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 2021 World Investment Report, the total stock was estimated at USD 139 million in 2020. After turning negative in 2017 ( USD -9 million), FDI inflows recovered in 2018 when they reached USD 7 million. However, they declined to USD 3 million in 2019 and 2020, partly due to the global economic crisis triggered by the Covid-19 pandemic. 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.

Bhutan recorded a 40 per cent decline in foreign direct investment (FDI) in 2021. In 2021 65% of FDIs came from Asia, 22% from Europe, 10% from America, and around 3% from the Oceania region. Most of the FDI projects are located in the capital Thimphu. The service sector dominates the overall FDI composition with a 78 per cent share. The hotel sector has the highest number of FDI projects, accounting for 38 per cent in 2021. The share of FDI in the information technology (IT) or IT-enabled service sector increased to 21% in 2021 from 19% in 2019. Forty per cent of the FDI projects are concentrated in the capital Thimphu and the remaining are located in the dzongkhags, or districts, of Paro and Chukha. A total of 4,747 Bhutanese were directly employed by 57 operating FDI projects as of December 2020 (Department of Industry, Bhutan & Phnom Penh Post, 2022).       

The Government of Bhutan has been among the most active in South Asia in terms of introducing reforms, creating a public information and credit register and simplifying the procedures necessary for business establishment. In 2015, the Government relaxed FDI regulations and foreign investors are now able to buy land and can 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 an inadequate policy in the areas of industrial license, trade, work and finance. The shortage of skilled labour is also a hindrance to development. Furthermore, the government of Bhutan wishes to continue restricting FDI in certain sectors in order to avoid competition with local traders. Bhutan is ranked 89th out of 190 countries in the last World Bank's 2020 Doing Business Report, eight spots lower than a year earlier. However, the score is relatively high for the country's income category (lower middle income) and region (south Asia).

 

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 201920202021
FDI Inward Flow (million USD) 312
FDI Stock (million USD) 580.4553.7408.6
Number of Greenfield Investments* 0.01.01.0
Value of Greenfield Investments (million USD) 083117

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 2022

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