A fund promoter or investment manager coming to the Gelephu Mindfulness City has two regulatory doors and one tax package. A manager already licensed in one of six Recognised Foreign Jurisdictions manages a GMC domestic fund on a no-objection from the Gelephu Financial Services Office, targeted within four weeks, and never holds a GMC licence. A new firm applies for a Financial Services Licence and reaches in-principle approval in two to three months on average. An approved fund pays nothing on income from designated investments for up to 15 years, and an approved manager pays 5% or 10% for 10 years renewable to 20, with five years at nil if approved on or before 31 December 2027. Carried interest is exempt. The framework is in force from 1 October 2026.
In short
- Managing assets and managing a collective investment fund are licensed activities. A manager licensed in a Recognised Foreign Jurisdiction manages a GMC domestic fund on a no-objection instead.
- A domestic fund is a public fund, an exempt fund or a qualified investor fund. The last two serve professional clients only, at US$50,000 and US$500,000 minimum subscriptions, and launch on a four-week no-objection.
- The full licence requires a five-year track record, one licensed Senior Executive Officer, at least two licensed directors and, for a fund, a senior manager. GFSO prescribes no qualification and sets no examination.
- An approved fund is exempt on income from designated investments for its life, up to 15 years, with US$10 million of assets under management at application, or US$50 million for real estate, energy and infrastructure.
- An approved manager pays 10% below US$25 million of assets under management and 5% at or above it, for 10 years renewable to 20, with five years at nil if approved by 31 December 2027.
- The conditions scale with size: 30 or 60 residence days a year, two or three Bhutanese hires by year three, and more than US$50,000 or US$100,000 of local spending a year.
The two licence activities
Depending on its intended business, the firm needs a Financial Services Licence covering one or both of two regulated activities: managing assets, and managing a collective investment fund. GFSO may ask an applicant to add further regulated activities where the business model calls for them.
Domestic and foreign funds
A fund pools money from investors and follows a defined investment strategy, usually run by a professional manager. A fund established or domiciled in GMC is a domestic fund; any other fund is a foreign fund. The three fund types, the launch process and the foreign-manager route all attach to domestic funds, and the registration detail sits in the Fund Rulebook (Funds) 2026. A carried interest vehicle for a manager's own officers, directors or employees is expressly not a fund.
The three domestic fund types compared
The fund type fixes the investor base, the minimum ticket, the disclosure document, the placement method and the pre-launch regulatory step.
- Public fund. Retail and professional clients. No minimum subscription. Full prospectus with detailed disclosure. Public and private placement. GFSO approval required before launch.
- Exempt fund. Professional clients only. US$50,000 minimum subscription. Less detailed prospectus. Private placement only. Launches on a no-objection from GFSO.
- Qualified investor fund (QIF). Professional clients only. US$500,000 minimum subscription. Less detailed prospectus. Private placement only. Launches on a no-objection from GFSO.
The exempt fund and the QIF are the same regulatory product at two ticket sizes; the public fund takes retail money, so it carries a full prospectus and an approval process. For most private equity, venture, credit and hedge strategies, the exempt fund or the QIF is the natural choice.
Launching a fund: the four-week no-objection
For an exempt fund or a QIF, the promoter sends GFSO or its case officer the launch documents, typically a simplified prospectus and factsheets, at least four weeks before the launch, and GFSO targets its no-objection within four weeks of the submission. For a public fund, the promoter expresses its intention to GFSO, which advises on the approval process. Every fund also needs an approved investment manager for tax purposes, so the manager's position is settled first.
The foreign-manager route: Recognised Foreign Jurisdictions
GFSO recognises that GMC benefits from experienced managers arriving from established international financial centres. A manager licensed or regulated by the competent authority of a Recognised Foreign Jurisdiction may apply to GFSO to manage assets for a GMC domestic fund without a separate GMC fund management licence. GFSO designates Recognised Foreign Jurisdictions by notice on its website; the initial list is Singapore, Japan, the Abu Dhabi Global Market, the Dubai International Financial Centre, Hong Kong and India. The manager must satisfy three conditions:
- A valid licence at home. A valid and subsisting fund management licence, or equivalent authorisation, from the competent authority of a Recognised Foreign Jurisdiction.
- A clean three-year record. No material regulatory action, sanction or disciplinary proceeding in the home jurisdiction within the preceding three years.
- GMC financial crime compliance. Compliance with the anti-money laundering, countering the financing of terrorism and sanctions requirements prescribed by GFSO.
The manager seeks a no-objection at least four weeks before starting, and GFSO targets its answer within four weeks, the same rhythm as the fund launch.
The full GMC licence
A company applying for a licence to manage assets shows that it, or its group, has a minimum five-year proven track record in investment management or a related business in a jurisdiction with a regulatory framework comparable to GMC's. Where it cannot, GFSO may look to the track record of its controllers and substantial shareholders and the experience of its key management.
Senior Executive Officer and directors. One licensed Senior Executive Officer and at least two licensed directors, each with at least five years of relevant experience, ten for the Senior Executive Officer of a public fund. Relevance is judged against the role: proprietary trading counts towards discretionary portfolio management, and sector experience such as corporate strategy counts, particularly for private equity and venture capital. Each should also have managerial or supervisory experience. GFSO will consider exemptions case by case for applicants with substantial relevant experience.
