Taxation System in Bhutan

Aggregated by the Bhutan Chamber of Commerce and Industry

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 monetised tax on :-

land
property
business income and
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

First Major Tax Reform in 1989
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 and Streamlining/simplification of procedures in line with the development objective enshrined in 7th FYP.

Tax Reform in 1992
Guiding principles :-

Rationalisation of tax structure
Expansion of tax base
Promotions of savings and investments
Correct trade imbalances
Ensure equity
Simplify administrative procedures for compliance and transparency

EXISTING TAX STRUCTURE
DIRECT TAX: (Urban Tax and Rural Tax)

30%

BIT/CIT on net Profit

The following rates are applied on the Net Taxable Income:

First Nu.100,000 (basic exemption) - Nil

Next Nu.150,000 - 6%

Next Nu.250,000 - 9%

Next Nu.500,000 - 12%

Nu.1000,001 & above - 15%

property transfer

Rural Tax :

Land & House tax
Cattle tax

INDIRECT TAX : (BST, CUSTOMS DUTY, EXCISE DUTY)

Bhutan Sales Tax :	0% to 100% depending on the nature of commodities
Customs Duty :	0% to 100% depending on the nature of commodities
Excise Duty :	On distillery products and aerated water
Royalties :	Royalties on Forestry products, mines, minerals and Tourism industries
Other Taxes:	Tax on export of goods in primary form such as timber Motor Vehicle Land and house tax