
in Indian Rupee except for those activities in Schedule III.
11. The convertible currency and Indian Rupee requirement for the establishment and
operation of the FDI Business shall be from the company’s own sources.
Collaboration and Franchise
12. FDI Companies shall be allowed to enter into technical, marketing and/or
franchising collaborations for the use of trade names, copyrights, patents and
trademarks, etc. subject to prior approval of the Ministry.
13. An application for approval of any collaboration as per rule 12 shall be submitted
to the Ministry together with a copy of the agreement to be signed between the
parties.
Company Incorporation
14. All FDI businesses shall incorporate under the Companies Act of Bhutan, 2016 and
amendments thereto upon issuance of FDI Registration Certificate.
Subscription
15. The investors in the business shall fully subscribe the equity. The deposit of the
total equity by all shareholders in the company accounts shall by no means go
beyond three years from the date of approval of the project.
16. The total foreign equity shall be deposited in the company’s foreign currency
account in the local banks in the approved currency of investment.
Debt Equity Ratio
17. The initial debt equity ratio of the FDI Company shall be as per the provisions of
the Prudential Regulations of the Royal Monetary Authority.
Lock-in-Period
18. The FDI Company shall retain 100% of the foreign equity invested in the company
for a minimum of three years from the date of start of commercial operations of the
FDI Business. However, this does not debar change in the foreign investors as long
as there is no withdrawal of the invested foreign equity.
3
Foreign Exchange and Borrowing
The following provisions shall be applicable to all FDI businesses:
19. All foreign exchange requirements of the business shall be:
(a) arranged by the company from its own sources for capital investment;
(b) met from the foreign exchange receipts of the business and sources approved
as per External Commercial Borrowing Guidelines/Laws of the Royal
Government during operation.
20. Notwithstanding 19 above, the Royal Government shall allow the FDI Company to
purchase convertible currency from the Royal Monetary Authority:
(a) for import of raw materials as a start-up support as per the Foreign Exchange
Rules & Regulations, 2018 and amendments thereto.
(b) for the purchase of capital goods in convertible currency where the foreign
investor’s equity in the project is insufficient to meet the total requirement.
However, the convertible currency amount shall not in any manner exceed the
equity obligations of the local investor. The foreign investor shall deposit the
total foreign equity in convertible currency in the foreign currency account of
the company prior to availing the local shareholder’s share of the convertible
currency. When this provision is exercised, the local shareholders shall not
decrease their shareholding for three years from the date of availing this
facility.
(c) for remittance of remuneration in accordance with the Foreign Exchange
Regulation, 2018 and amendments thereto.
21. The above conditions shall apply in accessing Indian Rupee by all FDI businesses.
22. FDI Company shall be allowed to borrow from abroad as per the External
Commercial Borrowing Guidelines/laws of the Royal Government.
23. FDI Company shall open a foreign currency account with a bank in Bhutan. All
transactions shall be routed through the banking channels. The company shall
submit the details of FC account to the Department within one month from the date
of opening of the account.
24. FDI Company shall be permitted to raise loans and borrow from financial
institutions in the country.
25. Other foreign exchange transactions shall be as per the provisions of the Foreign
Exchange Rules & Regulations, 2018 and amendments thereto.
4
Repatriation of Capital
26. The foreign investor shall have the right to repatriate the invested capital and any
capital gains in the currency of investment. This shall be governed by the relevant
laws and amendments thereto.
27. Foreign investors shall be allowed to dispose off their investments made in an FDI
company in line with the provisions of the FDI Policy, 2019; Companies Act of
Bhutan, 2016; and Insolvency law and amendments thereto.
28. FDI Company shall be entitled to repatriation of the compensation paid on account
of nationalization or expropriations of the business. Such compensation shall be in
the currency of investment or a mutually agreed convertible currency.
Repatriation of Dividend
29. Repatriation of dividend shall be in the currency of earning of the business on the
basis of self-sufficiency (net currency earnings). Net currency earnings shall be
accumulated for the preceding three successive years for this purpose. For
investments in Priority Activities in the service sector, where the investment in the
project was made in convertible currency and the earnings are in currencies other
than convertible currencies, the Royal Government shall allow the purchase of
convertible currency for the purpose of repatriation of dividend up to US$ 5 million
per annum.
30. In case of FDI businesses where the investment in the project was made in
convertible currency and earnings are in Indian Rupee, the foreign investor shall be
permitted to repatriate dividend in convertible currency with prior approval from
the RMA.
