SILASH SUBBA
Thimphu
In a significant move, Bhutan’s implementation of the Property Tax Act has brought about significant changes in the country’s fiscal landscape. To generate additional revenue, the Ministry of Finance introduced this Act, which came into effect on January 1, 2023. The Act replaces any conflicting laws and sets forth new regulations for property taxation.
Under this Act, both land tax and building tax are now payable annually. Land tax is calculated at a rate of 0.1 percent based on the taxable value of the land while building tax is also charged at the same rate on the taxable value of buildings. Moreover, a vacant land tax has been introduced, set at a fixed rate of 15 percent of the land tax amount. These taxes will contribute to funding public services and development initiatives, ultimately benefiting the government and the nation as a whole.
Finance Minister, Lekey Dorji said, “Our property rate is only 0.1 percent, which translates to Nu 1.00 tax levied on every Nu 1,000 property value, and remains the lowest in the world.”
This progressive approach takes into account the value of the property, ensuring that those with larger estates contribute proportionally more to the tax pool. Lyonpo said that the tax rates have been obtained in comparison to other countries, introduced in the Parliament, and passed as a law in November 2022.
This innovative approach to taxation has been hailed as both horizontally and vertically fair, ensuring that the burden is shared equitably among all residents.
By basing the tax rate on property value, the government aims to address the issue of income disparities. This means that individuals with larger properties will be contributing more to public services and infrastructure development, while those with smaller properties will have a more manageable tax burden.
The implementation of this fair property tax system is a significant step towards creating a more equitable society in Bhutan. It not only ensures that everyone contributes their fair share but also helps in funding essential services such as education, healthcare, and infrastructure development.
Moreover, this new tax system is expected to have a positive impact on the economy of Bhutan. By generating additional revenue, the government will have the means to invest in key sectors, fostering economic growth and creating more opportunities for its citizens.
The introduction of the fair property tax system in Bhutan has received widespread support from citizens and experts alike. It is seen as a progressive move towards building a more inclusive society, where everyone has a stake in the country’s development.
However, the implementation of the Property Tax Act has not been without its impact on the citizens of Bhutan. Many individuals and families are now faced with the responsibility of paying these property taxes, which may affect their financial planning and budgets. The Act recognizes this concern and provides certain exemptions and concessions to alleviate the tax burden for eligible individuals.
The property tax paid by rural residents in far-flung areas is minimal. It increases with proximity to urban areas since it is based on property assessment and valuation agency (PAVA) rates. There is also a 50 percent concession to the property owners whose lands are registered as Kamzhing that are cultivated and a 90 percent concession for cultivated Chhuzhing lands, and highland communities also get a 90 percent concession.
There is also a 50 percent concession on self-occupied traditional houses. While our rural population will certainly pay a little higher property tax compared to what was paid earlier, it will not put an undue burden on them but will be better off as they will have access to funds to pay for their development activities which otherwise the government could not afford. This will also make the governments more accountable to the taxpayers.
The government aims to strike a balance between generating revenue and ensuring the well-being of its citizens, said the Lyonpo.
It’s important to note that all property taxes must be paid by December 31st each year. The competent authority has the discretion to allow instalment payments, either with or without interest. However, failure to pay on time will result in a late payment penalty of 24 percent per annum. This emphasizes the importance of meeting the tax obligations promptly.
The introduction of the Property Tax Act demonstrates the government’s commitment to establishing a fair and sustainable taxation system. By implementing these property taxes, the government aims to create a more equitable society and provide essential services to its citizens. The Act reflects the government’s long-term vision for the country’s development and progress.
With this new legislation in place, both the government and the citizens of Bhutan will experience the impact of the Property Tax Act. The government will witness increased revenue generation, enabling them to invest in crucial sectors, while citizens will need
