An Infographic Overview of Key Reforms and Implications
Bhutan's government has introduced pivotal tax billsβIncome Tax, GST (Amendment), and Excise Taxβaiming to modernize the tax system, broaden the base, and enhance economic efficiency, despite an anticipated short-term revenue impact.
These bills form the core of a comprehensive tax overhaul effective 2025.
Nu 4.37B - 5.57B
Estimated Annual Loss
Primarily from direct tax concessions, intended to stimulate the economy and cushion GST impact.
Significant changes aim to provide relief to lower/middle-income earners and simplify taxation for small businesses.
The new seven-bracket system offers reduced rates for lower incomes. For example, the Nu 300,001-500,000 bracket is now taxed at 5%, down from 10% on a similar previous bracket.
Illustrative comparison of tax rates at different income levels.
34,397
Individuals to become tax-exempt due to BIT-PIT merger and rate rationalization.
These deductions aim to provide social support and encourage specific positive behaviors.
Reforms target stimulating investment and simplifying corporate taxation with a new uniform rate.
A new uniform CIT rate of 22% replaces previous rates of 30% for SOEs and 25% for other companies, aiming to enhance Bhutan's investment attractiveness.
Nu 2.95B
Projected annual revenue loss from eliminating this tax, benefiting corporate groups.
Nu 249M
Projected annual revenue gain from increasing the rate from 3% to 5%.
Set for July 2025, the Goods and Services Tax aims for a more efficient indirect tax system, though it brings significant changes to exemptions.
7%
To apply on all goods and services, replacing the old Sales Tax.
Nu 1.23B+
Annually from the GST (Amendment) Bill due to efficiency and revised exemptions. Broader estimates project Nu 3B-7.6B.
βοΈ Available
Businesses can claim GST paid on inputs, reducing tax cascading.
Many essential goods previously exempt will now attract 7% GST. This significantly broadens the tax base but may increase living costs.
Rice
Edible Oil
Salt
Medicines
Books
Mobile Phones
LED Lamps
Electric Vehicles*
*Note: While EVs move to GST net, the Excise Tax Bill proposes 0% excise for them.
A new online system by Data Torque Ltd. (NZ) is crucial for GST success, enabling registration, filing, and e-invoicing.
Simplified overview of the BITS process flow.
This bill maintains excise duties on specific goods like alcohol, tobacco, and certain vehicles, streamlining them into a separate law.
0%
Excise Duty on Electric Passenger Cars
60%
Excise Duty on "Other" unspecified passenger vehicles (HS Code 87.03)
2%
Typical Excise for Petrol/Diesel/Hybrid Passenger Cars
Strongly incentivizes EVs while heavily taxing certain other vehicle categories.
| Goods Category | Sample Item | Excise Tax Rate |
|---|---|---|
| Alcohol | Beer, Wine, Spirits | Nu 1200/litre alcohol content |
| Tobacco | Cigarettes | Nu 10 per NMB |
| Tobacco | E-cigarettes (inhalation) | 100% of value |
| Vehicles | Most Petrol/Diesel Cars | 2% of value |
Excise duties continue on goods with health or environmental considerations.
The reforms will create varied impacts across different segments of society and the economy.
The reforms extend beyond fiscal balances, influencing inflation, investment, and Gross National Happiness.
Short-term price increases expected due to broad-based GST. Direct tax cuts aim to mitigate this. Targeted support for vulnerable groups may be needed for food price hikes.
Reduced CIT (22%) aims to make Bhutan more competitive, attracting domestic and foreign investment. Complements existing FDI policies and fiscal incentives.
Reforms designed considering Gross National Happiness principles. Long-term impact on GNH domains (living standards, health, education, governance, ecology) will be crucial.
Successful implementation hinges on overcoming key challenges to realize the long-term vision of a modern, equitable, and efficient fiscal system.
The long-term vision is a fair, transparent tax system fostering private sector growth, investment, and innovation, aligned with GNH.