The Gelephu Mindfulness City does not have 0% corporate tax. The Income Tax Act 2025 sets the rate for companies at 15% on every dollar of chargeable income, and it has done so since the Act came into operation on 26 December 2024. Zero exists, but only as an approved exemption, for a limited class of company, for a limited period, with the approval window closing on 31 December 2030. If you have been planning on the basis of a headline you read somewhere, this is the article that fixes the model.

In short

• All dollar figures in GMC tax law are United States dollars, and withholding at 15% applies to interest, royalties, management fees and non-resident director fees.
• The headline company rate is 15% on every dollar of chargeable income. There is no tax-free band for companies and no lower general rate.
• An individual who is not a citizen of Bhutan, whether resident in GMC or not, pays 0% on chargeable income derived on or before 31 December 2030. A Bhutanese citizen not resident in GMC is also at 0% to the same date.
• A Bhutanese citizen resident in GMC pays on a progressive scale: nil on the first US$10,000, then 5%, 7%, 9%, 11% and 13% through successive bands, and 15% on every dollar above US$500,000.
• The Act charges income, not capital. There is a specific exemption for gains on disposals of ordinary and preference shares, with a 20% shareholding test, a 24 month holding period and property-related exclusions. Dividends paid by a company resident in GMC are exempt.
• 0% is reachable through an approved founders company, and 5% or above through an approved strategic and development company. Both require a discretionary approval in the public interest, and no approval may be granted after 31 December 2030.

Where "0% corporate tax" came from and why it is wrong

Press coverage repeatedly describes GMC as offering 0% corporate tax for priority sectors. It is a compression of two real provisions, and it is wrong as a statement of the headline position.

What actually exists in the statute is this. The general company rate is 15%. Alongside it sit two discretionary regimes: a full exemption for an approved founders company carrying on a qualifying business in an approved founders industry, and a concessionary rate of not less than 5% for an approved strategic and development company. Both are granted by the designated officer, both require a finding that approval is expedient in the public interest, and both close to new approvals after 31 December 2030.

So 0% is possible. It is not the rate. It is the outcome of an application that may or may not succeed, for a period fixed in a letter of approval. Any model that starts at zero is starting from the exception.

Companies: the 15% headline

The Income Tax Act 2025 charges tax on companies and bodies of persons at 15% on every dollar of chargeable income. Non-resident persons other than individuals, trustees and executors are charged at the same 15%.

The Act carries a reasonably generous set of reliefs, from research and development and employee equity allowances to accelerated write-offs for automation equipment and group relief between GMC companies. Against them sits a real anti-avoidance apparatus: a general anti-avoidance rule with a surcharge, arm's length pricing requirements and transfer pricing documentation obligations with their own surcharge. This is a 15% jurisdiction with teeth, not a nominal regime.

Two features of the charging provision do a lot of work. First, "every dollar" means there is no nil band, no small company rate and no graduated scale for companies. Second, the charge is on chargeable income, which is income after the deductions, allowances and exemptions the Act permits. The effective rate is a function of what the Act lets you deduct, and that is where the planning actually happens.

Individuals: 0% for non-citizens to 2030, a scale for citizens resident in GMC

An individual who is not a citizen of Bhutan, whether resident in GMC or not, is charged at 0% on chargeable income derived on or before 31 December 2030. A Bhutanese citizen who is not resident in GMC is likewise at 0% to the same date. A Bhutanese citizen who is resident in GMC is charged on a progressive scale set out in the Second Schedule.

The 0% for non-citizens is time limited and written into the statute with a date, so the question for anyone planning past 2030 is what replaces it, and nothing yet does.

Income versus capital, and the share disposal exemption

The Income Tax Act charges income, not capital, so there is no separate capital gains tax. That is the accurate version of the frequently repeated claim, and the distinction does all the work: whether a gain is income or capital is decided on ordinary principles, not on the label the taxpayer gives the transaction.

On top of that sits a specific exemption for gains derived by a company from disposing of shares in another company. For disposals made on or after 1 January 2026, it applies where the divesting company legally and beneficially owned the shares immediately before disposal, and had, throughout a continuous period of at least 24 months ending immediately before the disposal, either at least 20% of the ordinary shares in the investee company, or ordinary and preference shares whose value was at least 20% of the investee's total paid-up ordinary and preference share capital under the applicable accounting principles. A group version allows the 20% to be measured across companies in the same group at the start of that period, with a first-in-first-out rule and a requirement that the group did not fall below the threshold during it.

The exclusions matter as much as the test. The exemption does not apply to disposals of unlisted shares in a company that the Comptroller is satisfied trades in immovable property, principally holds it, or has undertaken property development, subject to a narrow carve-out. Nor does it apply to disposals by a partnership with one or more corporate partners.

Dividends paid by any company resident in GMC are exempt income. That, combined with the share disposal exemption where its conditions are met, is what makes a GMC holding company workable. It is not a blanket participation exemption and should not be described as one.

Withholding tax: the 15% you can actually forget about

Withholding is the most commonly missed item in a GMC model, because it applies at the point of payment and falls on the payer.

