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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%
 
5% 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



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