Senior manager for a fund. At least one individual other than the Senior Executive Officer carries out senior manager functions for the fund, such as operational risk and internal controls. A senior manager is an employee responsible for part of the firm's regulated activities, and is not a director or partner.
Fit and proper. Under GEN Rulebook 5.6.4 every key person must satisfy GFSO on integrity, competence and capability, financial soundness, the proposed role and any other relevant matters.
No prescribed qualification, no examination. GFSO prescribes no particular academic or professional qualification for a conventional investment manager, licensed director or Senior Executive Officer, and imposes no regulatory examination on approved persons.
In-principle approval and what follows it
The timeline varies with the activities and the quality of the submission. On average, successful applicants receive in-principle approval two to three months after submitting the licence application. It does not permit regulated activity: the firm must first fulfil its conditions, including incorporating an entity in GMC, opening a bank account in GMC and meeting any other regulatory requirements. Incorporation runs through the Gelephu Corporate Registration Office and the account through DK Bank, then the licence issues and the first fund launches. Licensed firms provide regulatory submissions and an annual audit report to GFSO.
The fund exemption: US$10 million and US$50 million
The fund incentive sits in sections 13O, 13OA and 13U of the GMC Income Tax Act. An approved fund is exempt on all income from designated investments for up to the life of the fund, up to 15 years, and is exempt from withholding tax on interest it pays to non-tax residents. A non-resident that merely invests in, or receives distributions from, a GMC fund does not create a taxable presence in GMC.
The fund must meet a minimum assets under management at the point of applying, set by what it invests in:
- Capital-intensive industries such as real estate, energy and infrastructure projects: US$50 million.
- All other industries: US$10 million.
Assets under management can include legally enforceable committed capital, so a closed-end fund counts signed commitments before capital is called. The threshold is tested once, at application. The fund's manager must itself be an approved investment manager on one of the concessionary tiers, and both incentives require an application to GMC.
There are no restrictions on what a fund may invest in. The Annex list of designated investments defines what the exemption covers: shares, bonds, deposits and foreign exchange, derivatives, structured products, loans, commodities, emission allowances, units in trusts and partnerships, limited liability company interests, digital assets, immovable property wherever situated and physical precious metals. The one carve-out is a digital token giving an interest in an underlying asset outside the list.
The manager rates: 5%, 10% and five years at nil
An approved investment manager pays a concessionary rate fixed by its assets under management at the point of applying:
- Below US$25 million: 10%.
- US$25 million and above: 5%.
The rate applies for an incentive period of 10 years, renewable to a total of 20. For any manager managing any fund and approved by the GMC Authority on or before 31 December 2027, a full tax exemption applies for the first five years of the incentive period, after which the concessionary rate applies, on the same conditions throughout.
Carried interest, the share of fund profits a manager receives in addition to its contractual management fee, is exempt in the manager's hands because it is paid out of fund profits that are themselves exempt. The fee is taxed at the concessionary rate; the carry is not taxed.
The conditions by tier
In both tiers the manager must be managed and controlled in GMC from year two.
Below US$25 million of assets under management
- Residence. Representatives reside in GMC or the rest of Bhutan for at least 30 days per year.
- Local hiring and spending, by year three. At least two Bhutanese residing in GMC hired in front or middle office roles, and more than US$50,000 spent in GMC annually, including salaries.
US$25 million of assets under management and above
- Residence. Representatives reside in GMC or the rest of Bhutan for at least 60 days per year and hold an employment pass.
- Local hiring and spending, by year three. At least three Bhutanese residing in GMC hired in front or middle office roles, and more than US$100,000 spent in GMC annually, including salaries.
Local spending means operating expenses incurred locally and paid to a local recipient: salaries, office rental, administrative and professional costs, and donations to an approved charity in GMC. There is no capital deployment requirement.
Representatives and day counting
An approved manager may appoint up to two of its employees as representatives to each qualifying fund, and no individual may represent more than ten funds. The representative should be acting for that fund while in GMC or the rest of Bhutan.
- Any part of a day is a full day. A representative arriving in GMC at 11pm has that day counted.
- Days aggregate across representatives. If both representatives spend seven days in GMC in the same week, the count is 14 days.
- Evidence follows immigration status. A short-term visa counts for its length; an employment pass holder declares the days.
Withholding tax, partnerships and returns of capital
- Dividends. No withholding tax, so no domestic compliance obligations on dividend payments.
- Interest. The domestic rate is 10%. Approved funds and managers are exempt and pay non-residents in full, filing a withholding tax return at 0% by the 15th day of the second month following the month of payment.
- Partnership allocations. Partnerships are tax transparent; profit allocated to partners is taxed in their hands.
- Sale of units or shares, and liquidation proceeds. Each may be viewed as a return of capital. There is no capital gains tax in GMC.
Capital mobility and banking with DK Bank
GMC imposes no foreign exchange controls other than on transactions in Bhutanese Ngultrum. A fund that does not transact in Ngultrum faces no foreign exchange rules and no profit repatriation restrictions beyond the Companies Act rules on retained profits.
