Income Tax Bill of Bhutan 2025
The National Council (NC) has endorsed the implementation of the Income Tax Bill of Bhutan 2025 and the Excise Tax Bill of Bhutan 2025, recognizing them as major steps toward modernizing and simplifying Bhutan’s tax system. Alongside its endorsement, the Council has proposed a series of recommendations to ensure legal compliance, fairness, and administrative efficiency.
Supporting the Income Tax Bill 2025, the NC stated that the Income Tax Bill has the potential to streamline Bhutan’s taxation system through several key reforms. These include the merging of business income of individuals under the Personal Income Tax (PIT) framework with rationalized tax slabs, a reduction in the tax burden on small businesses, broadening of the tax base, and the introduction of fairness-enhancing measures such as strengthened international tax compliance and anti-avoidance provisions.
The bill is also expected to promote voluntary compliance, enhance competitiveness, and modernize tax administration through digital and streamlined processes.
Recommending changes in the date of commencement of the bill, one of the major concerns raised by the Council was the proposed enforcement date of 1st January 2026. The Council argued that this contradicts Section 46(B) of the Public Finance (Amendment) Act 2012, which mandates that any new or amended tax measures must take effect retrospectively from the date the bill is introduced in the National Assembly (NA). “The Council has therefore recommended amending the commencement date accordingly.”
While recommending on tax refunds, current Section 515 of the Income Tax Bill mandates the Department to pay 5 percent annual interest on delayed tax refunds. The Council recommended “increasing the interest rate to 15 percent per annum to protect taxpayer rights and ensure timely refunds.”
The Council further supported key provisions under Schedule 3 (Exempt Amounts) of the bill. These include: “Exemption of interest income from fixed deposits up to Nu 400,000 per income year for individuals not engaged in business activities; and Exemption of dividend income up to Nu 200,000 per income year for individuals not conducting business.”
Excise Tax Bill of Bhutan 2025
The Council also endorsed the Excise Tax Bill of Bhutan 2025, “noting its relevance in broadening the tax base, addressing issues of double taxation and tax evasion, and modernizing the excise tax system through digitalization.”
Similar to the Income Tax Bill, the Council expressed concern that the proposed implementation date of 1st January 2026 violates the Public Finance Act. “It recommended that the effective date of the Excise Tax Bill be changed to the date of introduction in the NA”.
In line with public health priorities, the Council “upheld the House’s decision to impose a 100 percent excise tax on electronic cigarettes and similar personal electric vaporizing devices.”
Additionally, recognizing the essential service provided by firefighting vehicles during emergencies, “the Council recommended a 0 percent excise tax on such vehicles.”
The NC emphasized that its support for the two tax bills is grounded in the broader objective of building a fairer, more efficient, and digitally integrated tax system for Bhutan.
“The recommendations aims to reinforce legal consistency, protect taxpayer interests, and ensure effective implementation of tax reforms in alignment with the goals of the 13th Five Year Plan,” it stated.
Tashi Namgyal from Thimphu
