Payments to bhutan

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Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2014 A CABLE & FIBRE COMPANY WHICH GOT A TURNKEY PROJECT IN BHUTAN.

THE WIRES USED IN THE PROJECT IS SENT BY THE COMPANY HIMSELF FROM INDIA, HOWEVER FOR LABOUR, INSTALLATION & COMMISSIONING PURPOSE IT GIVES CONTRACTS TO CONTRACTORS IN BHUTAN.

WHETHER THE PAYMENTS MADE BY THE COMPANY TO THOSE CONTRACTORS ATTRACT ANY PROVISIONS OF TDS.

Querist : Anonymous

Querist : Anonymous (Querist)

24 December 2014 dear experts,
please reply

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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09 August 2024 When dealing with payments to contractors in Bhutan for services like labor, installation, and commissioning, the following aspects must be considered concerning TDS (Tax Deducted at Source) and the relevant tax provisions:

### Key Points on Payments to Contractors in Bhutan

#### 1. **Nature of Payments and Taxability:**
- **Service Type:** Payments made for services such as labor, installation, and commissioning are generally considered as fees for technical services or contract services.
- **TDS Applicability:** Payments made to non-residents for such services may attract tax liability under the Income Tax Act, even if the services are performed outside India. However, the applicability of TDS depends on various factors including the nature of the services and the provisions under the relevant Double Taxation Avoidance Agreement (DTAA) between India and Bhutan.

#### 2. **DTAA Between India and Bhutan:**
- **Double Taxation Avoidance Agreement (DTAA):** India and Bhutan have a DTAA which specifies how income is taxed to avoid double taxation. Under this agreement, the taxability of payments made to contractors will depend on the nature of services and the specific articles in the DTAA.
- **Article on Technical Services:** Typically, payments for technical services or management services might fall under Article 12 (Fees for Technical Services) or Article 7 (Business Profits) of the DTAA. In many cases, the DTAA will outline the rate of tax to be applied or may provide exemptions.
- **Tax Liability:** You need to review the DTAA to determine if such payments are taxable in India, and if so, at what rate.

#### 3. **Procedure for TDS Deduction:**
- **Form 15CA and 15CB:** If TDS is applicable based on the DTAA or domestic tax laws, the company must follow the procedures for remittance to a non-resident. This typically involves:
- **Filing Form 15CA:** To declare the details of the payment to the tax authorities.
- **Obtaining Form 15CB:** A chartered accountant's certificate confirming that the tax has been deducted or that no tax is payable as per the DTAA.

#### 4. **TDS on Payments to Contractors in Bhutan:**
- **TDS Rates:** If applicable, TDS needs to be deducted at the rate specified in the DTAA or as per the domestic tax provisions. For example, if the payment qualifies as "fees for technical services," the applicable rate under the DTAA should be used.
- **Compliance:** Ensure compliance with Indian tax laws, including deducting tax at source, depositing it with the government, and filing the appropriate returns.

### Summary Steps:

1. **Review the DTAA:** Examine the India-Bhutan DTAA to understand the taxability and applicable rates for payments made for services.
2. **Determine TDS Applicability:** Based on the nature of services and DTAA provisions, determine if TDS needs to be deducted.
3. **File Necessary Forms:**
- **Form 15CA:** For declaring details of the payment.
- **Form 15CB:** For certification from a chartered accountant regarding tax deduction or exemption.
4. **Deposit TDS:** If applicable, ensure that TDS is deducted and deposited with the government.

### Practical Example:

- **Scenario:** A company in India pays $10,000 to a contractor in Bhutan for installation services.
- **Action:**
- Review the DTAA to see if such payments fall under any specific articles and whether TDS applies.
- If TDS is applicable, calculate and deduct the appropriate amount based on the DTAA rate.
- File Form 15CA and obtain Form 15CB to process the payment.

For accurate guidance tailored to your specific situation, consulting a tax professional or a chartered accountant who specializes in international tax and compliance is highly recommended.

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