Interest. Where a person is liable to pay interest chargeable to tax to another person not known to be resident in GMC, the payer must deduct tax at 15% and pay it to the Comptroller immediately with notice. The deducted amount is a debt due to the Authority. Lower rates apply where a concessionary provision, such as the approved foreign loan regime, is in point.

Royalties and management fees. The same machinery applies to income within the deemed-source rules, covering royalties and payments for the use of movable property; payments for the use of scientific, technical, industrial or commercial knowledge, or for assistance in applying it; and payments for the management or assistance in the management of any trade, business or profession. The deeming applies where the payment is borne directly or indirectly by a person resident in GMC or a GMC permanent establishment, or is deductible against GMC income.

Non-resident directors. Remuneration paid by a company to a director not resident in GMC is subject to the same 15% deduction. Boards that appoint non-resident directors and pay them fees are frequently unaware of this until the first audit.

The Act provides for double taxation arrangements, tax credits and pooling, though a unilateral credit provision sits on the statute book awaiting commencement.

The routes to 0% and 5%, and the gates on them

The founders company route. Income of an approved founders company from a qualifying business carried on in a founders industry is exempt from tax. A founders industry is one that the designated officer, considering it expedient in the public interest, approves as an industry not being carried on in GMC on a scale adequate to the economic needs of GMC and for which there are favourable prospects for development. The company applies in writing in the prescribed form. If approved, it receives a letter of approval specifying the qualifying business, the commencement date and the period of exemption, subject to conditions. The period can be extended, but the total including all extensions must not exceed 15 years, and no company may be approved after 31 December 2030.

The strategic and development company route. The designated officer may approve a company as a strategic and development company and provide that tax at a concessionary rate of not less than 5% is levied on income from a specified trade or business. The letter of approval specifies the qualifying business, the rate, the commencement date and the relief period. Again, no approval after 31 December 2030.

Both regimes are discretionary, both are conditional, both are documented in a letter that fixes the terms, and both close at the end of 2030. If your plan depends on one, the application is the project, and the time to start it is not 2029.

What this does not solve yet

A significant number of the most attractive provisions, including most of the fund and trust exemptions, are awaiting commencement. Until the designated officer appoints a date by Gazette notification, they do nothing. The advance rulings machinery is among them, and in a new jurisdiction the ability to get a binding answer in advance is worth more than a rate. For now comfort comes from correspondence and from the terms of a letter of approval, not from a statutory ruling.

The treaty network is the central limitation. Relief depends on arrangements being in place with the jurisdictions you actually deal with, so anyone modelling withholding on outbound payments should assume the domestic rate until shown otherwise.

The 2030 dates are hard edges with nothing published behind them. The 0% for non-citizen individuals relieves income derived on or before 31 December 2030, and both approval windows close on the same date. What applies from 2031 has not been announced.

And approval is discretion. Both concessionary routes turn on a finding that approval is expedient in the public interest. That is a judgement, not a checklist, and no adviser can promise the outcome.

Frequently asked questions

Does Gelephu Mindfulness City have 0% corporate tax?

No. The Income Tax Act 2025 charges companies 15% on every dollar of chargeable income. A 0% outcome is available only to an approved founders company in an approved founders industry, for a period fixed in the letter of approval that cannot exceed 15 years in total, and no such approval may be granted after 31 December 2030.

What is the corporate tax rate in GMC?

15% on every dollar of chargeable income, for companies and bodies of persons, and the same rate for non-resident persons other than individuals, trustees and executors. There is no nil band and no general small company rate.

Do foreigners pay income tax in GMC?

An individual who is not a citizen of Bhutan, whether resident in GMC or not, pays 0% on chargeable income derived on or before 31 December 2030. That is a statutory end date, and nothing has been published about what applies after it.

Is there withholding tax on payments out of GMC?

Yes, generally at 15%. It applies to interest paid to a person not known to be resident in GMC, to royalties and management fees within the deemed-source rules, and to non-resident directors' remuneration. Relief depends on double taxation arrangements being in place.

The bottom line

GMC is a 15% jurisdiction with a genuine, time-limited incentive layer on top. That is a better proposition than the one the headlines describe, because it is the one that will still be there when your auditor asks. The individual position is the real prize for the next four years: 0% for non-citizens on income derived to the end of 2030, with the same statute making clear that the clock is running. Everything below zero on the company side runs through a discretionary approval that closes in 2030, which means the work starts now or not at all. Basnet Law is on the ground in Gelephu and can tell you, from the statute rather than from a press release, what rate your structure will actually pay.

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.

Sources

• Acts: Income Tax Act 2025 (GMC Law No. 6 of 2025), ss. 1(3), 2AA, 10, 12(6), 12(7), 13(1)(za), 13W, 13Y, 14C, 14L, 14R, 14V, 19A, 19B, 33, 33A, 34C, 34D, 34E, 34F, 37B, 42, 43(1)(a), 43(1)(b), 43(1)(ba), 43(1)(c), 43D, 43Y, 43Z, 45, 45A, 45B, 45D, 49, 50, 50A, 62A, 108, and the Second Schedule Part A Table 3; Application of Laws Act 2024 (GMC Law No. 1 of 2024); Companies Act 2025 (GMC Law No. 1 of 2025), s. 4A