Print — gmc-tax-regime — BhutanWiki

Gelephu Mindfulness City (GMC) operates a tax and incentive regime that sits apart from the rest of Bhutan. Since the entry into force of the GMC Income Tax Act 2025, the Special Administrative Region (SAR) has run its own income-tax code, its own customs system at the border with the rest of the country, and a retained sales-tax regime that exempts GMC businesses from Bhutan's national Goods and Services Tax (GST). Tax is calculated and paid in US dollars rather than ngultrum, reflecting the SAR's positioning as an offshore-style financial and investment jurisdiction.^[1]

The headline parameters are a 17 per cent corporate income tax on profits, with a discretionary 0 per cent rate for companies in priority sectors that meet investment commitments; zero tax on capital gains, dividends and inheritance; tax holidays of up to ten years for qualifying foreign investors; and an indefinite carry-forward of losses. The regime is designed to compete with Singapore, the Abu Dhabi Global Market and other offshore financial centres rather than with neighbouring Indian or Bangladeshi jurisdictions.^[2]^[3]

Legal basis

The GMC tax regime rests on a cluster of GMC-specific statutes enacted under the authority of the Application of Laws Act 2024, which came into force on 26 December 2024 and gave the Gelephu Mindfulness City Authority the power to legislate within the SAR. The principal tax instruments are:

GMC Income Tax Act 2025 (Law No. 6 of 2025) — governs corporate and personal income tax inside the SAR.
GMC Customs Act 2025 (Law No. 2 of 2025) — establishes a customs regime distinct from Bhutan's Department of Revenue and Customs.
GMC Companies Act 2025 (Law No. 1 of 2025) and GMC Financial Services Act 2025 (Law No. 5 of 2025) — provide the corporate and regulatory scaffolding for taxable entities.

The Royal Government of Bhutan's own Income Tax of Bhutan (Amendment) Act 2025 continues to apply to the rest of the country, but not inside the SAR. As Kuensel put it, "Bhutan now operates under two distinct income tax systems," with the GMC framework providing "separate rules for individuals and businesses within the economic hub".^[4]

Corporate income tax

The standard corporate income tax (CIT) rate for GMC-domiciled entities is 17 per cent of profits, the same headline rate used by Singapore — a deliberate alignment given that 18 Singaporean laws were imported wholesale into the SAR under the Application of Laws Act 2024.^[3]

The regime is described by the GMC Authority as a "one-tier" corporate tax system: tax is charged only at the corporate level, and there is no further withholding on dividends paid to shareholders. The headline rate can be reduced to 0 per cent for companies in priority sectors, contingent on the scale and substance of their investment. Priority sectors identified by GMC include sustainable finance, green technology, digital assets, wellness and healthcare, education, creative industries, agri-tech and aviation.^[3]

Investors are additionally offered tax holidays of up to ten years and an indefinite carry-forward of losses, which allows future profits to be offset against early-stage operating deficits without a time limit.^[5]

Selected investment income is taxed at flat rates: royalties at 10 per cent and interest income at 15 per cent, both withheld at source. Capital gains, dividends and inheritance are not taxed at all inside the SAR.^[3]

In May 2026 the Authority extended the 0 per cent CIT rate, together with a six-month banking-fee waiver through DK Bank, to fintech and digital-asset firms entering through a fast-track licensing pathway. The scheme is open to firms already regulated in Singapore, Hong Kong or Abu Dhabi, and is one of the most visible uses of the discretionary zero-rate provision.^[2]

Personal income tax

The GMC Income Tax Act 2025 introduces a separate personal income tax (PIT) framework for individuals resident in the SAR. An individual is treated as a GMC tax resident if they live or work in the city for at least 183 days in a tax year. Tax is computed and paid in US dollars, in line with the rest of the GMC fiscal apparatus.^[6]

Specific PIT brackets and headline rates for GMC residents have not been published in detail at the time of writing; the GMC Authority has said that rates will be set lower than the comparable bands of the national Income Tax of Bhutan (Amendment) Act 2025, which runs a progressive schedule from 0 to 25 per cent with the first Nu 300,000 (~USD 3,500) of income exempt.^[4]

Foreign employees of GMC-licensed firms are eligible for income tax exemptions through 2030, a transitional incentive designed to encourage relocation while the SAR builds out its workforce.^[3]

