Historical Background

• land
• property
• business income and
• consumption of good and services

First Major Tax Reform in 1989

• 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

• 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

• Rationalisation of tax structure
• Expansion of tax base
• Simplification of administrative procedures for compliance and transparency

DIRECT TAX STRUCTURE:

Personal Income Tax (PIT)

Rural Tax

• Land Tax
• House Tax
• Cattle Tax

Other Direct Taxes

• Motor Vehicle Tax
• Foreign Travel Tax
• Royalties
• Municipal Tax
• Business & Professional Licenses
• Health Contribution

Business Income Tax (BIT)/Corporate Income Tax (CIT)

BIT is a non-corporate business tax. It is levied @ of 30% on net profit. BIT is payable by all unincorporated business entities holding a trade license or registration certificate issued by the Ministry of Economic Affairs (MoEA).

CIT:

CIT is a corporation tax. It is levied @ of 30% on net profit. CIT is payable by those entities registered under the Company’s Act of the Kingdom of Bhutan, 2000.

BIT/CIT Registration:

Every business or company must register with the Regional Revenue & Customs Office (RRCO) from where the trade license or permit is issued or wherever the Head office is located within 3 months from the date of obtaining such trade license or permit.

Tax Filing:

Every business or company must file the tax returns (FORM BIT-2 for BIT payers and FORM CIT-2 for CIT payers), on a self assessed basis to the RRCO of registration before 31st March following the end of the income year.

Taxpayer Number (TPN):

TPN is a system generated alpha numeric number allotted to the taxpayers by the RRCO at the time of registration. It is issued in order to identify all tax transactions relating to a particular tax entity. TPN must be quoted as a reference in all the correspondences with the department to identify the taxpayer.

Personal Income Tax:

PIT is a tax levied on the personal income of an individual from any or more of the six sources namely; salary income, rental income, dividend income, cash crop income, interest income and income from other sources i.e. hire of privately owned vehicles, plants, machinery and from intellectual property rights.

Who is liable to pay Personal Income Tax?

• Bhutanese citizens
• Residents
• Any other persons earning income in Bhutan from the six sources mentioned above shall be liable to pay PIT

Who should register for Personal Income Tax?

All citizens above 18 years of age and residents having personal income from one or more of the six sources during an income year shall register by filling the registration FORM PIT-1. The duly filled registration form shall be submitted to the RRCO where you prefer to be registered as the taxpayer. In case of married couples, both the spouses must choose the same RRCO for registration.

How many regional offices are there to choose the most convenient RRCO for registration?

What are the primary documents required at the time of Registration?

A copy of the Citizenship Identity (CID) number for a citizen and Registration Permit Number (issued by the Department of Immigration and Census) for a resident is compulsorily required to enable you to register as the PIT Payer.

How often can the registration be changed?

There is no restriction imposed on the frequency of the change in registration. Anyone can change the registration as many times as you desire provided a written application is submitted to the RRCO of registration no later than 2 months before the end of the income year.

Who should file the tax return?

All citizens and residents having taxable income exceeding Nu. 100,000 per annum must file the tax return as per the FORM PIT-2 with the RRCO of registration before 1st March following the income year. An authorized representative can also file the tax return on behalf of the taxpayer

What are the main supporting documents required at the time of filing?

Salary Income

• Complete TDS Certificates from the employer with proof of PF and GIS deduction

• Complete TDS Certificates
• Ownership Certificate (one time unless the ownership is changed)
• Loan Statement for Interest paid on loans
• Receipt for Insurance premium, municipal taxes (Land and House tax) paid

• Complete TDS Certificates
• Loan Statement for Interest paid on Loans

• Complete TDS Certificates

• Complete TDS Certificates

• Proof of Insurance Premium paid
• Proof of donations made
• Proof of educational expenses claimed

• A copy of CID for first time filers
• Saving Bank Account Number
• Authorization letter if filed by representative

Tax Deducted at Source:

Purpose:

• To ease the burden of tax payment
• Ensure effective collection of taxes
• Timely mobilization of internal revenue
• To provide information on assessment

Refer TDS Guidelines for detailed information.

Tax Clearance Certificate (TCC):

Notifications:

• Notifications issued are written in PDF file format
• IT Act and Rules in PDF File format
• TDS Guideline in PDF File format
• PI Report for IYs 2007 & 2008 in PDF File format

Refer TCC Guidelines for detailed information.