Economic overview
Although Bhutan is endowed with various natural resources (dense forests, mineral deposits and basins that can be used for the production of hydro-electric energy), the use of these resources is still severely limited by the climatic conditions and the complex morphology of the territory. Agriculture remains the country’s main economic activity, with an incidence of 33.2% on the gross national product.
Another important source of revenues for Bhutan is the energy sector, which has developed strongly in recent years, which currently contributes to forming 41.9% of exports.
India continues to be the small kingdom’s main trading partner, purchasing 66% of its exports and supplying 94% of its imports. The country’s main imports are made up of electrical and mechanical machinery, lubricating oils and fuels, vehicles and related spare parts and cereals, while exports are essentially based on fruit and vegetable products (in addition to the aforementioned electricity). Other trading partners of the country are Bangladesh, Japan, Singapore and Thailand.
The economy contracted by 1.2 percent in FY20/21. Administrations area yield fell by 3.6 percent, as the travel industry stayed shut. While the hydro area upheld industry area development, development and assembling were antagonistically impacted by work deficiencies and high info costs. On the interest side, private utilization contracted because of homegrown COVID-19 regulation measures and lower earnings.
Normal expansion expanded from 3.0 percent in FY19/20 to 8.2 percent in FY20/21. While food expansion facilitated to 10.1 percent in June 2021, from a pinnacle of 17.0 percent in February 2021, non-food expansion sped up in FY20/21, in accordance with value advancement in India and higher fuel costs. High food expansion probably disintegrated the genuine wages of numerous provincial poor. This is relied upon to have prompted a slight expansion in the $3.20 neediness rate, from 10.3 in FY18/19 to 11.0 percent in FY19/20.
Main sectors of industry
AGRICULTURE
The economy of Bhutan is based on agriculture and forestry, constituting the economic base for more than 60% of the population, which consists largely of subsistence agriculture, livestock breeding and grazing, and in the mountainous areas especially of Yak. In the few fertile valleys of the South, rice, maize, root plants, citrus fruits, dairy products are produced.
THE INDUSTRY
The industrial sector is technologically backward, with most of the artisanal food production, and some industries involved in the production of cement and woodworking. Bhutan’s enormous hydroelectric potential is being exploited extensively – especially in collaboration with India, which needs to boost its economy – and with several projects under development. Thanks to this, wherever the electricity grid arrives, the population enjoys low-cost electricity and the hydroelectric sector has recently contributed significantly to the country’s budget, boosting Bhutan’s overall growth. It is often said that Bhutan’s hydroelectric power is its “gold” of the future.
TOURISM
Tourism in Bhutan began in 1974 when the government opened the country to foreigners. From then 274 tourists to an estimated 30,000 today, Bhutan has seen a cautious expansion, encouraging tourism inspired by ecotourism and responsible tourism models.
Tourism today contributes significantly to the labor market and the government is very attentive to the training and education of guides and tour operators in the country.
The strict control of tourism has spared Bhutan from many mistakes that other countries have suffered, following mass tourism, and for this reason it is often cited, in the context of sustainable tourism, as a positive example.
Taxation for businesses in Bhutan
The tax system is managed centrally by the Department of Revenue and Customs which is part of the Ministry of Finance. The Act of the Society of the Kingdom of 2001, with its subsequent amendments, represents the first modern and complete law on the taxation of income and VAT within the Kingdom, both as regards individuals, entities and companies . Tax legislation provides the financial administration with ample authority to inspect and request accounting, to confiscate assets and prosecute those who violate tax laws. Tax disputes are dealt with in the Royal Court of Justice.
The corporate income tax (CIT) is imposed on all companies registered under the Act of the Company of the Kingdom of Bhutan, with a rate of 30% on the net profit.
The business income tax (BIT) is a tax payable by all corporate entities without legal personality holding a business license or a registration certificate issued by the Ministry of Economic Affairs (MoEA) or any other competent authority. This tax also provides for the application of a rate of 30% on net profit.
Both the companies subject to the corporate income tax and the entities subject to the business income tax are required to submit their respective income tax returns using the appropriate forms (Form BIT-2 for the BIT and Form CIT-2 for the taxable persons of the CIT), within on 31 March following the end of the tax year covered by the return.
Entities and companies must register at the headquarters of the Regional Revenue and Customs Agency (RRCO) of the place where the commercial license is issued or where their registered office is located, within 3 months of obtaining the license itself for BIT taxable persons, within 3 months from the date of incorporation for CIT taxable persons.
Investing in Bhutan
Bhutan presented a “negative rundown” of areas shut to unfamiliar venture, any remaining exercises will stay open to FDI. 100% unfamiliar proprietorship is permitted in specific exercises like training, wellbeing, lodging and resorts and framework offices under administrations area.
Bhutan actually is the Asian nation drawing at all FDI (likewise because of its little size). This is in stamped difference to East Asia, where there have been huge streams. As of now, East Asia is the world’s top beneficiary of FDI, and nations like China, Vietnam, and Cambodia have profited from the inflow of FDI, as far as capital, innovation, information, and thoughts.
The Royal Government has an arrangement that permits FDI in both assembling and administration areas. This speculation system is administered by project-explicit arrangements and sectoral approaches subject to a few limitations.