Payments for Collaborative Agreements
31. Payment of royalty/fees for collaboration or franchise agreements (in areas such as
technical or marketing agreements or for the use of trade names, copyrights, patents
and trademarks etc) shall be permitted for the duration of the agreement, in annual
amounts not exceeding 10% of net sales.
32. Currencies for the payment of royalties, technical services fees and management
fees shall be based on the approval of the royalty or collaboration agreement,
technical service/management agreements.
33. Foreign exchange for purchase of proprietary raw materials shall be as per the
Foreign Exchange Rules & Regulations of the RMA.
5
Entry and Employment of Expatriate Personnel
Visas
34. The Royal Government shall issue multiple entry visa to:
(a) Foreign investors;
(b) Board of Directors of the FDI company;
(c) Professional and non-professional expatriate employees holding valid work
permits.
Permits
35. All FDI companies shall be entitled to work permits as below:
(a) upon issuance of FDI Registration Certificate, the company shall be entitled to
five work permits for professional and non-professional expatriates during the
business establishment phase. Any additional requirements shall be permitted
with due approval of the Ministry of Labour and Human Resources so long as
the requirement cannot be met from the domestic market.
(b) during the business operation phase, the company shall be entitled to work
permits for professional and non-professional expatriates as are required for
the business, provided that qualified and experienced Bhutanese personnel are
not available.
(c) FDI Company engaged in R&D, health, education, head office services and
similar other operations shall be allowed additional work permits for expatriate
personnel. However, the company shall not be allowed to employ expatriate
personnel in support positions.
36. Route permits shall be granted upon request in line with Immigration Rules &
Regulations, 2015 and amendments thereto.
37. All work permits shall be issued to an individual expatriate to work for a specific
Company.
Dependent Permits
38. The Royal Government shall issue dependent permits to dependents of the
expatriate employees in the professional category employed in the business.
39. Dependent permits will be issued to dependents of investors/promoters of FDI
companies.
6
Skills Development
40. All FDI Companies shall institute programs to foster transfer of skills to Bhutanese and
progressively increase employment of Bhutanese personnel. The Company shall attain the
ratio of 5:1 i.e. five Bhutanese regular employees for each expatriate employed by the 5th
year of commercial operations.
Investor Cards
41. Investor cards will be issued to investors/promoters of FDI companies.
Taxation
42. FDI Companies shall be governed by the taxation laws of Bhutan, namely: Sales
Tax, Customs and Excise Act, 2000, Income Tax Act 2001 and Customs Act of
Bhutan, 2017 and amendments thereto.
Land
43. Land for FDI Companies shall be available based on the provisions of the Land Act
of Bhutan, 2007 and Land Lease Rules & Regulations, 2018 and amendments
thereto. Local shareholders may capitalize freehold land as their equity
contribution.
Incentives and Exemptions
44. FDI Companies shall be entitled to the same incentives and exemptions as are made
available to similar domestic investments under the Fiscal Incentives Act of
Bhutan, 2017 and amendments thereto by the Royal Government, except in cases
where it is otherwise specified in the FDI Policy, 2019.
Protection of Intellectual Property Rights
45. FDI Companies shall enjoy the protection of intellectual property rights under the
Intellectual Property laws of the country and international conventions ratified by
the country as follows:
(a) Paris Convention;
(b) Madrid Agreement;
(c) Protocol to the Madrid Agreement; and
(d) Berne Convention.
7
Eligibility for Registration as FDI Business
46. A proposed FDI Business must:
(a) be in an open sector;
(b) fulfil the minimum investment requirement as prescribed in the FDI Policy
2019
(c) fulfil the shareholding pattern between the Bhutanese and the foreign investors:
i. for priority activities: as per Schedules I, II & III of these Rules &
Regulations
ii. for other activities: a maximum of 74% and a minimum of 20%
shareholding by the foreign investor(s), with an exception of minimum of
10% shareholding where the foreign investor is an institutional investor.
iii. An individual foreign investor shall own a minimum of 10 % of the equity.
FDI Registration
47. The application for FDI registration shall be as per the FDI Application Guidelines.
48. A separate application shall be submitted for each business activity.
49. The application for same activity in different locations shall fulfil the minimum
project cost and maximum foreign investor’s equity requirements separately for
each location.
