While it is often stated that 96% of Bhutan’s businesses operate as sole proprietorships, this figure actually encompasses a mix of sole proprietorships, partnership firms, and private limited companies. The government, however, emphasizes that the decision to incorporate and formalize lies with the private sector, while creating a policy environment designed to make the transition increasingly attractive.
“We have revised the corporate tax rate from 25% to 22%, significantly easing the financial burden on companies and providing certainty in taxation,” said an official from the Ministry of Industry, Commerce and Employment (MoICE). “Incorporation not only confers legal protection but also enhances credibility with banks, financial institutions, and international partners.”
Companies registered under the Companies Act of Bhutan 2016 gain broader access to financing through capital markets, including Initial Public Offerings (IPOs), bonds, and commercial papers at preferential interest rates. Yet many sole proprietorships—particularly in service sectors such as cafes, salons, and restaurants—continue to operate on models that do not immediately necessitate incorporation.
The government’s drive toward formalization has been reinforced through the Foreign Direct Investment (FDI) Rules and Regulations 2025, which require all foreign ventures to incorporate as companies, thereby strengthening Bhutan’s corporate governance culture.
“For that, we are deepening Bhutan’s capital market,” a spokesperson noted, highlighting that the nation’s market capitalization currently stands at only 29% of GDP, underscoring the need for greater investor participation and market depth.
Under the 13th Five Year Plan, the Corporate Regulatory Authority (CRA) is spearheading initiatives to expand the capital market and raise its profile among private firms and the public.
“Our objective is to position the capital market as a platform where savings are effectively channeled into productive business ventures,” said a CRA official.
Recent reforms have liberalized IPO criteria, including project-financing avenues that allow companies without strong profitability histories to list. On the debt side, CRA, in partnership with the Royal Monetary Authority (RMA) and the Royal Securities Exchange of Bhutan (RSEB), is piloting credit rating services to reduce the cost of issuing corporate bonds.
Currently, only 18 companies are listed on the exchange. To enhance participation, CRA plans to identify at least five private companies from a pool of 400 this year and guide them through the IPO process.
“If more companies tap into the stock market, it will not only ease their capital needs but also offer Bhutanese investors new opportunities to diversify their savings,” noted a senior broker at RSEB.
Officials also acknowledged that workforce and skills gaps remain among Bhutan’s most pressing challenges. Retaining skilled talent and reducing brain drain requires a coordinated, multi-agency approach, ensuring the local market and businesses have the human capital necessary to realize government initiatives effectively.
Within its mandate, MoICE is prioritizing job creation through the promotion of cottage and small industries (CSIs) and the creative sector—both highlighted as strategic priorities across its plans.
“Fostering entrepreneurship and creating opportunities at home is the most sustainable way to retain skilled Bhutanese,” the MoICE official said. “By supporting CSIs and the creative sector, we are building pathways for our youth to thrive domestically rather than seek opportunities abroad.”
Industry stakeholders echo this perspective, stressing that the right mix of capital access, robust legal frameworks, and skill development will be critical for Bhutan to cultivate a resilient, forward-looking economy.
Tashi Namgyal from Thimphu
