The GMC Tax Regime in Full: 15% on Companies, 0% on Non-Citizen Individuals Until 2030

Summary

• Income tax in GMC is charged under the Income Tax Act 2025 on income "accruing in or derived from GMC or received in GMC from outside GMC" (s. 10(1)). There is no separate capital gains tax.
• Companies and bodies of persons pay 15% on every dollar of chargeable income (s. 43(1)(a)); non-resident persons other than individuals, trustees and executors also pay 15% (s. 43(1)(c)).
• Individuals who are not citizens of Bhutan, resident in GMC or not, pay 0% on chargeable income derived on or before 31 December 2030 (s. 43(1)(ba)); so do Bhutanese citizens not resident in GMC (s. 43(1)(b)).
• Bhutanese citizens resident in GMC pay progressive rates from nil on the first $10,000 to 15% above $500,000 (s. 42; Second Schedule, Part A, Table 3).
• The first year of assessment runs from 1 January 2026 (s. 2(1)); tax is assessed on the preceding year's income (s. 35(1)); computations are filed in US dollars (s. 62A).
• Dividends paid by a GMC-resident company are exempt in the recipient's hands (s. 13(1)(za)).

The Act

The Income Tax Act 2025 (Law No. 6 of 2025) is deemed to have come into operation on 26 December 2024 (s. 1(1)). It repealed the Income Tax Act 1947 that had applied in GMC through item 9 of Schedule A to the Application of Laws Act 2024 (s. 1(2)).

"$" in the Act means the United States dollar (s. 2AA). The Act is administered by the Comptroller of Income Tax (s. 3).

What is taxed: the s. 10 charge

Section 10(1) charges income tax "for each year of assessment upon the income of any person accruing in or derived from GMC or received in GMC from outside GMC" under seven heads:

Two features shape the regime as a whole. First, it is territorial with a remittance limb: foreign income is taxed only if "received in GMC from outside GMC". Second, the charge is on income. Gains that are not "of an income nature" are outside s. 10(1)(g), which is why GMC has no capital gains tax as such (see our guide to s. 13W and share disposals). Employment income is defined widely in s. 10(2) to include wages, bonuses, allowances, the value of food, clothing or lodging, and employer-provided housing at the rent paid or the annual value (s. 10(2)(cb)). Gains from employee share options and similar rights are deemed employment income under s. 10(6).

Where income is sourced: s. 12

Section 12 deems certain income to be derived from GMC. A non-resident carrying on a trade partly in GMC is taxed on profits "not directly attributable to that part of the operations carried on outside GMC" (s. 12(1)). Employment income is derived from GMC where the employment is "exercised in GMC", whether or not it is received there (s. 12(4)). Interest, commission and fees in connection with a loan are derived from GMC where they are borne by a GMC resident or a GMC permanent establishment, or are deductible against GMC income (s. 12(6)). Royalties, payments for the use of know-how, management fees and rent for movable property are similarly deemed GMC-sourced where borne by a GMC resident or permanent establishment (s. 12(7)).

A "permanent establishment" is a fixed place where a business is wholly or partly carried on, including a place of management, branch, office, factory or workshop, and a person is deemed to have one where an agent in GMC habitually concludes contracts or secures orders on its behalf (s. 2(1)).

Who is "resident in GMC"

Residence decides which rate applies and whether foreign-sourced income is in scope. Section 2(1) gives two tests.

An individual is resident if, in the year preceding the year of assessment, he or she "resides in GMC except for such temporary absences therefrom as may be reasonable", and includes a person "who is physically present or who exercises an employment (other than as a director of a company) in GMC for 183 days or more" in that year. Presence for any part of a day counts as a day (s. 2(2)).

A company or body of persons is resident where "the control and management of whose business is exercised in GMC". Incorporation in GMC is not the test; the location of board-level decision-making is. A GMC company managed from abroad risks being non-resident, and a foreign company managed from Gelephu can be resident.

The rates

Companies and other non-individuals: s. 43(1)(a) and (c)

"Every company or body of persons" pays "tax at the rate of 15% on every dollar of the chargeable income thereof" (s. 43(1)(a)). "Company" means "any company incorporated or registered under any law in force in GMC or elsewhere", and "body of persons" covers unincorporated bodies but excludes companies and partnerships (s. 2(1)). Every non-resident person other than an individual, and every trustee and executor, is also charged at 15% (s. 43(1)(c)). There is no lower band and no small-company rate on the face of the Act.