FDI Registration Certificate (FDIRC)
50. The Department shall issue the FDIRC within one working week of receiving a
completed registration application.
51. The intent of issuing a FDIRC is to establish a foreign investor at par with a
domestic investor and to facilitate the processing of the investment proposal with
different agencies. A FDIRC does not construe approval of the proposed business.
52. The proponent shall bear any expenses incurred in seeking formal project approval.
In cases where a proposed FDI Business is rejected, the Royal Government shall
not be held liable for compensation of any expenses incurred by the investor.
53. The issue of a FDIRC may be delayed:
(a) if the Department, when considering an application for a FDIRC, requires
clarification from the concerned sectors;
(b) if the application submitted is incomplete or unclear.
8
Refusal of FDIRC
54. When an application for a FDIRC is not approved, the Department shall inform the
applicant in writing, giving the grounds for not issuing the Certificate.
Validity of FDIRC
55. The FDIRC shall be valid for a period of one year from the date of issue. During
this period, the proponent is required to submit documents for project approval. In
case the proponent is unable to submit required documents within this period for
genuine reasons, the Department may renew the FDIRC upon request of the
proponent. The validity of a FDIRC shall cease on:
(a) Surrender of the same by the investor; or
(b) Expiry of the period of FDIRC; or
(c) Rejection of the proposed business; or
(d) Issuance of formal project approval; or
(e) Cancellation by the Department.
Amendment of FDIRC
56. A FDI Business shall apply to the Department for change or amendment to the
Certificate. The Department shall assess the reasons for change/amendment. Upon
satisfaction and subject to the business surrendering the old certificate, the
Department shall issue a fresh FDIRC.
57. Following receipt of a FDIRC, the proponent shall incorporate the proposed
business under the Companies Act.
Business Approval
58. Priority Sector Activities
All FDI priority sector activities shall be approved by the Department upon
submission of required sectoral and environment clearances where required.
59. Other Activities
The Project Approval Committee shall assess and decide on the Other Activities
proposals.
60. Upon approval, the Department shall issue the letter of approval within five
working days. The approval shall clearly state the conditions and requirements to
be fulfilled during the operation of the business.
61. The investor shall obtain a Business Licence from the respective RTIOs within
three months from the date of issue of approval.
9
62. Sector Clearance(s)
Depending on the nature and type of activities, FDI Businesses may be required to
obtain sector clearance for FDI business approval. The terms and conditions in the
sector clearance shall form part of the requirements for compliance by the FDI
companies.
63. Downstream projects of FDI companies shall be treated as new projects and shall
be governed by terms and conditions similar to new FDI projects. However,
projects involving value addition to existing activities may be exempted of
minimum project cost requirement and the need to obtain FDIRC where the
investors and shareholding pattern remains same.
Rejection of Proposed Business
64. FDI Business proposal shall be rejected if:
(a) sectoral clearance has been refused; or
(b) the proposed project does not
i. meet the approval criteria; or
ii. conform to or comply with the provisions of these Rules and Regulations
and other laws of the country.
65. When the proposal is rejected, the Department shall convey this decision to the
investor/authorized representative of the proposed business along with reason(s)
for the rejection.
Amendment
66. An FDI Business may apply to the Department for any amendment or change of
any information of the approved project.
Suspension and Cancellation of a Business License
Suspension of Business
67. An FDI company may be imposed penalty or its business license suspended if:
(a) the business engages in activities other than those specified in the approval; or
(b) any conditions specified in the approval are breached; or
(c) the business fails to comply with any provisions of these Rules and
Regulations; or
(d) the business does not comply with or breaches any provisions/conditions of
any other legislations and by-laws of the country.
10
68. An FDI Business shall immediately cease to operate when its business license is
suspended. The suspension shall apply until the breach has been rectified and any
penalty imposed has been paid.
Cancellation of a FDI Business License
69. An FDI Business License may be cancelled in any of the following circumstances:
(a) on imposition of penalties, the company fails to comply with the penalties;
(b) on suspension of the business license, the company fails to rectify the
violation(s);
(c) information provided in the application form or in any other documents is
found to have been incorrect and designed to create a false impression of the
owners or ownership of the business or the nature of its activities;
(d) relevant Government agencies determine that foreign investor(s) of the FDI
Company had engaged in activities that interfere with or undermine the
authority of the Royal Government or are considered a threat to the security of
the country;
(e) the provisions/conditions of any other applicable legislations, by-laws or the
conditions laid down in a sector clearance is contravened and the sector
clearance is withdrawn.
