This is it: Lyonpo Khandu Wangchuk and Lyonpo Wangdi Norbu takes a final look at the EDP document before making it public yesterday
The holy grail of Bhutan’s economic development is out
When the finance and economic affairs ministers released the 39-page Economic Development Policy yesterday, private sector representatives and journalists pounced into the spiral bound document for ‘what is in store.’
The search was for incentives that the document, considered to be the holy book of Bhutan’s economic future, had in nine pages: Plans to motivate the private sector, increase tax base, achieve self sufficiency and provide employment opportunities that will ensure a 10% growth rate instead of the present target of 9%.
“These incentives are at the core of the Economic Development Policy” said the finance minister, Lyonpo Wangdi Norbu.
General Incentives
Apart from tourism, businesses that earn hard currency from export of goods will not have to pay business and corporate income taxes for a period of 10 years if they are established between January 1, 2010 and December 31, 2019. A five-year tax exemption is offered for businesses established between January 1, 2004 and December 31, 2009.
Machines imported for manufacturing goods or providing services like computers, construction materials, agricultural equipments, tourism related gears and buses, high-end hotel fittings, passenger buses, and art equipments will be exempt of sales tax and custom tax.
Sales tax exemption will be provided for all permissible raw materials and primary packaging materials. In both cases, the incentives will be valid till December 2019.
Do you want to make your business eco-friendly? You get an income tax rebate on 15% of the upgradation expenses.
A piece of advice for Bhutanese businesses that want maximum profit in minimum time: companies that reinvest profits back into the business will see 25% of the total reinvestment as being tax deductible.
For all domestic procurement, local agencies will get an additional 5% preference over foreign bidders. Expenditure on Research and Development will be tax deductible and innovation or invention that results in a patent registration will get 50% cash subsidy on the expenditure incurred.
“All existing businesses which started commercial operation on or after January 1, 2007, will also be eligible for all incentives with effect from Jan 1, 2010,” the economic affairs minister, Lyonpo Khandu Wangchuk said.
Specific Incentives
The incentives mainly focusing on balanced development and cottage and small industries (CSIs) will provide for a 10-year tax holiday to cooperatives that open outside Thimphu and Phuentsholing but they have to be established between January 1, 2010, and December 31, 2015. An additional 10-year tax holiday will be given to CSIs established in the interior areas notified by the government based on poverty levels. Cottage industries will receive rent-free land and structure for three years and preferences for purchase by the government.
Sector Specific Incentives
Commercial farming and processing will also get a 10-year tax holiday. IT parks are to get a 15-year tax holiday. IT service providers operating in the park exporting 80% of their goods will get a 10-year tax holiday and software companies with 80% national workforce will enjoy a five-year tax holiday.
High-end resorts and even basic guest houses and lodges established between 2010 and 2015 will be given a 10-year tax holiday. Farmhouses will be exempt from income tax and licensing requirements but will have to register with TCB.
A reinvestment allowance of 25% of the total expenditure incurred in upgradation of hotels will be allowed. Sales tax will be charged on only actual discounted room rates for hotels maintaining computerized systems. As Bhutan gears to promote itself as a international convention destination, foreign participants of meetings and conventions will be exempt from daily tourist tariff.
For employment in priority areas government will provide stipend to trainees and also bear 50% of the training fees.
Educational and vocational institutes established outside Thimphu and Phuentsholing municipalities will get a 10 to 15-year tax holiday and duty and sales tax exemption of textbooks, buses and teaching aids.
Newly established high-end 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.
All 100% FDI must bring their own convertible currency; import of raw materials will be duty free for industries that earn their own foreign exchange and export Bhutanese products. Recycling plants will be exempt from CIT/BIT for 15 years, sales and custom duties and provided land at nominal lease.
There is a five-year tax holiday to taxi/car hiring service companies.
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