Summary
- Section 43D of the Income Tax Act 2025 lets the designated officer approve a company as a "strategic and development company" and levy tax on income from a specified business at "a concessionary rate of not less than 5%" instead of the standard 15% (ss. 43D(1), 43(1)(a)).
- Approval is discretionary and depends on the designated officer being satisfied that it is "expedient in the public interest" (ss. 43D(1), (3)).
- The letter of approval fixes the qualifying business, the concessionary rate, the start date and the tax relief period (s. 43D(5)); the total relief period, including extensions, cannot exceed 20 years (s. 43D(7)).
- No company may be approved after 31 December 2030 (s. 43D(4)).
- Section 43D is in operation now.
- Approval can be revoked for contravention of the Act or any condition, and previously concessionary income can then be reassessed at the full rate (ss. 43D(11), (12)).
What the concession is
Companies in the Gelephu Mindfulness City Special Administrative Region (GMC) pay income tax at 15% on every dollar of chargeable income (Income Tax Act 2025, s. 43(1)(a)). All amounts in GMC tax law are in United States dollars: "$" means US dollars (s. 2AA).
Section 43D creates a negotiated exception. "Despite section 43", the designated officer may approve a company as a strategic and development company and "provide that tax at a concessionary rate of not less than 5% is to be levied and paid for each year of assessment upon the income of that company derived from a specified trade or business" (s. 43D(1)). The designated officer is the person appointed by the Druk Gyalpo as the officer designated for the purposes of the Act (s. 2(1)).
Three consequences follow from that wording. The concession is a reduced rate, not an exemption. The floor is 5%, and the Act sets no ceiling below 15%, so the rate could be anywhere from 5% upwards. And the concession attaches to income from a specified business, not to the company's income generally.
Its sibling is the founders company exemption under s. 13Y, a full exemption for up to 15 years confined to approved founders industries (see our guide to the section 13Y founders company exemption). Section 43D has a wider gateway and a longer maximum period, but a less generous outcome.
Who it applies to
Section 43D(2) provides that "any company" may apply to be approved for "a specified trade or business". "Company" means any company incorporated or registered under any law in force in GMC or elsewhere (s. 2(1)). The Act does not restrict the concession to a sector, an industry or a minimum size of business.
What the Act does require is a public-interest finding. The designated officer may approve a company only "where the designated officer is satisfied that it is expedient in the public interest to do so" (s. 43D(3)). The statute gives no list of criteria. Applicants should assume that the question the officer is asking is why a concessionary rate for this particular business serves GMC, and should build the application around that question.
The Gelephu Mindfulness City Authority lists eight priority industries for GMC (spiritual; health and wellness; education and knowledge; agri-tech and forestry; green energy and technologies; finance and digital assets; aviation and logistics; tourism). Section 43D does not refer to them, so a business outside them is not excluded, but a project that advances one will find the public-interest case easier to make.
How approval works
The application
The company makes "a written application to the designated officer, in such form and with such particulars as may be prescribed" (s. 43D(2)). The form and particulars are left to regulations. The Act does not specify an application fee, a processing time or a decision deadline.
Conditions
Conditions can come from two sources. Section 43D(1) refers to "such conditions as may be prescribed by regulations or as the designated officer thinks fit", and s. 43D(3) repeats that approval is "subject to such conditions as the designated officer thinks fit". The Act does not describe what those conditions might be. Whatever they are, they will be recorded in the letter of approval or in regulations, and they matter because a breach of any condition is a ground for revocation (s. 43D(11)(b)).
The letter of approval
Under s. 43D(5), the letter of approval must specify four things:
| Item | Provision |
|---|---|
| The qualifying business | s. 43D(5)(a) |
| The concessionary rate of tax on income from that business | s. 43D(5)(b) |
| The date of commencement of the tax relief | s. 43D(5)(c) |
| The tax relief period | s. 43D(5)(d) |
The letter is the operative document. It sets the rate, the scope and the duration, and every later question about the concession will start with its wording.
