Summary
- The Gelephu Mindfulness City (GMC) is a Special Administrative Region of about 4,046 km² in southern Bhutan, established by Royal Charter No. 1 of 2024 as "a fully independent and autonomous region" (Art. 1) governed by the GMC Authority (GMCA) (Art. 3).
- Land in GMC is made available on lease. The terms of occupation come from the lease itself.
- The Income Tax Act 2025 taxes rents and profits from property (s. 10(1)(f)), allows a deduction for the costs of obtaining or granting a lease of up to 3 years (s. 14ZE), allows vacant-property expenses where a lessee is being sought (s. 14ZF), and requires a buyer to withhold 15% from a non-resident seller of real property where the gain is trading income (s. 45D).
- The Property Tax Act 1960 and Stamp Duties Act 1929 apply in GMC, with modifications, through items 14 and 17 of Schedule A to the Application of Laws Act 2024.
- Contracts relating to interests in land are exempt from the Unfair Contract Terms Act 2026 (First Schedule), so lease exclusion clauses are not subject to the reasonableness test.
What this article covers
Every investor in GMC needs a site: a plot for a plant, a floor for an office, a parcel for a resort or a farm. This article explains what the published GMC sources say about how that site is obtained and held, and what tax and contract rules attach to it. It relies only on the Royal Charter, the GMC Acts, the Application of Laws Act 2024 and the official GMC website.
The rights and obligations of an occupier in GMC are set by the lease the occupier signs, read with the received common law and equity. That places a premium on the lease.
The constitutional and institutional setting
Royal Charter No. 1 of 2024, granted by the Druk Gyalpo on 10 February 2024, declares GMC "a fully independent and autonomous region in the Kingdom of Bhutan" with executive, legislative and independent judicial authority (Art. 1). The GMCA is the highest decision-making body, with corporate legal personality, chaired by the Druk Gyalpo (Art. 3). Article 4 empowers the GMCA to establish administrative and regulatory bodies and to enact laws with Royal Assent; Article 5 confers powers including fiscal, customs and tariff benefits and the grant of licences.
The official "Invest in GMC" page describes the practical route to a site. The Economic Development Group (EDG) "leads strategy and investments" and operates as a one-stop shop providing "end-to-end investor support", listed as "land identification, lease guidance, company incorporation, regulatory clearances", coordination with government agencies and investor aftercare. The page refers to leases being offered to investors. Proposals are submitted to the EDG. Corporate registration is handled by the Gelephu Corporate Registration Office (GCRO) and financial licensing by the Gelephu Financial Services Office (GFSO).
Two points follow from this rule. First, land is made available on lease. Second, the counterparty and gatekeeper for land is the GMCA through the EDG. The term, the rent basis, renewal rights and the form of lease are negotiated and recorded in each case.
What the lease must do
A GMC lease should be drafted as a complete code. The following matters are ones the lease will govern:
| Matter | Why it matters in GMC |
|---|---|
| Term, commencement and any renewal option | The Income Tax Act treats leases over 3 years differently for deductions (s. 14ZE(5)(a)) |
| Permitted use and priority-industry alignment | GMC's eight priority industries frame the EDG's investment strategy; the lease will record the approved use |
| Rent, review and currency | Every GMC Act reads "$" as United States dollars (for example Income Tax Act s. 2AA, Companies Act s. 4A); the lease should state its currency expressly |
| Development obligations and milestones | The lease sets what must be built and by when |
| Assignment, subletting and change of control | Transfers of leases in a business sale are treated specially for tax (s. 14ZE(5)(b)) and any restriction comes from the lease |
| Security of tenure and termination events | The lease's termination clause is the occupier's protection |
| Compensation on early termination or resumption | The lease should address it |
| Dispute resolution | "Court" in the GMC Acts is the judicial body the Druk Gyalpo designates; the lease should provide a mechanism (see our guide to dispute resolution in GMC) |
| Liability exclusions and indemnities | Contracts relating to interests in land are exempt from the Unfair Contract Terms Act 2026, so these clauses are enforceable as written |
The last point deserves emphasis. The First Schedule to the Unfair Contract Terms Act 2026 exempts contracts relating to interests in land from the Act's controls. Unlike a supply contract, where an exclusion clause must pass the reasonableness test in s. 11 of that Act, a lease's exclusions and limitations are enforced according to their terms under the common law received by s. 3 of the Application of Laws Act 2024. The signed document is what binds the parties.