70. Upon cancellation, a copy of the cancellation notice shall be sent to the relevant
agencies.
71. When a Business License is cancelled, the business shall immediately cease its
operations and commence winding up except when the case is under appeal and has
been granted an interim relief.
FDI FACILITATION
FDI Facilitation Committee
72. The Royal Government shall constitute a FDI Facilitation Committee to foster
inter-sectoral coordination and collaboration to promote FDI in the country. The
Committee shall:
(a) deliberate on issues in relation to overall FDI policy and regulatory
environment and provide recommendations;
(b) identify measures to enhance service delivery and foster “Whole of
Government” approach to FDI promotion;
(c) oversee and enhance investment promotion activities;
(d) provide policy directives on specific issues related to FDI; and
11
(e) review and revise Schedules as and when necessary.
73. The members of the FDI Facilitation Committee shall be as follows:
(a) Minister, Ministry of Economic Affairs – Chairperson;
(b) Secretary, Gross National Happiness Commission – Member;
(c) Secretary, Ministry of Finance – Member;
(d) Secretary, Ministry of Economic Affairs – Member;
(e) Secretary, Ministry of Labour and Human Resources – Member;
(f) Secretary, Ministry of Foreign Affairs – Member;
(g) Secretary, Ministry of Home and Cultural Affairs – Member;
(h) Governor, Royal Monetary Authority – Member;
(i) Secretary General, Bhutan Chamber of Commerce & Industry – Member;
(j) Head of Department, Department of Cottage and Small Industry – Member;
and
(k) Head of Department, Department of Industry - Member Secretary.
74. The Committee shall meet at least once a year. The Chairperson may call for
additional meetings as and when required.
75. Members from relevant agencies shall be co-opted as and when required.
76. The quorum for the Committee meeting shall be by simple majority.
77. The Department shall serve as the Secretariat of the Committee.
FDI Focal Officials
78. Relevant agencies of the Royal Government shall appoint FDI focal officials. The
designated FDI focal officials shall:
(a) be the point of contact for services related to FDI;
(b) coordinate and facilitate processing and issuance of clearances;
(c) coordinate the visit of foreign investors/business delegations to the respective
agency;
(d) participate in relevant meetings/events pertaining to FDI;
(e) provide updates on sector policies, laws, procedures related to FDI; and
(f) provide support/inputs on issues for discussion in the FDI Facilitation
Committee.
79. The Department shall convene coordination meeting with the focal officials at least
once a year.
12
Single Window Services
80. The FDI Division shall function as Investment Promotion Agency (IPA) and serve
as the point of contact for all FDIs;
81. Services shall be provided online through Integrated Business Licensing System.
In addition, FDI Division shall liaise with all relevant agencies through FDI focal
officials to provide the required services;
82. Agencies shall accord priority to FDI projects and fast track
clearances/permits/approval/license/authorizations;
83. Service charters shall be developed with each agency and the timeline for service
provision shall be strictly adhered to.
Project Approval Committee
84. The Project Approval Committee comprising the following members shall
deliberate and decide on proposals falling under “Other Activities”:
(a) Secretary – Chairperson;
(b) Head, Department of Cottage & Small Industry – Member;
(c) Head, Department of Industry – Member;
(d) Head, Department of Trade - Member; and
(e) Head, FDI Division – Member Secretary.
85. The Committee shall deliberate and decide on the proposals submitted.
86. The Committee shall meet as and when necessary.
87. The quorum for the Committee meeting shall be by simple majority of the
members.
88. The FDI Division shall serve as the Secretariat of the Committee.
Department
Powers of the Department
89. The Department shall have powers to:
(a) decide on issuance of a FDIR Certificate;
(b) decide on the proposals falling under priority sector;
(c) cancel or suspend a FDIR Certificate;
13
(d) enter business premises to monitor compliance with the conditions of
certificates or with the provisions of these Rules & Regulations and the FDI
Policy, 2019;
(e) impose penalties within the provisions of these Rules & Regulations.
90. Immunity of the Department
(a) No action shall lie against the Department or any officers working for the
Department in respect of any act done or omitted to be done in good faith in
the execution of the functions under these Rules and Regulations.
