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BASIC COUNTRY FACTS

Kingdom of Bhutan

Thimphu

  • Dzongkha
  • Nepali
  • Tshangla

771,608

Bhutanese ngultrum

.bt

+975

Bhutanese ngultrum

STATUTORY LABOR REQUIREMENTS

Probation Period

  • An employee who is employed for one year or more shall be on probation for 6 months days within which period either party may terminate the contract by giving the other party notice of 7 days.

Annual Leave

  • Employees who work for 6 months or more in continuous employment are entitled to paid annual leave. 
  • Annual leave entitlements accrue at a minimum rate of 1.5 days per month, or a minimum of 18 working days per year, such accrual to commence after the employee has completed 6 months of service.

Public Holidays

  1. Nyilo (2nd January)
  2. Traditional Day of Offering (25th January)
  3. Birth Anniversary of His Majesty the King (21st to 23rd February)
  4. Losar
  5. Birth Anniversary of 3rd Druk Gyalpo (2nd May)
  6. Lord Buddha's Parinirvana
  7. Birth Anniversary of Guru Rinpoche
  8. The First Sermon of Lord Buddha
  9. Blessed Rainy Day
  10. Dashain
  11. Druk Gyalpo Coronation Anniversary (1st November)
  12. Lhabab Duchen
  13. Anniversary of the 4th Druk (11th November)
  14. National Day (17th December)

Maternity Leave

  • A female employee shall be entitled to three months’ maternity leave in addition to other leaves on production of a medical certificate duly signed by a recognized medical practitioner in Bhutan
  • A female employee shall be entitled to maternity leave with salary subject to three confinements during the entire service of the employee.
  • In the event of miscarriage, a maximum leave of four weeks shall be granted on the production of a medical certificate from a recognized medical practitioner in Bhutan

Paternity Leave

  • Male employees are entitled to 10 working days of paid paternity leave

Sick Leave

  • Employees who work for 6 months or more in continuous employment are entitled to be paid sick leave. 
  • For full-time employees, sick leave entitlements accrue at a minimum rate of 5 working days per year, such accrual to commence after the employee has completed 6 months of service

Work Hours

  • The normal working hours for an employee of shall be:
    • 8 hours a day
    • 48 hours a week
    • 6 days a week

Overtime

  • An employee working overtime shall be paid overtime pay for the number of hours worked:
    • Normal rate of pay calculated on hourly basis for work other than between 10’O’ clock at night and 8’O’ clock in the following morning 
    • 1.5 times the normal rate of pay calculated on hourly basis for work between 10’O’ clock at night and 8’O’ clock in the following morning

Notice Period

  • A minimum of one month's notice shall be issued by the party intending to terminate the contract before expiry of the term. 
  • However, in the case of lecturers/teachers, three months’ notice shall be required.

 Severance 

  • An employee who retires on superannuation or after completion of 5 years’ service shall be eligible for receiving gratuity and other benefits
  • The amount of gratuity payable to an employee shall be an amount equivalent to one month’s last basic pay of the employee for every completed year of service with the employer times the number of years of his active service with the employer.

13th Month Salary in Brazil

  • No
  • There is no statutory requirement to pay the 13th or 14th month salary.
  • However, the employee can accumulate the holidays for a period of three years.
  • Additionally, upon satisfactory completion of one year of work the employee is entitled to a Gratuity payment.

INCOME TAX

  • Bhutanese citizens, residents and any other persons earning gross income exceeding Nu. 200,000 per annum in Bhutan from one or more of the six sources mentioned below shall be liable to pay PIT. 
  • The six sources of income are: 
  1. Employment Income
    • monthly basic salary allowances
    • fees & remuneration
    • bonus
    • commission
    • leave encashment
    • share of profits received by an employee
    • consultancy income by an non licensed consultant and
    • other benefits received free or at a concessional rate.
    2.Rental Income
    • land(s)
    • building(s)
    • house(s)
    • factory building(s)
    • warehouse(s) and
    • any other structures generating income.
     3. Dividend Income
    • Income received from holding of shares in a company registered in Bhutan.
    • However, dividend income does not include dividends received in the form of bonus shares. 
    • Dividend income exceeding Nu. 10,000 shall be subjected to TDS @ 10% on the whole amount.
    • Dividend income shall be taxed on receipt basis.
       4.Interest Income
    • Exempted from year 2016.
      5.Income from sale of Cash Crops
    • Income from cash crop means income earned in a year from sale of apple, orange and cardamom. 
    • The income shall be taxed on accrual basis
     6.Income from Other Sources
    • Income from other sources shall be taxed on accrual basis and its income is derived from any of the following sources:
    • Income from hire of privately owned vehicles, plants and machinery but excluding trucks and taxis;
    • Income from intellectual property rights such as copy rights, patent, trademark, design, model or any artistic work or scientific work.

 

Taxable Income

Tax Rate

Up to Nu. 200,000

0%

Nu. 200,001 to Nu. 250,000

10%

Nu. 250,001 to Nu. 500,000

15%

Nu. 500,001 to Nu. 1,000,000

20%

Above 1,000,000

25%

DEDUCTIBLE EXPENSES

Specific deductions/exemptions 

  • Income Sources Specific Deductions/Exemptions are as follows: -

Salary Income 

    • Less PF and GIS contributions.

Rental Income    

    • Less 20% on repairs and maintenance, interest payments, urban taxes and insurance premium.

Dividend Income 

    • Less Nu. 10,000 specific exemptions and interest on loans for shareholding.

Cash Crop Income  

    • Less 30% on Gross Cash Crop Income.

