Bhutan operates a residence-based income tax system administered by the Department of Revenue and Customs (DRC). Resident individuals and companies are taxed on worldwide income, while non-residents are taxed only on Bhutan-sourced income. Under the new Income Tax Act 2025 (effective January 1, 2026), Corporate Income Tax applies at a unified 22% rate for all companies, down from the prior 25-30% structure, and a separate progressive Personal Income Tax applies to individuals.
The tax year is the fiscal year ending December 31. Individual income tax returns are due by the last day of February (February 28, or February 29 in a leap year), while business and corporate tax returns are due by March 31 of the following year.
22% standard rate for all companies, unified under the Income Tax Act 2025 (effective January 1, 2026), replacing a prior 25-30% structure (30% for most businesses, 25% for export-oriented companies).
Progressive, 0% to 25%; territorial system, though residents (including expats) may be taxed on worldwide income depending on residency status.
10% (Bhutan Sales Tax / GST-equivalent).
An individual must have a permanent home in Bhutan and have been present for at least 182-183 days in a tax year to be a resident. Residents, including expatriates, may be taxed on worldwide income depending on residency status, while non-residents are taxed only on Bhutan-source income - Bhutan's system is fundamentally territorial with a worldwide-income overlay for established residents. A non-resident entity with a permanent establishment in Bhutan is taxed as a resident entity at the standard 25% corporate rate (or the 30% business income tax rate, depending on structure).
A non-resident entity that establishes a permanent establishment in Bhutan, whether through a fixed place of business or a dependent agent conducting business on its behalf, becomes liable for Bhutanese corporate income tax on the profits attributable to that establishment. The permanent establishment is treated as a separate resident entity and taxed at the standard 25% corporate income tax rate (or the 30% business income tax rate where applicable), with no separate branch-remittance tax on after-tax profits sent to the foreign head office.
No CFC-style attribution provision was found in Bhutan's tax legislation. Bhutan's Income Tax Act was comprehensively modernized via the Rules on the Income Tax Act of Bhutan 2025 (Ministry of Finance, mof.gov.bt) - a detailed, modern code covering corporate amalgamation, withholding, and an EBITDA-based interest/loss framework, but with no CFC-style attribution chapter among its provisions. Given the code's recency and detail, this is a genuine current-law finding rather than a documentation gap.
An EBITDA-based interest deductibility limitation applies, under which a person's EBITDA is deemed to have a value of zero under specified circumstances defined in the Rules, restricting interest deductibility accordingly. This is a genuine, specific, primary-sourced mechanism - a materially more reliable finding than a generic secondary-source claim that "thin capitalization rules exist" without detail.
Bhutan classifies entities by their domestic legal form under the Companies Act and Income Tax Act rather than offering an elective check-the-box system, and no ATAD2-style anti-hybrid mismatch regime addressing double-deduction or deduction-without-inclusion outcomes has been identified in Bhutanese tax law.
No domestic FBAR-equivalent regime requires Bhutanese residents to separately disclose foreign financial accounts, and Bhutan is not currently a CRS participating jurisdiction, so it does not automatically exchange financial account information with foreign tax authorities under the OECD's Common Reporting Standard. US persons remain independently subject to FinCEN Form 114 (FBAR) and potentially Form 8938 regardless of Bhutan's own rules.
No dedicated participation exemption regime for dividends or capital gains from a qualifying subsidiary was identified; dividend income above Nu 30,000 is itself subject to a 10% tax for individual recipients rather than being exempted, indicating Bhutan does not operate a conventional participation exemption for shareholdings.
Bhutan has no tax treaty with the United States, so double taxation may arise for US persons with Bhutan-source income. Bhutan is, however, party to the SAARC Limited Multilateral Agreement on Avoidance of Double Taxation among South Asian states (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) and has a bilateral double taxation agreement with India specifically, both of which provide credit-based relief for tax paid in the other contracting state on income also taxed in Bhutan.
Bhutan has a very limited tax treaty network. Bhutan has double taxation treaties with 5 countries in total.