The rate: "not less than 5%"
The Act does not fix the concessionary rate. It sets a floor of 5% and leaves the actual figure to the designated officer (s. 43D(1)). Nothing in the section requires the same rate to be offered to every approved company.
The rate can also change during the relief period. Under s. 43D(6)(b), the designated officer may substitute "a different rate of tax of not less than 5%" from a date the officer determines, either on the officer's own initiative or on the company's application. A company cannot assume the rate in its letter is fixed for the whole period; equally, it may apply for a lower one.
The relief period and the 20-year cap
The tax relief period is set in the letter (s. 43D(5)(d)). It may be extended "for such further period as the designated officer may determine, subject to subsection (7)" (s. 43D(6)(d)). Subsection (7) provides that the total relief period "for a qualifying business, together with all extensions, must not in total exceed 20 years".
The 20-year cap is five years longer than the 15-year cap on the founders company exemption (s. 13Y(8)). As with s. 13Y, the cap is expressed to apply "for a qualifying business", so it attaches to the business named in the letter.
The commencement date may be moved earlier or later by amendment (s. 43D(6)(c)), and the description of the qualifying business may itself be amended (s. 43D(6)(a)).
Ring-fencing the qualifying business
The concessionary rate applies only to income "derived from a specified trade or business" (s. 43D(1)). Two rules police that boundary.
First, where the company carries on any other trade or business, s. 43D(9) requires it to maintain separate accounts for that "separate trade or business" in respect of the same accounting period. The income of each separate business is ascertained under the ordinary provisions of the Act (s. 43D(10)) and taxed at 15%.
Second, s. 43D(8) provides that the capital allowances in ss. 16, 17, 18, 19, 19A, 19B, 19D, 20, 21 and 22 "must be taken into account even though no claim for such allowances has been made" in determining the income of the qualifying business. A company cannot hold back its capital allowances during the concessionary period in order to use them against income taxed at 15% later.
For groups, the allocation of shared costs and intra-group pricing between the concessionary business and other activities will attract scrutiny. The arm's length rule (s. 34D), the transfer pricing surcharge (s. 34E) and the documentation requirement (s. 34F) apply to a strategic and development company as to any other GMC taxpayer.
Revocation and reassessment
Approval can be lost if the conditions cease to be met. Section 43D(11) allows the designated officer to revoke approval "with effect from a date determined by the designated officer" if satisfied that the company has contravened "any provision of this Act" or "any condition of its approval". The revocation date is not confined to the future.
Section 43D(12) then permits the Comptroller, subject to s. 74, to make an assessment or additional assessment on the company:
- if it appears that any income "ought not to have been taxed at the concessionary rate" (s. 43D(12)(a));
- following an amendment of the letter of approval (s. 43D(12)(b)); or
- following revocation (s. 43D(12)(c)).
Section 74(1) allows an assessment within the year of assessment or four years after it; s. 74(2) removes the limit where there is fraud or wilful default. The cost of losing approval is the difference between the concessionary rate and 15% on the income of the affected years, plus any penalties under the Act's general provisions.
The 31 December 2030 deadline
"No company may be approved as a strategic and development company after 31 December 2030" (s. 43D(4)). The deadline is on approval, not on the relief period. A company approved at the end of 2030 could, subject to the letter, enjoy relief for up to 20 years thereafter.
Because the deadline is fixed in the Act, neither regulations nor the designated officer can extend it. Companies planning a substantial project in GMC should treat the end of 2030 as a hard stop and allow time for the application, the officer's assessment and any negotiation of conditions.
