The National Assembly (NA) on May 29, 2026, endorsed the Agreement between the Kingdom of Bhutan and the Republic of Singapore on the Elimination of Double Taxation, with lawmakers describing the treaty as a major milestone for Bhutan’s international economic engagement and a key institutional foundation for the Gelephu Mindfulness City (GMC) project.
During the third reading of the agreement, the NA emphasized that the treaty would strengthen investor confidence, enhance cross-border trade and investment, and deepen economic cooperation between Bhutan, Singapore and the GMC Special Administrative Region (SAR).
Member of Parliament (MP) from Nyisho-Sephu constituency, Kuenga Kuenga said the agreement represented an important step in building the legal and fiscal architecture needed to support Bhutan’s emerging international investment ambitions.
“The Agreement marks an important milestone in Bhutan’s international economic engagement and represents a significant step in strengthening the legal and fiscal foundations for cross-border investment between Bhutan and Singapore,” he said.
He added that the treaty carries particular strategic significance for the GMC initiative, which aims to position Bhutan as a major regional hub for sustainable investment, finance and innovation.
“It is also an important development for GMC as it builds the institutional architecture required to attract high-quality international investors, companies, financial institutions, family offices, and professional service providers,” Kuenga said.
The agreement seeks to eliminate double taxation on income arising from cross-border economic activities between Bhutan and Singapore while clarifying taxation rights for both jurisdictions. The arrangement is expected to provide greater certainty for investors and businesses operating across the two countries.
Under the treaty, taxes paid in one jurisdiction can be credited against tax liabilities in the other jurisdiction, thereby preventing the same income from being taxed twice. The agreement also includes mechanisms for exchange of tax information and measures to prevent treaty abuse and fiscal evasion in line with international standards.
The treaty contains several provisions aimed at facilitating international investment and financial flows.
Withholding tax on dividends has been capped at zero percent for qualifying companies and five percent for other dividend income. Interest and royalty payments will generally face withholding tax rates capped at five percent.
The agreement also establishes Permanent Establishment (PE) rules that determine when a business entity becomes taxable in another jurisdiction. Under the provisions, a construction-related permanent establishment would generally be triggered after six months of activity, although projects within GMC would receive an extended threshold of 12 months.
Similarly, a services-based permanent establishment would arise if services are provided for 120 days within any 12-month period.
One of the most notable features of the agreement is the formal recognition of the GMC SAR within the treaty framework.
This provision reflects Bhutan’s effort to integrate GMC’s distinct fiscal and regulatory framework into international investment and tax cooperation arrangements while maintaining consistency under a unified bilateral agreement.
The treaty also incorporates anti-tax avoidance measures designed to counter Base Erosion and Profit Shifting (BEPS), which refers to practices where companies shift profits across jurisdictions to reduce tax liabilities.
In addition, both governments have committed to the exchange of tax information between authorities to improve transparency and strengthen cooperation in combating tax evasion.
According to the agreement, where a resident of Bhutan earns income from Singapore that may be taxed in Singapore under the treaty provisions, Bhutan will allow the Singapore tax paid to be deducted as a credit against Bhutanese tax liabilities, subject to Bhutanese tax laws.
However, the credit cannot exceed the portion of Bhutanese tax attributable to the income earned in Singapore.
Similarly, residents of the GMC SAR earning taxable income from Singapore would be allowed to credit Singapore taxes paid against GMC tax liabilities.
The treaty further provides additional provisions for dividend income involving companies holding at least 10 percent ownership stakes in companies operating across the jurisdictions.
Reciprocal arrangements apply to Singapore residents earning income from Bhutan or GMC, with Singapore agreeing to allow Bhutanese or GMC taxes paid to be credited against Singapore tax liabilities.
Such provisions are viewed critical in reducing tax uncertainty and lowering barriers for international businesses considering investment in Bhutan and GMC.
The treaty is also expected to complement Bhutan’s broader economic diversification strategy at a time when the country is seeking to attract greater foreign direct investment, strengthen international partnerships and support large-scale development initiatives such as GMC.
The agreement with Singapore , one of Asia’s leading global financial and investment centers, could help improve Bhutan’s attractiveness to international investors seeking predictable tax arrangements and regulatory clarity.
The agreement was formally signed on May 12, 2026 in Singapore.
Finance Minister Lekey Dorji signed the treaty on behalf of the Royal Government of Bhutan and the GMC SAR, while Jeffrey Siow, Acting Minister for Transport and Senior Minister of State for Finance, signed on behalf of the Government of the Republic of Singapore.
Tashi Namgyal, Thimphu