Fixtures, plant and the Sale of Goods Act 2026
A site is rarely bare land for long. The Sale of Goods Act 2026, in force from 15 June 2026, defines "goods" to include "things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale", but "personal chattels" excludes "chattel interests in real estate" and fixtures except trade machinery (s. 1A(1)). A contract for the sale of plant and equipment that is to be removed from a site is a sale of goods, with the implied terms and remedies that Act supplies; a contract for the land itself, with fixtures, is not (see our guide to commercial contracts in GMC).
Tax on rent and property income
The Income Tax Act 2025 charges tax on "rents, royalties, premiums and any other profits arising from property" accruing in or derived from GMC (s. 10(1)(f)). A landlord, including an investor that sublets part of its site, is taxed on that income at the rate applicable to it: 15% on every dollar of chargeable income for companies (s. 43(1)(a)), and 0% for an individual who is not a citizen of Bhutan on chargeable income derived on or before 31 December 2030 (s. 43(1)(ba)).
Deducting the cost of getting or granting a lease (s. 14ZE)
A tenant that uses a property for its trade or business may deduct expenditure incurred "for the purpose of obtaining a lease, or renewing or extending a lease" of that property (s. 14ZE(1)). A landlord deriving rental income under s. 10(1)(f) may deduct expenditure incurred in granting, renewing or extending a lease (s. 14ZE(2)). Qualifying expenditure means "any commission, legal fees, stamp duty, advertising expenses and such other expenditure as may be prescribed", excluding anything already deductible under s. 14 (s. 14ZE(4)).
The limits matter for site leases. No deduction is allowed for a lease, renewal or extension "for a term that (excluding any option for the renewal or extension of the lease) exceeds 3 years" (s. 14ZE(5)(a)); for a lease acquired through the acquisition, sale, transfer or restructuring of a business (s. 14ZE(5)(b)); or for a sale-and-leaseback (s. 14ZE(5)(c)). A company in the business of letting property in which it holds a proprietary interest beyond legal ownership is also excluded from the tenant-side deduction (s. 14ZE(3)). The costs of negotiating a 30-year site lease from the GMCA are therefore not deductible under s. 14ZE, whereas the costs of a 3-year office lease are. The capital treatment of long-lease costs is governed by the Act's general rules, including the prohibition on deducting capital sums (s. 15(1)(c)).
Vacant property (s. 14ZF)
A landlord whose rental property is vacant for part of a basis period may deduct expenditure on "repair, insurance, maintenance or upkeep" while vacant, and property tax paid on it (s. 14ZF(2)), but only if the Comptroller is satisfied that the landlord "has made reasonable efforts in the circumstances to procure a lessee" (s. 14ZF(3)). Marketing records are the evidence.
The 15% withholding on real property gains (s. 45D)
Section 45D is the provision most likely to surprise a buyer of GMC real estate or of a long lease. Where a person's income from the disposal of real property is chargeable under s. 10(1)(a), that is, where the gain is a trading or business profit rather than a capital receipt, and the seller is a "non-resident person", the "designated person" must, before paying any part of the consideration, "immediately deduct therefrom tax at the rate of 15% on every dollar of such payment" (s. 45D(1)).
The mechanics are precise:
- Who withholds. The "designated person" is the advocate and solicitor acting for the buyer, if there is one; otherwise the buyer itself (s. 45D(6)).