Other Income          

    • Less 30% on Gross Other Income.

General Deductions 

  • In addition, the following general deductions are given
  • Education allowance up to a max of Nu. 150,000 per child.
  • Life insurance premium.
  • Self-education allowances up to a max Nu. 150,000 p.a.
  • Donations up to a max of 5% of the total adjusted gross income.

Deductible Expenses

Specific deductions/exemptions

  • Income Sources Specific Deductions/Exemptions are as follows: -
Salary Income 
  • Less PF and GIS contributions.
Rental Income         
  • Less 20% on repairs and maintenance, interest payments, urban taxes and insurance premium.
Dividend Income 
  • Less Nu. 10,000 specific exemptions and interest on loans for shareholding.
Cash Crop Income  
  • Less 30% on Gross Cash Crop Income.
Other Income             
  • Less 30% on Gross Other Income.

General Deductions

  • Education allowance up to a max of Nu. 150,000 per child.
  • Life insurance premium.
  • Self-education allowances up to a max Nu. 150,000 p.a.
  • Donations up to a max of 5% of the total adjusted gross income.

IMMIGRATION

    • Only skilled persons and technicians not available amongst Bhutanese will be approved for recruitment and employment by the Labor Recruitment Committee.
    • Permit to recruit foreign worker will not be approved if the category of workforce requested is locally available. 
    • A foreigner who is between 20–50 years old only will be permitted for employment and will be issued with work permit. 
    • A Work Permit will be issued for a maximum period of 12 months at a time and should be produced for inspection by the Labor and Immigration Inspectors. 
    • The Work Permit will have information such as the foreign worker’s Name, Work Permit Number, Activity, and Validity of the Permit, the occupation in which the foreign worker is permitted to work, as well as the Employer’s Name and Address. 
  • The foreign worker is only allowed to work for the employer at a specific work site and in the occupation as stated in the Work Permit. 

Type of Visa/Permit

Documentation

Validity

Eligibility

Work Permit

  • Form ‘B(II)’ issued by Department of Immigration
  • Medical Fitness Certificate
  • Identification document (one of the following):
  • Passport
  • Election/Voters Card 
  • Identity card issued by Central Government and State Government.

12 months                                                                                                 

  • Only skilled persons and technicians not available amongst Bhutanese will be approved for recruitment and employment by the Labor Recruitment Committee.
  • A foreigner who is between 20–50 years old only will be permitted for employment and will be issued with work permit. 
  • Only those who have no criminal records and also who had not left Bhutan during his/her earlier employment without information/permission of the employer.
  • Only those who are physically and mentally fit and free from any communicable diseases supported by medical fitness certificate issued by a professional medical practitioner of a hospital in Bhutan.

VALUE ADDED TAX

  • In Bhutan, the sales tax rate is a tax charged to consumers based on the purchase price of certain goods and services. 
  • The Sales Tax Rate in Bhutan stands at 50 percent.

VAT

Standard Rate

50%

WITHHOLDING TAX

  • 10% withholding tax applies on Dividends
  • 5% withholding tax applies on royalties’
  • Interest income is not subject to withholding tax.


WHT

Dividends

10%

Royalties

5%

Interest

0%

TERMINATION

  • A minimum of one month's notice shall be issued by the Employer/Employee intending to terminate the contract before expiry of the term. 
  • However, in the case of lecturers/teachers, three months’ notice shall be required. 
  • In the event of failure to serve the notice in advance of the required period, the defaulting party shall pay to the other, the basic pay of the employee for the stipulated notice period.
  • A contract employee shall not be indispensable to the Government of Bhutan and hence shall be liable to be removed from service at any time when the Government finds his services redundant or on violation of any of these provisions.
  • An employee who retires on superannuation or after completion of 5 years’ service shall be eligible for receiving gratuity and other benefits
  • The amount of gratuity payable to an employee shall be an amount equivalent to one month’s last basic pay of the employee for every completed year of service with the employer times the number of years of his active service with the employer.
  • If at any time during his employment, the employee shall be tried for gross misconduct or breach or non-observance of any of the stipulation herein. 
  • The employee shall, at the option and discretion of the employer, forfeit the gratuity. 
  • In addition to such forfeiture, the employer may terminate the services of the employee forthwith and without any notice or payment in lieu thereof. 
  • Upon such termination, the employee shall not be entitled to claim any compensation or damages.

STATUTORY BENEFITS

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Paternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

PAYMENTS AND INVOICING

  • All citizens above 18 years of age and residents having personal income from one or more of the six sources during an income year shall register either online or by submitting the registration FORM PIT-1. 
  • In case of manual registration, the registration form must be submitted to the RRCO where you prefer to be registered as the taxpayer along with a copy of your Citizenship ID card.
  • All incomes falling within the purview of BIT, CIT, and PIT under the Income Tax Act of the Kingdom of Bhutan 2001, are subject to Tax Deducted at Source (TDS).
  • Tax Deducted at Source (TDS) is:
    • a preliminary estimate of tax liability payable on a Pay As You Earn (PAYE) basis.
    • deducted at source from the payments made to a taxpayer by a withholding agent and deposited to the nearest RRCO.
    • adjusted against the final tax liability.
    • not a separate or new form of tax, but a mode of collection on a current income basis.
    • intended to ease the taxpayers from the burden of having to pay tax at one time during the time of filing.
    • an important source of information for ascertaining income and expenditure of a taxpayer during assessments.

EASE OF DOING BUSINESS

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Bhutan ranked 91st in the World in 2019 in terms of ease of doing business.

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