Summary
- The Gelephu Mindfulness City (GMC) is a Special Administrative Region of the Kingdom of Bhutan created by Royal Charter No. 1 of 2024, granted by the Druk Gyalpo on 10 February 2024.
- Article 1 of the Charter describes GMC as "a fully independent and autonomous region in the Kingdom of Bhutan" with executive, legislative and independent judicial authority, including final adjudication.
- GMC is autonomous, not sovereign. It sits inside Bhutan, its laws take effect with Royal Assent, its security is provided by the Armed Forces of Bhutan (Article 6) and the Charter can be amended only by Royal Decree (Article 7).
- GMC has its own statute book: sixteen instruments are listed by the Gelephu Mindfulness City Authority, from the Application of Laws Act 2024 to the Application of Laws (Amendment) Act 2026, and every Act is made "in exercise of the powers under Article 4(2)" of the Charter.
- The default legal system is common law. The common law and equity of established common law jurisdictions apply under s. 3 of the Application of Laws Act 2024, subject to GMC's own enactments.
- Whether a GMC company benefits from a particular international arrangement is a question to check instrument by instrument; the Income Tax Act 2025 gives GMC its own machinery for double tax arrangements (s. 49) and international tax compliance agreements (s. 105K).
What the question means
When a general counsel asks whether GMC is "a separate jurisdiction", they are usually asking four questions at once: does GMC have its own laws; who makes them and can they be changed from outside; who decides disputes; and is a GMC company Bhutanese for international purposes? The answers differ depending on which sense of the word is meant. This article takes them in turn, using only the Charter, the GMC Acts and the official GMC pages.
The constitutional foundation: Royal Charter No. 1 of 2024
GMC exists because of a single instrument: Royal Charter No. 1 of 2024, granted by the Druk Gyalpo (the King of Bhutan) on 10 February 2024. The Charter is the top of GMC's legal hierarchy. Every GMC Act refers back to it.
The key articles are these.
Article 1 establishes GMC as "a fully independent and autonomous region in the Kingdom of Bhutan". It confers executive, legislative and independent judicial authority, and that judicial authority includes final adjudication. Two phrases in the Charter matter for this question. "Fully independent and autonomous" describes the breadth of self-government. "In the Kingdom of Bhutan" fixes where that self-government sits.
Article 3 creates the GMC Authority (GMCA) as the highest decision-making body. The GMCA has corporate legal personality and is chaired by the Druk Gyalpo.
Article 4 gives the GMCA the power to establish administrative and regulatory bodies, including a central bank, an independent judiciary and a legal system based on common law principles. The GMCA may enact laws, and those laws require Royal Assent.
Article 5 lists the substantive powers, including fiscal, customs and tariff benefits, licences, free trade agreements, funds and dealing in digital assets.
Article 6 places security under the Armed Forces of Bhutan.
Article 7 provides that the Charter may be amended only by Royal Decree.
The official GMC website describes the arrangement as "one country, two systems" and describes GMC as a Special Administrative Region in southern Bhutan with an area of about 4,046 km², built around eight priority industries including Finance and Digital Assets.
Autonomy is not sovereignty
It is worth being precise here, because the distinction drives risk analysis.
GMC is not a state. It has no separate international legal personality of the kind a sovereign country has. The Charter is a grant from the Crown of Bhutan, and the Charter itself says who can change it: only the Druk Gyalpo, by Royal Decree (Article 7). GMC laws take effect with Royal Assent, and the Druk Gyalpo chairs the GMCA (Article 3).
The GMC statutes reflect this arrangement. Each Act begins with the same enacting formula, made "in exercise of the powers under Article 4(2)" of the Charter "and with the assent of the Druk Gyalpo". The Companies Act 2025 defines the "designated officer" who oversees the Registrar as "a person appointed by the Druk Gyalpo" (s. 4), and the Registrar must refuse to register a company likely to be used for purposes prejudicial to public order "in GMC or the Kingdom of Bhutan" (s. 20(2)(a)).
What GMC has, then, is a very wide delegated autonomy that is entrenched at the level of a Royal Charter. GMC's legislative power is real: the GMCA has enacted a full commercial code in under two years. That power is exercised within Bhutan's constitutional order, with Royal Assent as a step in every Act. And the Charter is stable by design, because it cannot be amended by ordinary GMC legislation or by the GMCA alone.
Does GMC have its own laws?