Partnerships are transparent: income is computed at partnership level and assessed on the partners (s. 36), and the same applies to LLPs (s. 36A) and limited partnerships (s. 36C). Trustees may be charged at a lower rate, or not at all, on income to which a beneficiary is entitled (s. 43(2)).

Non-citizen individuals: s. 43(1)(ba)

"Every individual who is not a citizen of the Kingdom of Bhutan (whether resident in GMC or not)" pays "tax at the rate of 0% on every dollar of the chargeable income thereof which is derived on or before 31 December 2030" (s. 43(1)(ba)). Three points follow from the rate structure. The rate is 0%, not an exemption: the income remains chargeable, returns may still be required (s. 62), and the residence tests still apply. The test is citizenship, not nationality of passport used for entry. And the window is defined by when the income is "derived", so salary for December 2030 is at 0% while salary for January 2031 is not, unless the Act is amended.

Bhutanese citizens who are not resident in GMC are treated the same way (s. 43(1)(b)).

Bhutanese citizens resident in GMC: s. 42 and Table 3

Section 42(1) charges "every individual who is a citizen of the Kingdom of Bhutan and resident in GMC" at the rates in Part A of the Second Schedule. Table 3 provides:

Worked example: a resident Bhutanese citizen with chargeable income of $120,000 pays nil on the first $10,000, $1,000 on the next $20,000, $2,100 on the next $30,000, $3,600 on the next $40,000 and $2,200 on the remaining $20,000: $8,900 in total, an effective rate of about 7.4%. Resident citizens are also allowed an earned-income deduction of $1,500 or the earned income if less (s. 39(1)), and the spouse and other reliefs in s. 39.

Gross-basis rates on non-residents

Where a non-resident derives GMC-sourced interest or loan-related fees (s. 12(6)), or royalties, know-how payments or movable-property rent (s. 12(7)(a), (b), (d)), not through a GMC trade or permanent establishment, tax is levied at 10% on the gross amount (s. 43(3)); royalties and know-how payments under s. 12(7)(a) and (b) are at 5% (s. 43(3A)), subject to ss. 43Y and 43Z on approved foreign loans and royalties. Income from a profession or vocation carried on in GMC by a non-resident individual whose principal place of business is abroad, or by a foreign firm, is taxed at 15% of the gross amount (s. 43(4)).

Withholding: the payer's obligations

The gross-basis rates are collected at source. A person paying interest to a person not known to be resident in GMC must deduct tax at 15%, or at the s. 43(3) or (3A) rate where those apply, and account for it to the Comptroller (s. 45(1)). Section 45 is applied to royalties, management fees and similar payments (s. 45A), to remuneration paid by a company to a non-resident director (s. 45B, at 15%), to income of non-resident professionals (s. 45F), and to gains from real property transactions (s. 45D). Employers must deduct tax from wages and salary at source (s. 44B).

For the 0% class of individuals the arithmetic is simple, but the mechanics are not optional: an employer of a non-citizen employee still operates s. 44B, and the deduction is at the rate the Act produces.

Exempt income: s. 13

Section 13(1) lists exempt income. The provisions most relevant to a GMC business and its staff are:

• Dividends. "Any dividends paid by any company resident in GMC" are exempt (s. 13(1)(za)). The Act does not use the phrase "one-tier"; the effect is that profits are taxed once at 15% at company level and distributions are not taxed again in the shareholder's hands.
• Bank deposit interest. Interest on deposits with an approved bank in GMC is exempt for non-resident individuals and for non-resident non-individuals without a GMC business or permanent establishment (s. 13(1)(t)), and for any individual (s. 13(1)(zd)).
• Individuals' investment income. Interest from debt securities, annuity income, life-policy income and distributions from authorised unit trusts derived from GMC by an individual are exempt, except where derived through a partnership in GMC or from carrying on a trade or business (s. 13(1)(ze)).
• Institutions in the First Schedule (s. 13(1)(e)) and registered charities (s. 13(1)(zm)).

Further exemptions for income from debt securities sit in s. 13(1)(a), (aa), (b), (ba), (bb) and (bc).

Computing the bill: from statutory income to tax payable

The mechanics of assessment are conventional. Statutory income for a year of assessment is the income of the preceding year from each source (s. 35(1)); a person who makes up accounts to a day other than 31 December may be directed to use that accounting year (s. 35(4)). Deductions are allowed for outgoings and expenses "wholly and exclusively incurred" in producing the income (s. 14(1)), and capital allowances for plant and machinery are given under ss. 19 and 19A, including a 100% write-off by election for computers and prescribed automation equipment (s. 19A(2)). Assessable income is statutory income less trade losses and other Part 7 deductions (s. 37(1), (3)); chargeable income is assessable income less reliefs (s. 38). Tax computations must be denominated in US dollars (s. 62A), with a functional-currency alternative where accounts are kept in another currency (s. 62B).