(b) The Department or any of its officers involved in the furnishing or supply of
information, electronically or otherwise, relating to a person registered under
these Rules & Regulations to any other person shall not be liable for any loss
or damage suffered by any person, including for the expenses incurred relating
to FDI proposal and application, by reason of any error or omission, of
whatever nature and however caused, if the error or omission is made in good
faith and in the ordinary course of the discharge of the duties of the Department
or its officers or has occurred or arisen as a result of any defect or breakdown
in the service or in any of the equipment used for the service.
FDI Division
91. FDI Division shall be strengthened to serve as an IPA as follows:
(a) The Division shall be supported by three functional units, namely, Promotion
& Advocacy, Investment Services, and Investment Facilitation Services;
(b) The Division shall be provided adequate resources to carry out the mandates
including a minimum of three officials under each unit.
Functions of the Division
92. The Division shall carry out the functions as follows:
(a) Promotion and Advocacy Services (Investment Promotion)
i. develop and implement investment promotion strategies and action plan;
ii. develop investment promotional tools;
iii. investor targeting and marketing (conduct investment
seminars/forums/business delegation, etc.);
iv. handle investor enquiries and facilitate investors’ visit;
v. conduct investment mapping and projects identification; and
vi. conduct research on FDI;
(b) Investment Services (Investment Generation)
i. One-stop service by liaising with focal points and missions abroad;
ii. Project handling (appraisal, evaluation and approval); ands
14
iii. legal services (investment treaties, dispute settlement, legal advice, etc.)
(c) Investment Facilitation Services (Investment Facilitation)
i. grievances handling;
ii. investor service centre for post approval services;
iii. investment retention and reinvestment;
iv. provide policy recommendations;
vii. infrastructure and property development supports;
viii. monitoring and evaluation; and
ix. conducting surveys and maintaining information system
Disposal of Investment
Transfer of Shares
93. Types of transfer allowed:
(a) Transfer of shares from a foreign investor to a domestic investor and between
domestic investors in an FDI company.
(b) Transfer of shares from one foreign investor to another foreign investor. In
such cases, if the transferee is a new partner, the transferor shall furnish to the
Department all such documents as required by a foreign investor at the time of
obtaining an FDIRC .
(c) Transfer of shares from a domestic investor to an existing foreign investor in
the FDI Company. However, such transfers shall not be allowed where the
company has availed the facility of purchasing convertible currency for capital
expenditure.
94. Subject to the fulfilment of the Lock-in-period, transfer of shares may be permitted
within the permissible range of minimum and maximum shareholdings.
95. In seeking approval for the transfer of shares the following shall be submitted to
the Department:
(a) consent letter from transferor and transferee clearly indicating the number of
shares, face value of share and the price at which the transfer is proposed to be
effected;
(b) fair Valuation Certificate from the stock exchange (for public listed companies)
or Chartered Accountant/recognized firms (for other companies) indicating the
current value of shares;
15
(c) copy of the shareholders resolution;
(d) share transfer agreement between the transferor and transferee; and
(e) if the proposed share transfer is to a new foreign investor, the FDI company
shall furnish to the Department all such documents as required for registration
of a new foreign investor at the time of obtaining an FDI Registration
Certificate.
96. Upon approval of the transfer of shares, the company shall submit a proof of
payment of the agreed value to the transferor within six months from the date of
such approval, following which recommendation to the Company Registry
Division to effect the necessary changes shall be made.
97. A copy of the share transfer approval shall be shared with RMA.
98. In case of a public listed company, in addition to seeking approval from the
Department, the transfer of shares shall be processed through the stock exchanges.
Disposal by Winding up/Liquidation
99. Winding up of the FDI company shall be permitted as per relevant provisions of
the Companies Act and Insolvency law.
100. The application for winding up/liquidation of the Company shall be submitted
to the Department along with the following:
(a) Shareholders resolution;
(b) Reasons of winding up/liquidation
101. The Company shall initiate winding up/liquidation with Company Registry
Division upon approval by the Department.
Dispute Settlement
102. All disputes arising between the parties shall be resolved using the option of
alternative dispute settlement mechanism as per Alternative Dispute Resolution
Act of Bhutan, 2013 and amendments thereto or the option of using mutually
agreed framework between the parties.
103. The disputing parties shall also have the option to adjudicate the dispute before
the Royal Court of Justice of Bhutan.
104. Any order or decree passed under the (102) shall be final and binding between
the parties, save and except when the order or decree is on contest before the
Royal Court of Justice.