DK Bank, the main GMC-licensed bank, provides the account the in-principle approval requires: multi-currency corporate accounts in nine currencies with Fedwire access for US dollars; offshore corporate accounts for Cayman Islands and British Virgin Islands vehicles; receiving and sending selected stablecoins such as USDC and USDT, with liquidity providers for on- and off-ramping; and custody in the customer's name for listed fixed income and equities, with bond trading through its panel of counterparties.
Reporting, and what happens if a condition is missed
An approved manager reports its achievement against the conditions each year in its corporate tax return. The incentive is terminated only after the conditions are missed for two consecutive years: missed in year seven, the incentive continues for year seven; missed again in year eight, it ends with effect from year eight, with no clawback for the first seven years.
Commencement
The guidelines take effect on or after 1 October 2026. A manager that wants five years at nil must be approved on or before 31 December 2027, a little over fifteen months to complete the licence or no-objection, the incorporation, the banking and the incentive application.
How Basnet Law runs the engagement
- Route selection. We confirm whether the manager can use the no-objection route from a Recognised Foreign Jurisdiction or needs the full licence, and which regulated activities it must cover.
- Fund design. We settle the fund type against the investor base, choose the vehicle, and confirm whether the strategy sits at the US$10 million or the US$50 million threshold.
- People. We map the Senior Executive Officer, the directors and the senior manager against the experience and fit and proper requirements, and prepare the case where the firm relies on its controllers' track record.
- Application and no-objection. We prepare the licence application or the no-objection pack with the simplified prospectus and factsheets, and file at least four weeks before launch.
- In-principle approval to trading. We incorporate through the Gelephu Corporate Registration Office, open the DK Bank account and close the remaining conditions.
- Incentive and compliance. We lodge the incentive applications, record assets under management at entry, appoint the representatives, and set the annual calendar for residence days, hiring, spending and reporting.
Frequently asked questions
Licensing and fund types
What is the difference between an exempt fund and a qualified investor fund?
The minimum subscription: US$50,000 for the exempt fund and US$500,000 for the QIF. Both are for professional clients only, use a less detailed prospectus, are placed privately and launch on a no-objection from GFSO.
How long does it take to launch an exempt fund or a QIF?
The promoter files the simplified prospectus and factsheets at least four weeks before the launch, and GFSO targets its no-objection within four weeks.
Is a carried interest vehicle a fund?
No. An arrangement established solely to let a manager's officers, directors or employees, or related persons, participate in carried interest or similar profit from one or more funds is not a fund.
The foreign-manager route and the full licence
Which jurisdictions are Recognised Foreign Jurisdictions?
The initial list is Singapore, Japan, the Abu Dhabi Global Market, the Dubai International Financial Centre, Hong Kong and India. GFSO updates the list by notice on its website.
What must a foreign-licensed manager show?
A valid and subsisting home licence; no material regulatory action, sanction or disciplinary proceeding at home in the preceding three years; and compliance with GFSO's anti-money laundering, counter-terrorist financing and sanctions requirements.
Who must be appointed for a full licence?
One licensed Senior Executive Officer and at least two licensed directors, each with five years of relevant experience, ten for the Senior Executive Officer of a public fund, plus, for a fund, a senior manager who is not a director or partner. All must be fit and proper.
What can the firm do once it has in-principle approval?
Not trade. In-principle approval is conditional: the firm must incorporate in GMC, open a GMC bank account and meet the other regulatory requirements before it conducts regulated activities.
Tax
When is the assets under management threshold tested?
Only at the point of applying for the incentive, when the manager or fund is told the qualifying conditions it must satisfy. Legally enforceable committed capital counts.
How does a manager qualify for the five tax-free years?
By managing a fund and being approved by the GMC Authority on or before 31 December 2027. The exemption covers the first five years of the incentive period and carries the same conditions as the concessionary rate that follows.
What happens if the manager misses a hiring or spending condition in one year?
The incentive continues for that year. It is terminated only after two consecutive years of missed conditions, with effect from the second year, and there is no clawback of the incentive already enjoyed.
The bottom line
A manager licensed in one of the six Recognised Foreign Jurisdictions can be managing a GMC exempt fund about four weeks after filing its no-objection requests, and a new firm with the right people can hold in-principle approval within two to three months. The tax package is 15 years at nil for the fund, 5% or 10% for the manager for up to 20 years, exempt carry, no withholding on dividends or interest and no capital gains tax. The date that decides its value is 31 December 2027, after which the five tax-free years are no longer offered.
Related guides
Sources
- Gelephu Mindfulness City Authority, Guidelines on Regulatory Requirements and Tax Incentives for Funds and Investment Managers, released 20 September 2026, effective on or after 1 October 2026.
- Gelephu Mindfulness City Authority, Frequently Asked Questions: Family Offices, Funds and Investment Managers, released 20 September 2026, including the Annex of designated investments.
- GMC Income Tax Act, sections 13O, 13OA and 13U; Fund Rulebook (Funds) 2026; GEN Rulebook, rule 5.6.4.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
