If the new Income Tax Bill of Bhutan 2025 is endorsed in this Parliament session, every taxpayer in the country will be paying less tax than in the previous years. The finance minister today introduced the new bill, which will replace the Income Tax Act of the Kingdom of Bhutan 2001. The proposed bill merges Business Income Tax under the Personal Income Tax and introduces a 5 per cent tax cut.
The finance ministry this time proposes an overhaul of the Income Tax Act of the Kingdom of Bhutan 2001 and is expected to replace the 24-year-old Income Tax Act. It proposed merging business income tax under the personal income tax and streamlining income tax slabs.
The Income Tax Act of 2001 was last amended in 2020. The amendment raised the PIT exemption slab from Nu 200,000 to 300,000 and increased the tax rate from 25 to 30 per cent for the highest income bracket, along with 10 per cent surcharge on income equal to or more than Nu 1 M.
Under the Income Tax (Amendment) Act 2020, individuals earning between Nu 300,000 to 400,000 paid 10 per cent tax.
The new bill, however, proposes a 5 per cent tax for those earning between Nu 300,000 to 500,000 annually.
The rates will then rise across five brackets, with a maximum of 30 per cent for income exceeding Nu 3.5 M.
Finance Minister Lekey Dorji said, “Merging the Business Income Tax with the Personal Income Tax will exempt around 35,000 taxpayers. It will reduce the number of registered taxpayers from over 120,000 to 106,000.”
However, the minister acknowledged that the new slabs and rates may cause an initial revenue loss between Nu 4.3 to 5.5bn. The merger alone could reduce revenue by over 250 M.
The finance minister says this change will benefit the economy in the long term. The bill is scheduled for further deliberation in the coming weeks.
Along with the Income Tax Bill, the minister also introduced the Excise Tax Bill of Bhutan 2025 and the Goods and Services Tax Bill 2025.
Deki Lhazom/Samten Dolkar
Edited by Sangay Chezom
