Bhutan: New GST regime to replace existing sales tax framework

Bhutan is set to implement its long-awaited goods and services tax (GST) regime on January 1, 2026, replacing the existing sales tax framework.

The GST rollout follows years of delay due to technical challenges with the Bhutan integrated taxation system (BITS). The GST Amendment Law 2025, passed by Parliament, confirms a standard GST rate of 5%, reduced from the originally proposed 7%. The regime retains provisions imposing a GST registration obligation on nonresident providers of “B2C imported services” to Bhutanese consumers.

Registration

Nonresidents are required to register for GST if their gross sales exceed BTN 5 million in the previous 12 months, BTN 2.5 million in the previous six months, or are expected to exceed BTN 5 million in the upcoming 12 months.

Registration must be completed within 30 days of the month following the period in which the threshold is exceeded. Nonresidents must appoint a local representative in Bhutan for GST registration.

There is a provision for compulsory registration: when the tax authority has objective evidence that a person is required to be registered for GST and that person has not applied for registration within the prescribed period, the tax authority shall notify the person to register, register the person, and advise them that they are registered.

Scope

A supply made by a nonresident is treated as a supply in Bhutan if the service is physically performed by a person present in Bhutan, if the service is directly related to land located in Bhutan, or if it involves other services that are imported business-to-business (B2B) or imported business-to-consumer (B2C) services.

Nonresident providers are liable to account for GST on supplies of “imported B2C services” that occur in Bhutan. This is defined as services supplied by a person not resident in Bhutan to a Bhutanese consumer.

The law further clarifies that electronic services (e-services) encompass a wide range of activities when provided or delivered via a telecommunications network. These include websites, web-hosting, remote maintenance of programs and equipment, software and its updates (with certain exceptions), virtual currencies, images, text, information, access to databases, self-education packages, music, films, games, and broadcasts or events of a political, cultural, artistic, sporting, or scientific nature, including broadcast television services delivered electronically. The definition also extends to any other supplies that constitute imported B2C services made through electronic communication.

Customer location

A person is considered a Bhutanese consumer if the contact and billing address of the recipient of services is in Bhutan, and either the bank from which the payment is made is located in Bhutan or the credit or debit card used for payment is issued in Bhutan.

B2B vs. B2C

The obligation to collect GST arises only in the case of imported B2C supplies, which the Act defines as services provided by a nonresident to a Bhutanese customer.

More specifically, a Bhutanese customer is either an unregistered resident or a registered resident who does not acquire the supplied service solely or partly in the course or furtherance of an economic activity.

A GST registration number serves to distinguish B2B from B2C transactions; if a nonresident provider cannot make this distinction, the supply should be treated as B2C, and GST should be charged accordingly.

Invoicing

A registered person making a taxable supply must issue a serially numbered tax invoice by the time GST is payable. Among other things, the invoice should include key details such as the words “tax invoice,” date, supplier and customer information, description and quantity of goods or services, discounts, total amount.

Marketplace liability

The supplier is generally responsible for registering and collecting GST, except in cases involving electronic distribution platforms. In such instances, the platform itself is required to charge and collect GST. An electronic distribution platform refers to any medium, such as a website, internet portal, gateway, web store, or web marketplace, that enables persons to make supplies available to customers by electronic means, is operated electronically, and is not used solely for processing payments for any supply.

Penalties

A late payment penalty shall be levied at 15% per annum.

Failure to file returns on three or more occasions purposely may be considered a criminal offence and subject to a fine.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Chinedu Nwachukwu | chinedunwachukwu@kpmg.com