flag Bhutan Bhutan: Investing

FDI in Figures

The share of FDI in Bhutan's GDP remains relatively low compared to other developing countries. According to UNCTAD's World Investment Report 2023, the total stock was estimated at USD 419 million at the end of 2022, equivalent to around 15.9% of the country’s GDP, while inflows over the year amounted to a mere USD 11 million. Despite the recent rise in FDI inflows, Bhutan still is the Asian country attracting the least FDI, partially due to its small size. India is the largest investor (mainly in the manufacturing industry), followed by Singapore and Thailand. The Department of Industry has greenlit 12 FDI ventures, amounting to BTN 7,606.95 million in 2023. Among these, seven projects fall within the service sector, while the remaining five operate in manufacturing. 65% of the total FDI projects in the country are from investors based in Asia, followed by Europe (17%) and America (11%). The hotel sector remains the one with the highest number of FDI received till date (34.9%) followed by IT/ITES with 21.7%. FDI projects are mostly located in Thimphu, Paro, and Chukha Dzongkhags (data Department of Industry). As of December 2023, the reported FDI projects directly employed 4,327 Bhutanese individuals. When factoring in employees from projects yet to commence commercial operations and expatriate staff in operational FDI firms, the total employment figure rises to 4577.

Bhutan is undergoing a transformation in its economic framework, moving away from a reliance on the public sector for growth. Recognizing the significance of private-sector growth, the government is prioritizing economic diversification, especially given demographic changes that will introduce more young workers into the labor force. However, the development of a comprehensive regulatory framework is still underway, with enforcement of existing regulations proving inconsistent despite recent attempts at improvement. To address labor shortages, the government has launched various skilling and reskilling initiatives. In recent years, the Government relaxed FDI regulations and foreign investors are now allowed to buy land and invest in Bhutan with a minimum stake of 10%. In selected sectors, ownership is permitted up to 100%, and the pharmaceutical sector is now open to FDI. A measure has been introduced which makes it easier to exchange local currency into foreign currencies. However, outside of concerns to protect its culture and environment, geographical factors hold back the region: the country has a small territory, is landlocked and very mountainous, thus making infrastructure construction very difficult and costly. In addition, FDI development is limited by a substantially controlled system and inadequate policy in the areas of industrial license, trade, work, and finance. Bhutan ranks 26th among the 180 economies on the Corruption Perception Index 2023 and 108th out of 184 countries on the latest Index of Economic Freedom.

 

Country Comparison For the Protection of Investors

  Bhutan South Asia United States Germany
Index of Transaction Transparency* 4.0 5.8 7.0 5.0
Index of Manager’s Responsibility** 4.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 6.0 7.4 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 1111
FDI Stock (million USD) 553.7408.6419.4
Number of Greenfield Investments* 1.01.01.0
Value of Greenfield Investments (million USD) 81118179

Source: UNCTAD - Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

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Tax Rates

Sales Tax.
Goods and services tax is levied at 7%.
Zero-rated items include: exports; leased goods used outside Bhutan; certain goods and services supplied to non-resident warrantor; certain goods for use in international transport; services connected with land outside Bhutan; intellectual property rights for use outside Bhutan; international transport and related services; etc.
Company Tax
30% on net profit for state enterprise companies
25% on net profit for other companies
Withholding Taxes
Dividends: 10%; Interests: 0%; Royalties: 5%.
Social Security Contributions Paid By Employers
At least 5% of monthly basic earnings.
Other Domestic Resources
Department of Revenue and Customs
Overview of Bhutan's tax measures in response to Covid-19
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 
 

Individual Taxes

Personal Income Tax
Up to BTN 300,000 0%
From BTN 300,001 to BTN 400,000 10%
From BTN 400,001 to BTN 650,000 15%
From BTN 650,001 to BTN 1,000,000 20%
From BTN 1,000,000 to BTN 1,500,000 25%
From BTN 1,500,001 and above 30%
Surcharge (applies if the annual PIT is equal to or more than BTN 1,000,000) 10%
 
 

Country Comparison For Corporate Taxation

  Bhutan South Asia United States Germany
Number of Payments of Taxes per Year 18.0 26.7 10.6 9.0
Time Taken For Administrative Formalities (Hours) 52.0 273.5 175.0 218.0
Total Share of Taxes (% of Profit) 35.3 43.9 36.6 48.8

Source: Doing Business - Latest available data.

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Investment Opportunities

Tenders, Projects and Public Procurement
Asian Development Bank, Proposed Projects in Asia
DgMarket, Tenders Worldwide
Setting Up a Company
Consult Doing Business Website, to know about procedures to start a Business in Bhutan.
 

Business Setup Procedures

Setting Up a Company Bhutan South Asia
Procedures (number) 8.00 7.12
Time (days) 12.00 14.56

Source: Doing Business.

 
 
 

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Latest Update: May 2024

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