- Who is non-resident. A "non-resident person" is one "not known to be resident in GMC to the designated person" (s. 45D(6)). The test is the buyer's knowledge; a buyer that has not established the seller's residence must withhold.
- What is real property. "Real property" means "any land and any interest, option or other right in or over any land", and "land" includes land of any tenure in GMC, buildings whether completed or not, and any estate or interest in them (s. 45D(6)). An assignment of a lease, or the grant of an option over a site, is within the definition.
- Notice and payment. The designated person must immediately notify the Comptroller of the deduction, using the electronic service unless the Comptroller permits otherwise, and pay the amount by the 15th day of the second month after the month of deduction; the amount is a debt due to the GMCA (s. 45D(2), (2A)).
- Joint owners. Where property is jointly owned, the joint owners are presumed to share the proceeds equally, and the designated person retains and pays over tax on the non-resident owner's presumed share (s. 45D(4), (5)).
- Branch exception. The section does not apply to a payment to a GMC branch of a non-GMC company that is a non-resident person (s. 45D(5A)).
Section 45D applies the general withholding provisions of s. 45(2)–(8) with modifications (s. 45D(3)). The withholding is on the gross payment, not the gain, and it is an obligation of the buyer's side; a buyer that pays a non-resident seller in full without withholding has a personal debt to the GMCA. Every GMC property transaction with a non-resident seller therefore needs a residence check, a s. 10(1)(a) analysis of whether the seller is trading, and a withholding mechanism in the completion arrangements.
Property tax and stamp duty: the Schedule A overlay
Two applied enactments apply in GMC through Schedule A to the Application of Laws Act 2024, "as amended from time to time, with modifications" (s. 4): the Property Tax Act 1960 (item 14) and the Stamp Duties Act 1929 (item 17). Unlike the Companies Act 1967 and the Income Tax Act 1947, which were deleted from Schedule A and replaced by GMC's own Acts, these two remain applied enactments. Their operation in GMC depends on the modifications made under the Application of Laws Act.
The GMC Acts confirm that both taxes are live concepts. The Income Tax Act treats "stamp duty" as a cost of obtaining a lease (s. 14ZE(4)(a)) and "property tax" as a deductible outgoing on vacant property (s. 14ZF(2)(b)). The Employment Act 2025 contemplates an employer being declared an agent for recovery of "property tax" payable by an employee (s. 26(b)). The rates under the applied Acts are subject to modification; Basnet Law confirms the current position for a specific transaction.
Structuring the site holding
Several GMC-specific points affect the choice of vehicle for holding a lease:
- Local presence. Every GMC company must have at least one director "ordinarily resident in GMC", which includes a holder of a valid work visa or work pass (Companies Act 2025, s. 145(1), (1A)). A site-holding subsidiary needs that director from incorporation.
- Tax incentives tied to the business. A founders company exemption (s. 13Y) or a strategic and development company concessionary rate of not less than 5% (s. 43D) attaches to an approved company carrying on a qualifying business; neither approval is available after 31 December 2030. The entity that holds the lease should be the one that carries on the approved business, or the group structure should be designed so that the incentive and the occupation costs sit together (see our guide to GMC tax incentives).
- Group relief. GMC companies may transfer losses within a group under s. 37B of the Income Tax Act, which is relevant where a property-holding company runs early-year losses.
- Partnerships. The Limited Partnerships Act 2026 allows a limited partner to hold property through an LP without taking part in management (s. 6), and the Limited Liability Partnerships Act 2026 gives an LLP separate legal personality and the capacity to hold property (ss. 4, 5), offering alternatives to a company for a joint venture site.
Practical checklist for securing a site
- Approach the EDG with a proposal aligned to a priority industry; ask for land identification and lease guidance as part of the one-stop process.
- Incorporate the holding entity through GCRO with a GMC-resident director in place (Companies Act s. 145).
- Treat the lease as the complete legal framework: term, renewal, use, rent and currency, development milestones, assignment, termination, compensation and dispute resolution must all be expressly agreed.