Yes. Sixteen instruments are listed by the GMC Authority, including the Royal Charter itself. The 2025 Acts (Companies, Customs, Employment, Employment of Foreign Workforce, Financial Services and Income Tax) are each "deemed to have come into operation on 26 December 2024" (see, for example, Companies Act 2025, s. 1(1)). The 2026 Acts cover business names, limited liability partnerships, limited partnerships, partnerships, sale of goods and unfair contract terms; the last two came into operation on 15 June 2026.
Where GMC has not legislated, the Application of Laws Act 2024 fills the gap. Its s. 3 applies the received common law and equity of established common law jurisdictions, so far as suited to GMC's circumstances and subject to GMC enactments. Its s. 4 and Schedule A apply a list of statutes drawn from an established common law jurisdiction, with modifications. Its s. 5 and Schedule B apply a set of financial services rulebooks with modifications. Its s. 5A and Schedule C (inserted in 2025) apply the Kingdom of Bhutan's sales tax, customs and excise laws. Its s. 7 sets the residual rule: for matters not otherwise covered, the GMCA determines the applicable law; Bhutan law applies generally by default; and the applied general law is presumptive for civil and commercial matters. (See our guide to which law applies in GMC.)
So the answer to "does Bhutanese law apply?" is: GMC law applies first, then the received common law and applied statutes, and Bhutan law applies to everything else by default, alongside the Schedule C tax laws that apply directly.
Who decides disputes?
Article 1 of the Charter gives GMC independent judicial authority with final adjudication, and Article 4 directs the GMCA to establish an independent judiciary. This is the arrangement the Charter provides.
The statutes are precise about judicial designation. Each of the Companies Act 2025, Financial Services Act 2025, Income Tax Act 2025 and Employment Act 2025 defines "court" as "such judicial body that the Druk Gyalpo may designate for the purposes of that provision". The Application of Laws Act 2024 provides in s. 11 for the GMCA to administer and enforce the law.
Two consequences follow from this arrangement. First, the architecture for a GMC judiciary is fixed at Charter level and is independent by design. Second, the courts that hear particular matters are settled by designation. Regulatory decisions already have statutory appeal routes: a refusal to register a company, for example, can be appealed to the designated officer within 30 days (Companies Act 2025, s. 20(3)). The Financial Services Act 2025 names the Gelephu Financial Services Office (GFSO) as "the Regulator" with its own statutory objectives (s. 1A).
Is a GMC company Bhutanese for international purposes?
This question deserves a careful answer.
A company incorporated under the Companies Act 2025 is a GMC company. It is a body corporate by registration of its constitution with the GMC Registrar (s. 19(5)), it must have a registered office in GMC (s. 142) and at least one director ordinarily resident in GMC (s. 145(1)). Its tax residence, under the Income Tax Act 2025, turns on whether "the control and management of whose business is exercised in GMC" (s. 2, "resident in GMC").
For international tax purposes, the Income Tax Act 2025 gives GMC its own machinery:
- Section 49 allows the designated officer to declare by order that arrangements made with the government of any country "outside GMC" for relief from double taxation have effect despite anything in any written law.
- Section 105Kin Part 20B, allows the designated officer to declare international tax compliance agreements, and expressly contemplates an agreement "between the GMCA and the Government of the United States of America" on FATCA, competent authority agreements for automatic exchange of financial account information, country-by-country reporting agreements and crypto-asset reporting framework (CARF) agreements.
- Part 20A (ss. 105A–105H) provides for exchange of information under double taxation and exchange-of-information arrangements.
Whether an arrangement to which the Kingdom of Bhutan is party extends to a GMC resident depends on its terms and on whether an order has been made under s. 49. That is a treaty-by-treaty question, and no board should assume the answer in either direction: GMC is a region of Bhutan, which points one way; GMC has its own Comptroller (s. 3) and treaty-giving machinery, which points the other. (See our guide to double taxation relief for GMC companies.)
