Bhutan Birding and Heritage Travels

16 July, 2009 - Numerous financial incentives to encourage growth of new businesses, stimulate existing ones and attract external investment have been proposed in the economic development policy (EDP), which is yet to be finalised by the finance ministry.

Apart from tourism, businesses that earn in hard currency from exports of goods will not have to pay business and corporate income.

Businesses that undertake environmental-friendly upgradation will get 15 percent money back on their corporate tax. Expenditure incurred in research and development will be tax deductible and patent registration of new inventions will get up to Nu one million or 50 percent as refund. Companies that reinvest profits back into the business will get a maximum of 25 percent of the total reinvestment through tax deductions.

“These incentives are the heart of the policy as it will create the enabling environment,” said ministry of economic affairs (MoEA) PPD head, Yeshey Selden.

Businesses that open in remote areas will be given a 15-year tax holiday, in addition to the regular incentives. “One of the key aims is encouraging and supporting cottage and small industries (CSI),” said Yeshey Pelden. Cottage industries and cooperatives, established outside Thimphu and Phuentsholing municipalities, will get a 10-year tax holiday.

Cottage industries will receive rent-free land and structure for three years and preferences for purchase by the government. Around 25 percent of their loan interest will be subsidised and interest income earned by banks from loans to cottage industries will be exempted from income tax for four years.

CSI will also receive a subsidy of 25 percent of the cost of the plant and machinery with a maximum limit of Nu 250,000. Individual artisans will be given exemption of sales tax and custom duty on import of equipment.

In agriculture, all farm machinery and any other agricultural input could be exempt from sales tax and import duties. Commercial farming and processing will get a 10-year tax holiday.

IT parks are to get a 15-year tax holiday, IT service or good providers operating in the park a 10-year tax holiday and software companies with 80 percent national workforce will enjoy a five year tax holiday.

Media houses are to get exemption of sales tax and duty on import of specific professional equipment and, for the film industry, sales tax will be reduced from 30 percent to 10 percent on the sale of tickets till 2012, with no income tax on film production, do*****entaries and serials for public broadcasting.

Under tourism, tourists travelling east of the country will be provided with a 50 percent waiver on the daily royalty. High-end resorts will be given a 10-year tax holiday and all imported fittings will be duty free to encourage high quality hotels. Import of vehicles for tourism, high-end food products and camping gear will also be exempt from duties.

Import of heavy machinery for the construction industry will also be exempt from duties.

Educational and vocational institutes established outside Thimphu and Phuentsholing municipalities will get a 10-year tax holiday and exemption on various duties and taxes. The government will also provide stipends to trainees and bear 50 percent of training costs.

Newly established private health services will be eligible for a 10-year tax holiday and medical shops in remote areas will get a five-year tax holiday.

Bhutan chamber of commerce and industry (BCCI) president Topgyal Dorji said, “As of now, it’s a pretty good incentive package and won’t only benefit big manufacturers but also small businesses, will promote growth, create jobs and benefit the economy and the country in the long run.”

The president said that any loss of revenue in the short term, by way of incentives, was actually an investment by the government and would be more than made up for in long term.

The draft EDP is expected to be finalised with changes by August.

Tax holiday
15 years
for IT parks
for businesses in remote areas

10 years
commercial farms
cottage/small industries outside Thimphu/Phuentsholing
private health services and educational institutes

Others
50%
waiver on the daily royalty for tourists in the east

0%
taxes and duties for raw materials and Machinery for Industry
duties on agricultural machinery