- Assume that exclusion and indemnity clauses in the lease will be enforced as written; UCTA does not apply to interests in land.
- Model the tax: rents under s. 10(1)(f); lease-cost deductions under s. 14ZE only for terms of 3 years or less; vacant-property deductions under s. 14ZF with marketing evidence.
- On any acquisition or assignment from a non-resident, establish the seller's residence and whether the gain is trading income; if withholding applies, deduct 15% at completion and remit by the 15th of the second following month (s. 45D).
- Confirm the property tax and stamp duty position under the applied Property Tax Act 1960 and Stamp Duties Act 1929 before signing.
- Diary the 31 December 2030 deadline for founders company and strategic and development company approvals if the site is for an incentivised business.
- Keep contracts for removable plant separate from the land documents so that the Sale of Goods Act 2026 implied terms apply to the equipment.
Frequently asked questions
How is land made available to investors in GMC?
Land in GMC is made available on lease.
How long can a GMC lease be?
The term is agreed in the lease. The Income Tax Act distinguishes leases of up to 3 years, whose acquisition costs are deductible under s. 14ZE, from longer leases, whose costs are not; that is a tax classification, not a limit on term.
Which law governs rights of occupation in GMC?
Rights of occupation come from the lease and the received common law and equity (Application of Laws Act 2024, s. 3), and GMC can rely on common law precedents from any common law jurisdiction.
When does the 15% withholding in s. 45D apply?
When a buyer (or the buyer's advocate and solicitor) pays consideration for real property, land, buildings, or any interest, option or right over land, to a seller not known to be resident in GMC, and the seller's gain is chargeable as trading income under s. 10(1)(a). The buyer's side must deduct 15% of each payment, notify the Comptroller and remit by the 15th of the second following month.
Are lease exclusion clauses subject to the Unfair Contract Terms Act 2026?
No. The First Schedule to that Act exempts contracts relating to interests in land, so a lease's exclusions, limitations and indemnities are enforced according to their terms under the common law.
Does property tax apply in GMC?
The Property Tax Act 1960 applies in GMC with modifications through item 14 of Schedule A to the Application of Laws Act 2024, and the Income Tax Act refers to property tax as a deductible outgoing on vacant rental property (s. 14ZF(2)(b)).
Key takeaways
- Land in GMC is made available on lease.
- The lease is the law of the site: term, use, rent, termination, compensation and disputes are whatever the document says, and UCTA does not police it.
- Rents are taxed under s. 10(1)(f); lease costs are deductible only for terms of 3 years or less (s. 14ZE); vacant-property costs need evidence of marketing (s. 14ZF).
- Buyers from non-resident sellers of real property must withhold 15% where the gain is trading income (s. 45D) and remit by the 15th of the second following month.
- Property tax and stamp duty operate through the applied Acts in Schedule A; confirm the modified position before completion.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Royal Charter No. 1 of 2024, Arts. 1, 3, 4, 5
- Application of Laws Act 2024 (Law No. 1 of 2024), ss. 3, 4; Schedule A items 14 (Property Tax Act 1960) and 17 (Stamp Duties Act 1929)
- Income Tax Act 2025 (Law No. 6 of 2025), ss. 2AA, 10(1)(a), 10(1)(f), 13Y, 14ZE, 14ZF, 15(1)(c), 37B, 43(1)(a), 43(1)(ba), 43D, 45, 45D
- Companies Act 2025 (Law No. 1 of 2025), ss. 4A, 145
- Unfair Contract Terms Act 2026 (Law No. 6 of 2026), s. 11; First Schedule
- Sale of Goods Act 2026 (Law No. 5 of 2026), s. 1A(1)
- Employment Act 2025 (Law No. 3 of 2025), s. 26(b)
- Limited Partnerships Act 2026 (Law No. 3 of 2026), s. 6; Limited Liability Partnerships Act 2026 (Law No. 2 of 2026), ss. 4, 5
