The personal tax position in the Gelephu Mindfulness City Special Administrative Region is one of the few headline claims about the jurisdiction that survives contact with the statute. The Income Tax Act 2025 charges every individual who is not a citizen of the Kingdom of Bhutan, whether resident in GMC or not, at 0% on every dollar of chargeable income derived on or before 31 December 2030. No approval, no industry test, no minimum salary, no cap. What the headline does not tell you is that the date is hard, that Bhutanese citizens resident in GMC are taxed on a progressive scale, and that the real friction in hiring is not tax at all. It is the work pass.
In short
- Individuals who are not Bhutanese citizens pay 0% on chargeable income derived on or before 31 December 2030. Bhutanese citizens not resident in GMC are also at 0% to the same date.
- Bhutanese citizens resident in GMC pay a progressive scale: nil on the first $10,000, then 5%, 7%, 9%, 11% and 13% across successive bands, reaching 15% on chargeable income above $500,000.
- All of those figures are United States dollars, and tax computations must be denominated in US dollars, with a defined exception for a different functional currency.
- Employing a foreign employee without a valid work pass is a criminal offence under the Employment of Foreign Workforce Act 2025, carrying a fine of at least $5,000 and up to $30,000, or up to 12 months imprisonment, or both.
- A levy is payable on employers in respect of foreign employees holding work passes. The amount is fixed by order in the Gazette, not in the Act.
- Every GMC company must have at least one director ordinarily resident in GMC. That can be any employee holding a valid GMCA employment pass, or a Bhutanese citizen. The previous waiver ended on 30 April 2026.
The rate, precisely
Two provisions carry the personal tax regime.
The first charges individuals who are not citizens of Bhutan at 0% on chargeable income derived on or before 31 December 2030. Residence is irrelevant to this limb. The Act says whether resident in GMC or not. The tax analysis of a foreign hire in Gelephu therefore does not turn on day counting within GMC, although it may turn on day counting in whatever country that person is also connected to.
The second charges every individual who is a citizen of Bhutan and resident in GMC at the rates in Part A of the Second Schedule: nil on the first $10,000 of chargeable income; 5% on the next $20,000; 7% on the next $30,000; 9% on the next $40,000; 11% on the next $100,000; 13% on the next $300,000; and 15% on anything above $500,000. A Bhutanese citizen who is not resident in GMC is at 0% on chargeable income derived on or before 31 December 2030.
So a GMC office may hold two different tax positions at adjacent desks. That is not an oversight. It reflects a policy of attracting international talent while taxing local citizens on a normal, if gentle, progressive basis.
The employer's obligation follows the scale. The Income Tax Act requires an employer paying wages, salary, commission or bonus to an employee charged under the progressive scale to deduct tax at that rate, give immediate notice using the electronic service and pay the amount to the Comptroller, where it is treated as a debt due to GMCA.
A second obligation surprises employers moving from elsewhere. Under the Employment Act 2025, no payment of salary or other sum due on termination of service may be made without the permission of the relevant tax officer, and the employer must immediately notify that officer of the termination. Payment must not be delayed more than 30 days after that notice is given and received. Build tax clearance into offboarding from the first hire, not the first departure.
The date is the design
31 December 2030 is not a soft target. It is written into both limbs of the 0% charge and defines the period in which chargeable income must be derived.
That date interacts with the corporate side. New approvals as a founders company or as a strategic and development company also close on 31 December 2030, while the fund manager exemptions close a year earlier on 31 December 2029. GMC has built an incentive regime with an explicit horizon rather than an indefinite promise. The advantage is front loaded, and the value of arriving declines with every year you wait.
For remuneration design this has consequences. Deferred compensation, long vesting equity and carried interest that crystallise after 2030 sit outside the window. The Income Tax Act supports equity on the company side, with deductions for treasury shares transferred under an employee equity-based remuneration scheme and for new shares issued by a holding company. But the timing of the individual's charge decides whether the 0% rate applies.
The work pass is the real gate
The Employment of Foreign Workforce Act 2025 is short, strict and criminal in tone. Read it before drafting an offer letter.
A person must not employ a foreign employee unless that employee has a valid work pass, a foreign employee must not be in employment without one, and no one may employ a foreign employee otherwise than in accordance with the conditions of the pass. Contravention of the first prohibition carries a fine of at least $5,000 and not more than $30,000, or imprisonment for up to 12 months, or both. On a second conviction an individual faces a fine of at least $10,000 and imprisonment of at least one month, and a body corporate a fine of at least $20,000 and up to $60,000.
Ignorance is not a defence unless the employer proves it exercised due diligence to ascertain the employee's nationality, and a defendant is not deemed to have done so unless it checked the passport, document of identity or other travel document. That is a documented process requirement for your onboarding checklist.
A work pass is tied to the employer and the employee named on it, and to the trade, sector, occupation or type of employment specified in the pass or submitted with the application, plus anything else the Controller of Work Passes approves. A promotion into a materially different role, or a secondment to an affiliate, is a regulatory event.
Around that core the Act builds an administrative frame: an application process for work passes, a register of foreign employees the employer must keep, an obligation on termination of a foreign employee's employment, a route for self-employed foreigners to apply in their own right, rules on custody and loss of a pass, and a prohibition on a foreigner without a valid pass entering or remaining at a work place. There are also restrictions on the receipt of moneys in connection with employing a foreign employee, proscribed workforce-related practices, and offences by bodies corporate that reach responsible officers.