One of the more unusual provisions is a national-service deduction. Bhutanese citizens who are GMC tax residents and who participate in Gyalsung, DeSuung or Pelsung receive a 100 US dollar deduction from their GMC tax bill, approximately Nu 9,500. The deduction was announced on 31 March 2026 by Tan Bin Eng, Managing Director of Tax, Immigration and Corporate Registry at the GMC Authority, who described it as "a strategic innovation to see how fiscal policy can multiply human capacity".^[6]

Customs and the GMC border

Under the GMC Customs Act 2025, the SAR operates a customs administration independent of Bhutan's Department of Revenue and Customs. Movement of goods between GMC and the rest of Bhutan is treated as an import-export transaction, with separate documentation and inspection at designated border check posts.^[1]

For GMC-registered businesses, imports are zero-rated for the purpose of Bhutan's GST to prevent double taxation, since GMC has retained the older sales-tax regime rather than adopting the national GST that took effect across the rest of the country in 2026. The Authority polices the zero-rating closely to prevent goods from being routed through GMC to evade national tax.^[7]

Two product categories have published rates of note for cross-border trade. Wood-based products exported from GMC into the rest of Bhutan attract a 5 per cent GST, while wood-based products imported into GMC from the rest of Bhutan are charged a 20 per cent sales tax. Local agricultural produce traded within the SAR is not taxed.^[7]

Investor incentives and capital movement

Beyond rate concessions, the GMC regime offers a package of non-rate incentives:

100 per cent foreign ownership in selected sectors, removing the joint-venture requirements that apply elsewhere in Bhutan.
Streamlined land leases granted directly by the Authority, with terms aligned to investment commitments.
Indefinite loss carry-forward, with no expiry clock on accumulated losses.
Foreign tax exemptions through 2030, covering both qualifying foreign employees and certain foreign-sourced income of GMC entities.
Multi-currency banking through DK Bank, the SAR's designated banking partner, which holds accounts in nine currencies and provides Bitcoin-backed corporate lending.^[2]

The package is similar in structure to the offshore-style regimes of the Dubai International Financial Centre and the Abu Dhabi Global Market, both of which influenced the SAR's design through the import of ten ADGM financial regulations under the Application of Laws Act 2024.^[1]

Excise, alcohol, tobacco and gambling

The published GMC legislation does not include a standalone excise act for alcohol, tobacco or gambling, and the Authority has not issued separate rates for these categories at the time of writing. Singapore-style controls on alcohol licensing and tobacco sale follow from the importation of Singaporean trading and consumer-protection statutes, but rate-level provisions specific to GMC are not yet in the public domain. The wider Bhutanese policy framework on tobacco, set out in the Tobacco Control Act, was historically among the strictest in the world, and it is not clear how it will be reconciled with the SAR's separate legal universe. Gambling, which is prohibited in Bhutan proper, has not been authorised in any GMC statute published to date.

Comparison with the rest-of-Bhutan tax system

The GMC regime differs from the national tax system in several structural ways:

Currency. GMC tax is assessed and paid in US dollars; national tax is in ngultrum.
Corporate rate. GMC's headline CIT is 17 per cent; Bhutan's standard CIT is 25 per cent under the Income Tax of Bhutan (Amendment) Act 2025.
Investment income. GMC charges no tax on dividends, capital gains or inheritance; the national system taxes dividends above Nu 300,000 (~USD 3,500) at 10 per cent.
Indirect tax. GMC retains a sales tax with zero-rated imports for registered businesses; the rest of Bhutan operates GST.
Customs. GMC has its own customs authority; the rest of Bhutan is administered by the Department of Revenue and Customs.
Foreign ownership. GMC permits 100 per cent foreign ownership in selected sectors; the rest of Bhutan generally requires majority Bhutanese participation under the Foreign Direct Investment Policy.

The SAR is therefore not a tax-favoured zone inside the Bhutanese tax system, but a parallel tax jurisdiction.

Outlook and unresolved questions

Several elements of the regime remain undocumented at the time of writing. The PIT brackets that apply inside GMC have not been published in detail; the exact substance test and investment threshold that triggers the 0 per cent CIT in priority sectors has not been disclosed in statute; and the relationship between GMC's customs perimeter and the Bhutan-India trade arrangements, which underpin most goods movement in southern Bhutan, has not been spelled out in public documents.

The Authority has indicated that the GMC regime may serve as a pilot for wider Bhutanese tax reform under what Tan Bin Eng described as a "One Country One System" objective targeted at 2065, although this remains a stated aspiration rather than a published timeline.^[6]

Tax and incentive regime of Gelephu Mindfulness City