Section 43D and section 13Y compared
| Feature | Section 13Y (founders company) | Section 43D (strategic and development company) |
|---|---|---|
| Relief | Full exemption | Concessionary rate of not less than 5% |
| Gateway | Business in an approved "founders industry" (s. 13Y(2)) | Any specified trade or business; public-interest finding (s. 43D(3)) |
| Maximum period incl. extensions | 15 years (s. 13Y(8)) | 20 years (s. 43D(7)) |
| Rate variable during period | Not applicable | Yes, to a different rate of not less than 5% (s. 43D(6)(b)) |
| Separate accounts for other business | Yes (s. 13Y(10)) | Yes (s. 43D(9)) |
| Capital allowances deemed claimed | Yes (s. 13Y(9)) | Yes (s. 43D(8)) |
| Last date for approval | 31 December 2030 (s. 13Y(5)) | 31 December 2030 (s. 43D(4)) |
| Commenced | Yes | Yes |
The Act does not say whether a company may hold both approvals. Each letter is tied to a specified qualifying business, so the question would only arise where a company has more than one business, and it would be for the designated officer to decide. A company whose industry is already carried on in GMC at an adequate scale will not qualify under s. 13Y at all, and s. 43D will be the relevant provision.
Practical checklist / Next steps
- Define the qualifying business precisely. The letter of approval will name it (s. 43D(5)(a)), and only income from that business gets the concessionary rate.
- Establish the company. Incorporate a GMC company or register a foreign company under the Companies Act 2025, with at least one director ordinarily resident in GMC (Companies Act 2025, s. 145(1)).
- Prepare the application in the prescribed form with the prescribed particulars (s. 43D(2)). Confirm current regulations before filing; the Act itself does not set fees or timelines.
- Build the public-interest case. Explain what the business brings to GMC and why a concessionary rate is expedient (ss. 43D(1), (3)).
- Consider the rate. The floor is 5%; there is no fixed figure. Be ready to explain the rate you seek.
- Review every condition in the letter of approval and in any regulations, and set up internal monitoring, because breach leads to revocation (s. 43D(11)).
- Maintain separate accounts for any non-qualifying activity from the first day of the relief period (s. 43D(9)).
- Model capital allowances as deemed claimed (s. 43D(8)).
- Diarise the relief period, the 20-year cap and any extension application (ss. 43D(6)(d), (7)).
- Lodge the application well before 31 December 2030 (s. 43D(4)).
Frequently asked questions
What rate will a strategic and development company pay?
The Act does not fix the rate. It provides for "a concessionary rate of not less than 5%" (s. 43D(1)), so the rate can be 5% or any higher figure below the standard 15%. The actual rate is specified in the letter of approval (s. 43D(5)(b)) and may be substituted later by amendment (s. 43D(6)(b)).
How long does the concession last?
The tax relief period is set in the letter of approval (s. 43D(5)(d)) and can be extended (s. 43D(6)(d)). The total period for a qualifying business, including all extensions, cannot exceed 20 years (s. 43D(7)).
Is s. 43D in force?
Yes. The Act is deemed to have come into operation on 26 December 2024, and s. 43D operates from that date. The application form and any general conditions are left to regulations.
Can the concession be withdrawn?
Yes. The designated officer may revoke approval, from a date the officer determines, for contravention of the Act or of any condition of approval (s. 43D(11)). The Comptroller may then reassess income that was taxed at the concessionary rate, subject to the time limits in s. 74 (s. 43D(12)).
What is the deadline?
No company may be approved after 31 December 2030 (s. 43D(4)). The relief period itself may run beyond that date.
Key takeaways
- Section 43D offers a negotiated rate of not less than 5% on income from a specified business, for a period capped at 20 years including extensions.
- Approval is discretionary and rests on a public-interest finding; the Act sets no sector restriction and no fixed criteria.
- The letter of approval governs the rate, the scope and the period, and all three can be amended by the designated officer.
- Separate accounts, deemed capital allowances and the reassessment powers in ss. 43D(8), (9) and (12) make compliance an ongoing obligation.
- The window for approval closes on 31 December 2030 (s. 43D(4)).
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 (Law No. 6 of 2025), ss. 1(3), 2(1), 2AA, 13Y, 34D, 34E, 34F, 43(1)(a), 43D, 74
- Companies Act 2025 (Law No. 1 of 2025), s. 145(1)