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Appeals
105. An appeal on any decision of the Project Approval Committee and/or the Department
under these Rules & Regulations shall lie with the Minister. An appeal shall be
submitted within 15 days of the receipt of the decision by the aggrieved party. The
Minister may entertain an appeal, lodged beyond 15 days, if satisfied that the appellant
was prevented by sufficient cause from presenting the appeal within the stipulated time.
106. The memorandum of appeal shall specifically and succinctly disclose the grounds of
appeal.
107. The Minister shall, after making such further inquiry as may be necessary, and
according a hearing to the aggrieved party, pass such order in writing, as he/she thinks
just and proper which confirms, modifies or annuls the decision appealed against.
Monitoring
108. The Ministry/competent authority shall be responsible for the monitoring of FDI
Businesses. In addition, the relevant sectors shall monitor the FDI businesses
within the framework of their respective legislations, policies and rules and
regulations and the MoUs or agreements signed (if any). Among others,
(a) The Royal Monetary Authority shall:
i. monitor use of foreign exchange; and
ii. maintain and share data on FDI flows on biannual basis.
(b) The Ministry of Labour and Human Resources shall:
i. maintain FDI specific information on employment and
ii. monitor training and skills development of Bhutanese.
(c) The Ministry of Home & Cultural Affairs shall monitor and maintain
information on visas, permits and other immigration issues, and
(d) The National Environment Commission Secretariat shall monitor the
compliance of the business to environmental legislations.
109. Where ever possible the agencies shall carry out joint monitoring.
Reporting
110. All FDI Companies shall submit completed annual FDI Survey Form to the
Department as prescribed. Failure to submit the same shall be considered as an
offence and be liable for penalties.
17
Penalties
111. The FDI company shall be liable to penalties for any violations and shall be dealt
as per the provisions of the relevant laws, Rules and Regulations.
112. FDI companies violating the provision(s) of these Rules & Regulations shall be
liable for a penalty of up to Nu 25,000/- and, where the contravention is a
continuing one, a further fine of Nu 500/- per day shall be levied till the
contravention is rectified.
113. Non rectification of the contravention, non-payment of the penalty imposed or
repeat violations shall lead to cancellation of the license.
114. Non-compliance to 110 above shall be liable for penalties as per 112 above.
Delegation of Authority
115. The Minister may delegate, by written notice, any or all the powers, except the
power under Rule 105, 106 and 107 of appeal, under these Rules & Regulations
to agencies/officials of the Ministry and/or committees established for the
purpose.
Interpretation
116. In case of interpretation of these Rules & Regulations, the matter shall be
referred to the Ministry whose decision in interpreting the provision shall be
final and binding.
Definitions
117. Unless otherwise repugnant to any other laws:
(1) ‘Business’ means FDI business registered under these Rules and
Regulations
(2) ‘Certificate’ means FDI Registration Certificate (FDIRC) issued by the
Department.
(3) ‘Chairperson’ means the Chairperson of the FDI Facilitation Committee.
(4) ‘Competent Authority’ means an agency authorised by law to issue sector
license/clearance/authorization.
(5) ‘Companies Act’ means Companies Act of Bhutan, 2016 and amendments
thereto.
(6) ‘Currency of investment’ means the currency in which the investment was
made by the foreign investor.
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(7) ‘Department’ means the Department of Industry in the Ministry of
Economic Affairs.
(8) ‘Head of Department' means the Head of the Department of Industry.
(9) ‘Existing domestic entity’ means a business entity already established and
operating in the country and fully owned by Bhutanese.
(10) ‘Foreign Direct Investment (FDI)’ means the act of making an investment,
through an FDI Company, in a business activity in Bhutan.
(11) ‘FDI Business’ means any business activity, which is owned by an FDI
Company.
(12) ‘FDI Company' means a business incorporated or registered in the country
for the purpose of undertaking business activity.
(13) ‘Foreign Investor’ means
(a) person who is a citizen of a country other than Bhutan; or
(b) an entity which is incorporated or registered outside Bhutan.
(14) ‘Foreign Institutional Investor (FII)’ means entities such as pension funds,
insurance companies, saving institutions and investment companies that
pool together funds on behalf of others and invest those funds in a variety
of different financial instruments and asset classes.
(15) 'License’ means a business license issued by the Ministry.
(16) ‘Local administration’ means Dzongkhag or a Municipality overseeing
administration of the locality where the business is proposed or
established.
(17) ‘Minister’ means the Minister for Economic Affairs.
