Contents

Taxation System in Bhutan

Historical Background

Before 1960:- Taxes were collected in kind and in form of Labour contribution. Taxes in kind were gradually phased out to be replaced by nominal monetized tax on:-

• land

• property

• business income

• consumption of good and services

First Major Tax Reform in 1989

Purpose:

• To take stock of various tax measures

• To develop a coherent and rational tax system

• To establish a system of tax in fair, equitable and efficient manner that minimises the need for frequent change.

• To fully document the system in a way that promotes tax payer awareness

Main features:

• BIT on net profit replaced 2% turnover tax

• Export income exempted

• Plant machinery exempted from sales tax and import duty

• other nuisance taxes were abolished

Tax Reform in 1992

Purpose:

• Rationalisation of tax structure

• Expansion of tax base

• Simplification of administrative procedures for compliance and transparency

DIRECT TAX STRUCTURE:

• Business Income Tax (BIT) 30% on Net Profit

• Corporate Income Tax (CIT) 30% on Net Profit

Personal Income Tax (PIT)

• Income Slabs                    Tax Rate

• 0 - 100,000                        0%

• 100,001 - 250,000              10%

• 250,001 - 500,000              15%

• 500,001 - 1,000,000           20%

• 1,000,001 and above          25%

Property Transfer Tax 5%

Rural Tax

• Land Tax

• House Tax

• Cattle Tax

Other Direct Taxes
Purpose:

• Motor Vehicle Tax

• Foreign Travel Tax

• Royalties

• Municipal Tax

• Business & Professional Licenses

• Health Contribution

Business Income Tax (BIT)/Corporate Income Tax (CIT)

BIT:
BIT is a non-corporate business tax. It is levied @ of 30% on net profit. BIT is payable by all unincorporated business entities holding a trade license or registration certificate issued by the Ministry of Economic Affairs (MoEA).

CIT:
CIT is a corporation tax. It is levied @ of 30% on net profit. CIT is payable by those entities registered under the Company's Act of the Kingdom of Bhutan, 2000.

BIT/CIT Registration:

Every business or company must register with the Regional Revenue & Customs Office (RRCO) from where the trade license or permit is issued or wherever the Head office is located within 3 months from the date of obtaining such trade license or permit.