The levy sits alongside all of this. The designated officer may, by order in the Gazette, impose a levy on employers in respect of foreign employees, and on self-employed foreigners, who hold work passes. It remains payable unless the pass has expired, been suspended or revoked, or been cancelled by the Controller on the employer's application. Late payment attracts a daily penalty capped at 30% of the outstanding levy, and the Controller may waive, remit or refund levy or penalty.
Where the figures are set
The Employment of Foreign Workforce Act creates the levy and leaves its amount to be fixed by order in the Gazette. It creates work passes and leaves categories, eligibility criteria and quotas to regulations. The same is true of the national minimum wage: the Employment Act 2025 provides that workers are to be paid at least the national minimum wage, with the amount set by the same route.
The current figures come from GMCA, and we confirm them for clients at the point of hiring.
Payroll in dollars, paid through a GMC bank
Currency is settled. Every dollar reference in the Employment Act, the Employment of Foreign Workforce Act, the Companies Act and the Income Tax Act is read as United States dollars, and tax computations must be denominated in US dollars, subject to a provision allowing a different functional currency where financial accounts are maintained in one in accordance with financial reporting standards in GMC.
On mechanics, salary must be paid before the expiry of the seventh day after the last day of the salary period, with overtime payable within 14 days of the end of the period in which it was worked, and salary due on dismissal paid on the day of dismissal or within three days if that is not possible. The Act permits payment into an account at a bank licensed in GMC in the employee's name or a joint account, by cheque payable to the employee, or, with the employee's written consent and in a manner agreed in writing and approved by the designated officer, otherwise than in legal tender.
That last point connects payroll to banking: a GMC employer paying a GMC workforce in US dollars needs a GMC banking relationship.
The resident director, and why it is an employment question
Every GMC company must have at least one director who is ordinarily resident in GMC, which the Companies Act 2025 defines to include a person resident in GMC or holding a valid work visa or work pass. The Gelephu Corporate Registration Office has confirmed that the resident director, and the authorised representative of a branch, can be any company employee holding a valid employment pass issued by GMCA, and that a Bhutanese citizen can also fill the role. The previous waiver ended on 30 April 2026, and the Registrar has power to revoke a company's or branch's registration where the requirement is not satisfied.
Hiring and corporate compliance are therefore one workstream. Your first GMC hire with a valid pass is also, potentially, your resident director.
Home-country tax
The 0% rate is a GMC rate. An employee who remains tax resident elsewhere, or who is a citizen of a country that taxes on citizenship, may still have a liability at home, and the Income Tax Act carries double taxation relief and a unilateral credit provision for that case.
Frequently asked questions
Do foreign employees really pay no income tax in GMC?
Individuals who are not citizens of Bhutan are charged at 0% on chargeable income derived on or before 31 December 2030, whether or not they are resident in GMC. That is a rate set by statute, not a discretionary incentive, and it says nothing about liabilities in an employee's home country.
What do Bhutanese employees pay?
A Bhutanese citizen resident in GMC is taxed on a progressive scale starting at nil on the first $10,000 and rising through 5%, 7%, 9%, 11% and 13% bands to 15% on chargeable income above $500,000. A Bhutanese citizen not resident in GMC is at 0% to 31 December 2030.
How much is the foreign worker levy?
The Employment of Foreign Workforce Act 2025 empowers the designated officer to fix the levy by order in the Gazette. Rates, pass categories and quotas are set by regulation, and GMCA confirms the current figures.
Can my employee be the resident director?
Yes. A director who is ordinarily resident in GMC may be a person resident in GMC or a holder of a valid work visa or work pass, and the registry has confirmed that any company employee with a valid GMCA employment pass, or a Bhutanese citizen, can hold the role.
The bottom line
GMC's personal tax position is the rare claim that is better than its summary: a statutory 0% for non-Bhutanese individuals, with no approval and no cap, running to the end of 2030. The friction has moved. It now sits in the work pass regime, which is criminal in character and documentary in its defences. Treat the pass, the levy and the resident director as one compliance project owned by someone senior, confirm the levy with GMCA at the point of hiring, and build the workforce model to capture the window to 2030.
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
- Income Tax Act 2025 (Law No. 6 of 2025): s.42 and Second Schedule Part A (rates for Bhutanese citizens resident in GMC); s.43(1)(b) and (ba) (0% to 31 December 2030); s.44B (deduction of tax at source by employer); s.14L, s.14M, s.14MA (employee equity-based remuneration deductions); s.49 and s.50 (double taxation relief); s.50A (unilateral credits); s.62A and s.62B (US dollar); s.2AA.
- Employment of Foreign Workforce Act 2025 (Law No. 4 of 2025): s.3 (Controller of Work Passes); s.5 (prohibition and penalties); s.6A; s.7 (application); s.8 (register); s.9; s.10; s.11 (levy by Gazette order, penalty capped at 30%); s.12 (validity of pass); s.13; s.20; s.22A; s.22B; s.29 (regulations).
- Employment Act 2025 (Law No. 3 of 2025): s.21 (time of payment); s.21A (national minimum wage); s.22 and s.23; s.24 (income tax clearance); s.63 (payment through bank).
- Companies Act 2025 (Law No. 1 of 2025): s.145(1) and s.145(1A) (resident director).