What "one country, two systems" means in practice
Read together, the Charter and the statutes produce the following picture.
| Question | GMC position | Source |
|---|---|---|
| Who legislates? | The GMCA, with Royal Assent | Charter Art. 4; enacting formula of every Act |
| Who administers companies? | Registrar of Companies within the Gelephu Corporate Registration Office (GCRO) | Companies Act 2025, ss. 4, 8 |
| Who regulates finance and virtual assets? | GFSO, as "the Regulator" | Financial Services Act 2025, s. 1A; GFSO |
| Who collects tax? | Comptroller of Income Tax appointed by the designated officer | Income Tax Act 2025, s. 3 |
| Which common law? | The received common law and equity of established common law jurisdictions, subject to GMC enactments | Application of Laws Act 2024, s. 3 |
| Who adjudicates? | Independent GMC judiciary with final adjudication; courts designated by the Druk Gyalpo | Charter Arts. 1, 4; Companies Act 2025, s. 4 |
| Who provides security? | Armed Forces of Bhutan | Charter Art. 6 |
| Who can amend the Charter? | The Druk Gyalpo, by Royal Decree | Charter Art. 7 |
| Currency of the statute book | United States dollars | Companies Act 2025, s. 4A; Income Tax Act 2025, s. 2AA |
Sovereign and enforcement risk: how to frame it
Boards commonly ask for a "sovereign risk" view. We would split it into three questions. Legislative risk: GMC laws can be changed by the GMCA with Royal Assent, as with any legislature, but the Charter's own amendment rule (Article 7) is stricter. Enforcement risk: GMC has a functioning registry, a regulator with a published rulebook, a tax administration and statutory appeal routes, and contractual protections (governing law, arbitration, security) remain available in the ordinary way. Recognition risk: counterparties and banks may ask how GMC fits their frameworks, and the best answer is documentary, the Charter, the incorporating Act and the GCRO notice of incorporation (Companies Act 2025, s. 19(4)).
Practical checklist / Next steps
- Read Royal Charter No. 1 of 2024. It is short and it is the source of every GMC power.
- Identify which GMC Act governs your activity.
- For anything the GMC Acts do not cover, apply the Application of Laws Act 2024 order: GMC enactment, then Schedule A and B instruments, then the received common law, then the s. 7 residual rules.
- For cross-border tax, confirm whether any s. 49 order or s. 105K declaration relevant to your home country has been made. Do not assume.
- Draft contracts with express governing-law and dispute-resolution clauses, and check the current judicial designation for your matter.
- Keep a jurisdiction file for banks and counterparties: Charter, incorporating Act, notice of incorporation and certificate of confirmation of incorporation (s. 19(7)).
Frequently asked questions
Is GMC a country?
No. GMC is a Special Administrative Region within the Kingdom of Bhutan, created by Royal Charter No. 1 of 2024. Article 1 describes it as a fully independent and autonomous region "in the Kingdom of Bhutan". It has its own laws, regulators and judicial authority, but it is not a sovereign state.
Does Bhutanese law apply in GMC?
The answer is partly yes. GMC's own Acts apply first. Where they are silent, the received common law and the Schedule A and B instruments apply under the Application of Laws Act 2024, and Bhutan law applies generally as the default under s. 7. The Kingdom's sales tax, customs and excise laws apply directly under s. 5A and Schedule C.
Who is the highest authority in GMC?
The GMC Authority (GMCA), which Article 3 of the Charter establishes as the highest decision-making body, chaired by the Druk Gyalpo. The GMCA makes GMC's laws under Article 4(2), and those laws require Royal Assent.
Is a GMC company covered by Bhutan's tax treaties?
The Income Tax Act 2025 gives GMC its own power to give effect to double taxation arrangements (s. 49) and international tax compliance agreements (s. 105K). Whether any particular arrangement reaches a GMC resident must be checked against that arrangement and any order made under the Act.
Key takeaways
- GMC is autonomous within Bhutan, not sovereign: wide self-government under Royal Charter No. 1 of 2024, entrenched by the Article 7 amendment rule.
- GMC has a complete statute book of its own, with common law as the default system under the Application of Laws Act 2024.
- Judicial authority is independent at Charter level; specific courts are designated by the Druk Gyalpo.
- International tax coverage is governed by GMC's own ss. 49 and 105K machinery and must be verified arrangement by arrangement.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Royal Charter No. 1 of 2024 (GMC), Arts. 1, 3, 4, 5, 6, 7
- Application of Laws Act 2024 (Law No. 1 of 2024), ss. 3, 4, 5, 5A, 7, 11; Schedules A, B, C
- Companies Act 2025, ss. 1, 4, 4A, 8, 19, 20, 142, 145
- Financial Services Act 2025, s. 1A
- Income Tax Act 2025, ss. 1, 2, 2AA, 3, 49, 105A–105H (Part 20A), 105K (Part 20B)
- Employment Act 2025, s. 2 (definition of "court")