(18) ‘Ministry’ means the Ministry of Economic Affairs.
(19) ‘Other Activities’ means any business activity not listed in the Schedules
I, II, III and IV.
(20) ‘Priority Sector Activities’ means the activities listed in Schedules I, II and
III of these Rules & Regulations.
(21) ‘Project cost’ means the total capital cost of the project excluding the
working capital.
(22) ‘Sectoral clearance’ means approvals/permits/clearances/licences/
authorizations from relevant agencies as required.
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Schedule - I
PRODUCTION & MANUFACTURING
Priority List of Activities
Sl. Sector
Minimum
Project
Cost (Nu m)
Maximum Foreign
Investor’s Equity
(%)
Conditions/
Requirements
1 Agro based Production:
i. Agro processing
ii. Bio-technology
iii. Poultry
iv. Fisheries
v. Floriculture
vi. Health Food
vii. Animal Feed
viii. Bio-fertilizer & Bio
pesticides
ix. Meat processing
x. Apiculture
xi. Horticulture
xii. Dairy
20
74
None
2 Forest based Production 50 74 None
3 i. Solar and wind energy
ii. Other renewable
energy
20 Based on Alternative Renewable Energy
Policy, 2013
4 Water based products 50 74 None
5 Pharmaceutical products 50 74 As per sector policy
6 Other manufacturing:
i. Electronics
ii. Electricals
iii. Computer hardware
iv. Building materials
50
74
None
20
Schedule - II
SERVICES
Priority List of Activities
Sl. Sector
Minimum
Project
Cost
(Nu m)
Maximum
Foreign
Investor’s
Equity
(%)
Conditions/
Requirements
1 Education
i. Primary Education
ii. General Secondary Education
iii. Higher Education
300
74
As per sector policy
2 Health
i. All-inclusive specialised
hospital services
ii. Specialized Medical Services
iii. Specialized Dental Services
iv. Specialized Medical
Laboratory Services
v. Specialized Diagnostic-
imaging services
vi. Specialized Traditional
Medical Services
200
100
As per sector policy:
“All inclusive specialised
hospital services” applies
to hospitals providing at
least one procedure
presently referred outside
country and having its
own complete set of
diagnostic services and
laboratory facilities.
3 Hotels/Resorts - Five star &
above
200 100 None
4 Infrastructure Facilities on PPP
model
NA 100 As per the PPP Policy
5 Sports and recreation facilities 25 74 None
6 Wellness Centre 25 74 None
7 IT Park development 200 100 None
8 Research & Development 10 100 Established firms
employing a minimum of
5 experts
9 Head Office Services 5 100 None
10 IT/ITES:
i. inside IT Parks
ii. outside IT Parks NA 100 As per sector Policy
3 100
11 Construction Services 100 74 None
12 Waste management
i. Recycling of domestic waste
ii. Waste management services
25
74
None
13 i. Water supply and management
25 74 As per sector policy
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ii. Urban water treatment and
supply
14 4 Star Hotels 25 74 None
15 Technical and Vocational
Education
25 74 None
16 Consultancy Services 5 74 Established firms
employing a minimum of 5
experts and having presence
in more than two countries
or experience in
international market.
17 Financial Services As per FSA 51 As per Financial Services
Act
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Schedule - III
Priority List of Activities: Small Scale Activities
SL Sector Minimum Project
Cost (Nu. M)
Maximum Foreign
Investor’s Equity (%)
1 Value added Agro-based products
(based on domestic produces)
1. Fruit and vegetable processing
2. Food Processing
3. Herbal and medicinal products
4. Honey-based products
5. Spices
6. Confectioneries
5
49
2 Forest based Production
1. Value added hand-made paper
products
2. Waste wood products
3. Bamboo products
4. Cosmetics
5. Essential oil products
5 49
3 Others
1. Souvenir
2. Ceramic products
5 49
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Schedule – IV
NEGATIVE LIST
Sl. Activity
1 News Media
2 Distribution services including wholesale, retail and micro trade
3 Mining for sale of minerals in primary or raw form
4 Hotel 3 star and below
5 General Health Services
6 Industries that do not meet the Certificate of Origin requirements
7 Activities in the Prohibited List of the Royal Government
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Schedule - V
Criteria for Approval of Other Activities Proposals
Items Criteria
Value addition 40% or more
Foreign exchange Positive forex flows
Employment generation Clear long term plan
