Verified Facts
The tax rates in Bhutan range from 0% to 25% for personal income, with a corporate tax rate of 20% and a value-added tax (VAT) rate of 10%, making it essential for expats and businesses to understand the country's tax system to navigate their obligations.
Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. This is a general guide only.
Quick Facts
Tax System Overview
Bhutan's tax system is based on a territorial taxation principle, where only income earned within the country is subject to tax. However, for residents, including expats, worldwide income may be subject to tax, depending on their residency status. To be considered a tax resident in Bhutan, an individual must have a permanent home in the country and have been present in the country for at least 182 days in a tax year. Non-residents are taxed only on their Bhutan-sourced income.
The Bhutanese government has implemented various tax reforms in recent years to enhance the country's tax system and encourage foreign investment. The tax system is administered by the Department of Revenue and Customs, which is responsible for collecting taxes, enforcing tax laws, and providing taxpayer services. The country's tax laws are based on the Income Tax Act of Bhutan, which provides the framework for the taxation of individuals and businesses.
Personal Income Tax
| Income Bracket (BTN) | Tax Rate |
|---|---|
| 0 - 100,000 | 0% |
| 100,001 - 200,000 | 5% |
| 200,001 - 500,000 | 10% |
| 500,001 - 1,000,000 | 15% |
| 1,000,001 and above | 25% |
| Personal income tax in Bhutan is progressive, with rates ranging from 0% to 25%. Taxpayers are allowed to claim deductions for expenses such as interest on housing loans, education expenses, and medical expenses. Allowances are also available for dependents and charitable donations. Tax returns must be filed by June 30th of each year, and tax payments can be made online or through designated banks. |
Corporate & Business Tax
- The corporate tax rate in Bhutan is 20%, applicable to all companies, including foreign-owned entities.
- Small business incentives are available for enterprises with an annual turnover of less than BTN 1 million, with a reduced tax rate of 10%.
- Free zones have been established in certain areas, offering tax exemptions and other incentives for foreign investors.
- Companies must register with the Department of Revenue and Customs and obtain a tax identification number (TIN) to operate in Bhutan.
- Foreign companies must also register with the Royal Government of Bhutan's Ministry of Economic Affairs to obtain a business license.
VAT / Sales Tax
- The standard VAT rate in Bhutan is 10%, applicable to most goods and services.
- Reduced rates of 5% and 0% apply to certain essential goods and services, such as food, medicine, and education.
- Exemptions are available for export-oriented businesses, as well as for certain charitable and non-profit organizations.
- A tourist refund scheme is available for foreign tourists, allowing them to claim a refund of VAT paid on certain goods and services.
For Expats & Foreign Workers
- Tax residency rules apply to expats who have been present in Bhutan for at least 182 days in a tax year.
- Bhutan has double taxation treaties with five countries, including India, to avoid double taxation of income.
- Expats are required to register with the Department of Revenue and Customs and obtain a TIN to work in Bhutan.
- Social security contributions are mandatory for all employees, including expats, with a contribution rate of 5% of salary.
- Remittance rules allow expats to remit their income abroad, subject to certain conditions and tax clearances.
- Expats are also required to file tax returns with the Department of Revenue and Customs, declaring their worldwide income.
Crypto & Investment Income
- Investment income, such as dividends and interest, is subject to tax at the applicable income tax rate.
- Capital gains tax is applicable to gains from the sale of assets, including shares and real estate, at a rate of 10%.
- Cryptocurrency transactions are subject to tax, with gains from the sale of cryptocurrencies considered as capital gains.
- Taxpayers are required to declare their investment income and cryptocurrency transactions in their tax returns, and pay tax on any gains or income earned.