Summary

• Section 13T of the Income Tax Act 2025 exempts from tax "all relevant income of an eligible family-owned investment holding company" (s. 13T(1)).
• An eligible company is one whose shareholders are related in the manner prescribed by regulations, whose operation consists wholly or mainly of holding or making investments, and which meets any other prescribed conditions (s. 13T(3)).
• "Relevant income" is limited to specified categories of GMC-source investment income (s. 13(1)(zd), (ze), (zh), (zi), (zj), (zk), (zl)) and foreign-source income received in GMC of the kind covered by s. 13(7A).
• Section 13T is enacted but not yet in force. Under s. 1(3)(n) it commences on a date appointed by the designated officer by Gazette notification. The related fund exemptions in ss. 13O, 13OA and 13U are also not yet commenced.
• A company that fails the definition in any basis period is excluded permanently, even if it later qualifies again (s. 13T(4)).
• Individuals who are not Bhutanese citizens pay tax at 0% on chargeable income derived on or before 31 December 2030 (s. 43(1)(ba)), which is relevant to how family members themselves are taxed today.

What a family office is, and why GMC has a statutory vehicle for it

A family office is an entity that manages the investments and affairs of a single family. In legal terms it is usually an investment holding company owned by family members, sometimes paired with a management company that employs the professionals who run it.

The Income Tax Act 2025 of the Gelephu Mindfulness City Special Administrative Region (GMC) contains a provision written for this structure. Section 13T exempts the "relevant income" of an "eligible family-owned investment holding company". It sits alongside the fund exemptions in ss. 13O, 13OA and 13U and the donation deduction in s. 37AA.

One point must be made at the outset. Section 13T is on the statute book but commences only on a date appointed by the designated officer by notification in the Gazette (s. 1(3)(n)). The same is true of ss. 13O, 13OA and 13U (s. 1(3)(k), (l), (o)). Until those dates are appointed, the exemptions cannot be claimed.

All "$" amounts in GMC tax law are United States dollars (s. 2AA).

Who qualifies: the three-limb definition

Section 13T(3) defines an "eligible family-owned investment holding company" as any company:

1. "whose shareholders are related to each other in the manner prescribed by regulations";
2. "whose operation consists wholly or mainly of the holding or making of investments"; and
3. "which satisfies such other conditions as may be prescribed by regulations".

Related shareholders

The Act does not define the required family relationship; that is left to regulations, which have not been published. Until they are, it is not possible to say whether in-laws, cousins or family trusts will count, or whether a minority non-family shareholder is permitted. The test is applied to the shareholders, so the company's register of members is where compliance starts.

Wholly or mainly holding or making investments

The company's operation must consist "wholly or mainly" of holding or making investments. The Act gives no percentage threshold, so a company that also trades must consider whether that trade is more than incidental.

Other prescribed conditions

Regulations may add further conditions. The Act does not indicate what they will be, and none should be assumed.

"Company" means a company incorporated or registered under any law in force in GMC or elsewhere (s. 2(1)). Section 13T does not, on its face, require GMC incorporation, unlike s. 13O, which is confined to a company "incorporated and resident in GMC".

What income is exempt: "relevant income"

The exemption is not a blanket exemption of the company's income. It covers "relevant income", defined in s. 13T(3) as:

• income of the kinds referred to in s. 13(1)(zd), (ze), (zh), (zi), (zj), (zk) or (zl) "accrued in or derived from GMC"; or
• income of the kinds referred to in s. 13(7A) "received in GMC".

The listed paragraphs of s. 13(1) are exemptions that, in their own terms, apply to individuals. In summary:

Section 13(7A) exempts income from sources outside GMC received in GMC by an individual who is not resident in GMC, and by a resident individual where the Comptroller is satisfied the exemption would be beneficial.

The effect of s. 13T is to give a family-owned holding company the same treatment on these categories that an individual investor would receive. It does not exempt trading income, rental income from GMC property, or income outside the listed categories. Gains from the disposal of shares may separately be exempt for a company under s. 13W, which is in force and applies where the divesting company has held at least 20% of the investee company's ordinary shares for a continuous period of at least 24 months (s. 13W(1A)).

Deductions and the one-strike rule

Section 13T(2) allows the designated officer to make regulations for the deduction of expenses, allowances and losses of an eligible company "otherwise than in accordance with this Act". Because relevant income is exempt, regulations can set out how expenses are allocated between exempt and non-exempt income.

Section 13T(4) is the provision families most need to understand. Where a company "fails to satisfy the definition ... in any basis period, then this section does not apply to the company in any subsequent basis period, even if it satisfies the definition in that subsequent basis period". The exemption is lost permanently on a single failure. A share transfer to a non-qualifying person, a shift away from investment activity, or a breach of a prescribed condition in one year ends the exemption for good. Constitutional restrictions on share transfers and a shareholders' agreement are the natural safeguards.

