December 10, 2024
DOING BUSINESS IN BHUTAN: OPPORTUNITIES, CHALLENGES AND INSIGHTS INTO A UNIQUE MARKET
INTRODUCTION
Bhutan, situated in the heart of the Himalayas is a small country in South Asia bordered by India and China. Bhutan offers a distinctive and unique environment to businesses rooted in its allegiance to Gross National Happiness (‘GNH”). Bhutan in its process of improving its business environment, has been ranked 89th out of 190 countries in the World Bank’s latest Ease of Doing Business report. With rules and regulations prioritizing sustainability and cultural integrity, Bhutan provides business opportunities in the manufacturing, mining, agriculture, tourism, and renewable energy sectors.
ECONOMIC OVERVIEW
In 2023, Bhutan is a lower-middle-income nation with a projected GDP growth of 5.2%, driven by hydropower, tourism, and agriculture, which supports more than 60% of the population. Despite various challenges, its economy shows resilience, concentrating on diversification and development.
FOREIGN DIRECT INVESTMENT IN BHUTAN
As of 2024, the country has adopted a careful approach to foreign direct investment (“FDI”), which aims to balance its economic development with its philosophy of GNH. FDI policies in Bhutan limit foreign equity ownership to 49%. India is the key source of FDI in Bhutan and the investments from Thailand and Singapore are rapidly increasing.
ADVANTAGES OF DOING BUSINESS IN BHUTAN
Bhutan offers a unique business environment with its rich biodiversity, highly skilled and qualified workforce, adequate infrastructure, and political stability. The businesses in this country are also supported by low operational costs and an effortless tax structure.
MINIMUM ELIGIBILITY CRITERIA FOR DOING BUSINESS IN BHUTAN
To start a business in Bhutan, all investors must attain at least 18 years of age, register the business under the Companies Act of the Kingdom of Bhutan 2000, the investment should be made in US Dollars, and get work permits and visas to comply with immigration and employment regulations.
STEPS TO SET UP A BUSINESS IN BHUTAN
- Create a business plan that cautiously defines the business concept, analysis of the market, and financial predictions.
- Choose the structure of business i.e. sole proprietorship, partnership, or limited company.
- Select a distinctive and legally sound company name.
- Establish the company’s objectives and principles in the Memorandum of Association and the Articles of Association
- Obtain a Tax Identification Number from the Bhutan Revenue Authority.
- The business should be registered with the Registrar of Companies.
- To start a business, a license from the Ministry of Economic Affairs or relevant sector regulators has to be secured.
- Register a bank account of a business for financial transactions.
- Foreign investors must secure a work permit and visa from the Department of Immigration.
TAXATION SYSTEM IN BHUTAN
Bhutan’s taxation system is governed by the Income Tax Act of 2001 which characterizes progressive personal and corporate income tax rates (0%-30%) including a 10% Value Added Tax (“VAT”). It includes incentives for hydropower, agriculture, and tourism to encourage FDI in priority sectors. The Department of Revenue and Customs manages compliance, with a growing focus on digital tax administration.
ACCOUNTING STANDARDS
Bhutan follows the Bhutanese Financial Accounting Standards (“BFAS”), based on the International Financial Reporting Standards (“IFRS”), to guarantee transparency and consistency in financial accounting. The Bhutanese Institute of Certified Public Accountants (“BICPA”) is the regulatory and managing body for maintaining accounting standards.
EMPLOYMENT AND LABOUR LAWS
In Bhutan, employment contracts stipulate compensation levels, working hours, and benefits, and labour law is an instrument for safeguarding the rights of workers, including union rights and rights against child labour. For each day of work, the minimum wage in Bhutan is BTN 125 and imposes equal opportunity, prohibition of child labour, and social security benefits.
CONCLUSION
Bhutan offers a unique business environment for investors and has various opportunities in sectors such as hydropower, manufacturing, agriculture, and tourism. The country concentrates on ethical and economic growth, making Bhutan a perfect place for responsible investments.
HOW WE CAN HELP?
- Our team of professionals may guide you through the process of setting up a business in Bhutan. We can also ensure compliance with all requirements, including registration, licensing, tax obligations, employment, and labour laws.
- Our team offers advice to help set up successful businesses in emerging sectors.
- Our team of experts can conduct extensive market research to assist businesses in understanding and comprehending their target audience, industry trends, and potential competitors.
For more information or queries, please email us at
[email protected]
Key Contact
Surendra Singh Chandrawat
Managing Partner