Returns are furnished when the Comptroller requires them by Gazette notice or written notice (s. 62), and tax is payable within one month after service of the notice of assessment, whether or not an objection is lodged (s. 85(1)). The Comptroller may disregard transactions whose purpose or effect is to avoid tax (s. 33), with a surcharge (s. 33A), and related-party dealings must be at arm's length (s. 34D) with documentation (s. 34F).

Incentives that lower the 15%

Two headline incentives sit alongside the flat rate, and both close to new approvals after 31 December 2030. An approved founders company in a "founders industry" can be exempt on its qualifying income for a total period of up to 15 years (s. 13Y; no approval after 31 December 2030, s. 13Y(5)). A strategic and development company can be approved for a concessionary rate "of not less than 5%" (s. 43D; no approval after 31 December 2030, s. 43D(4)). Others include the finance and treasury centre rate (s. 43E), the fund exemptions (ss. 13O, 13OA, 13U) and the family-owned investment holding company exemption (s. 13T). The Act also provides for advance rulings (s. 108 and the Seventh Schedule).

Practical checklist / Next steps

1. Fix residence: confirm where the company's control and management sits, and count days for each individual (s. 2(1), (2)).
2. Classify every individual by citizenship: non-citizens and non-resident citizens are at 0% to 31 December 2030 (s. 43(1)(b), (ba)); resident citizens use Table 3.
3. Map income by s. 10 head and by source under s. 12, including foreign income that will be "received in GMC".
4. Set up s. 44B payroll deduction and s. 45 withholding on interest, royalties, non-resident director fees and non-resident professionals.
5. Keep books in US dollars or document a functional currency (ss. 62A, 62B); confirm the accounting year-end for s. 35.
6. Assess eligibility for s. 13Y or s. 43D before the 31 December 2030 cut-off.

Frequently asked questions

What is the corporate tax rate in GMC?

15% on every dollar of a company's chargeable income (Income Tax Act 2025, s. 43(1)(a)). The same rate applies to bodies of persons, to non-resident entities and to trustees and executors (s. 43(1)(c)). Concessionary rates of not less than 5% (s. 43D) and a full exemption (s. 13Y) are available on approval.

Is personal income tax 0% in GMC?

For individuals who are not citizens of Bhutan, yes: 0% on chargeable income derived on or before 31 December 2030, whether or not they are resident in GMC (s. 43(1)(ba)). Bhutanese citizens resident in GMC pay progressive rates from nil to 15% under s. 42 and Table 3.

Are dividends from a GMC company taxed?

Dividends paid by a company resident in GMC are exempt income in the recipient's hands (s. 13(1)(za)). The company has already paid 15% on the underlying profits.

When does the GMC tax year start?

The first year of assessment is the twelve months commencing 1 January 2026 (s. 2(1)). Income is assessed on the preceding year (s. 35(1)), so the first year of assessment covers income of 2025 from the Act's commencement.

Does foreign income get taxed in GMC?

Only if it is "received in GMC from outside GMC" (s. 10(1)), or deemed GMC-sourced under s. 12. Section 10L sets the rule on gains from foreign assets.

Key takeaways

• One statute, one flat 15% corporate rate, no capital gains tax as such, and USD filing.
• 0% for non-citizen individuals and non-resident citizens on income derived on or before 31 December 2030; Table 3 for resident citizens.
• Residence turns on control and management for companies and on 183 days or residing for individuals.
• Dividends from GMC-resident companies are exempt; withholding applies to interest, royalties and non-resident directors' fees.
• The s. 13Y and s. 43D incentives close to new approvals after 31 December 2030.

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

• Income Tax Act 2025, ss. 1, 2(1), 2(2), 2AA, 3, 10(1), 10(2), 10(6), 10L, 12(1), 12(4), 12(6), 12(7), 13(1)(a)–(bc), 13(1)(e), 13(1)(t), 13(1)(za), 13(1)(zd), 13(1)(ze), 13(1)(zm), 13O, 13OA, 13T, 13U, 13Y, 14(1), 19, 19A, 33, 33A, 34D, 34F, 35, 36, 36A, 36C, 37, 38, 39, 42, 43(1)–(4), 43D, 43E, 43Y, 43Z, 44B, 45, 45A, 45B, 45D, 45F, 62, 62A, 62B, 85, 108; Second Schedule, Part A, Table 3
• Application of Laws Act 2024, Schedule A, item 9