How section 13T fits with the fund exemptions and section 37AA

Family capital in GMC can be organised in more than one way, and the Act's fund provisions may be relevant alongside, or instead of, s. 13T (see our guide to the sections 13O, 13OA and 13U fund exemptions).

• Section 13O exempts prescribed income of a company incorporated and resident in GMC, approved by the designated officer or an authorised body, arising from funds managed in GMC by a fund manager or by an approved person. No approval may be granted after 31 December 2029 (s. 13O(2)).
• Section 13OA provides the equivalent for partners of an approved limited partnership, with the same 31 December 2029 cut-off (s. 13OA(5)).
• Section 13U exempts prescribed income of an approved person, or of the vehicles in an approved master-feeder, master-feeder-SPV or master fund-SPV structure, arising from funds managed in GMC by a fund manager; approvals may be granted from commencement to 31 December 2029 (s. 13U(2)).

A "fund manager" for these purposes is a company holding a licence to carry on fund management under the laws regulating the securities and derivatives industry, or a company exempted from holding one (s. 2(1)). In GMC, that points to a Financial Services Permission from the Gelephu Financial Services Office (GFSO) covering "Managing Assets" (Financial Services Act 2025, Schedule 1, para 56) or "Managing a Collective Investment Fund" (para 59).

The difference in approach matters. Section 13T is status-based: a company meeting the definition is exempt without individual approval. Sections 13O, 13OA and 13U are approval-based: the designated officer or an authorised body must approve the company, partnership or structure and can impose and vary conditions (ss. 13O(1A)–(1C), 13OA(2)–(4), 13U(2F)–(2H)).

Section 37AA adds a philanthropic dimension. It allows a deduction for donations of money by an "approved donor" related, under rules made by the designated officer, to a s. 13O company, a s. 13OA limited partnership or a s. 13U vehicle (s. 37AA(2)). The deduction is capped at the lower of the donations made and 40% of the donor's statutory income (s. 37AA(4)); any unused balance is lost (s. 37AA(5)); and there may be only one approved donor per vehicle at any time (s. 37AA(8)). Approvals may be given only during a period appointed by Gazette notification (s. 37AA(6)). Section 37AA is in force, but because it depends on approvals under ss. 13O, 13OA and 13U, which are not yet commenced, it cannot operate in practice until they do.

Does a family office need a GFSO licence?

Managing the investments of a family holding company can fall within "Managing Assets" under Schedule 1 of the Financial Services Act 2025. An activity is regulated only if carried on "By way of Business" (Sch. 1, Part 1, para 3), and the general exclusions include one for groups and joint enterprises (para 77). A single-family office managing only its own group's assets may be able to rely on those provisions; a structure that manages assets for outsiders, or that wishes to be a "fund manager" for ss. 13O, 13OA and 13U, will need a Financial Services Permission (see our guide to fund manager licensing in GMC). The analysis is fact-specific and GFSO's rulebooks apply.

The position of family members today

While s. 13T waits for commencement, the individual rate provisions are already in force and shape how family members are taxed:

• An individual who is not a citizen of Bhutan, whether resident in GMC or not, pays tax at 0% on chargeable income derived on or before 31 December 2030 (s. 43(1)(ba)).
• A Bhutanese citizen not resident in GMC also pays 0% to 31 December 2030 (s. 43(1)(b)).
• A Bhutanese citizen resident in GMC is taxed at the progressive rates in the Second Schedule, Part A, Table 3, starting with a nil band on the first $10,000 and rising to 15% above $500,000 (s. 42).
• Foreign-source income received in GMC by a non-resident individual is exempt under s. 13(7A).

Where the shareholders are non-Bhutanese individuals, their own exposure to GMC tax is nil until the end of 2030 regardless of s. 13T. The value of s. 13T lies in the company layer, and in the period after 2030.

Practical checklist / Next steps

1. Decide the structure: a single holding company, or a holding company plus a separate management company that could apply for a GFSO Financial Services Permission.
2. Incorporate in GMC under the Companies Act 2025 (see our guide to incorporating a company in GMC). At least one director must be ordinarily resident in GMC (Companies Act 2025, s. 145(1)).
3. Draft the constitution and a shareholders' agreement to restrict share transfers to family members, so that the related-shareholder limb of s. 13T(3) cannot be breached inadvertently. Remember the one-strike rule in s. 13T(4).
4. Keep the company's activities to holding and making investments (s. 13T(3)(b)). Put any operating business in a separate entity.
5. Map expected income against the "relevant income" categories. Income outside them will be taxed at 15% (s. 43(1)(a)) unless another exemption, such as s. 13W, applies.
6. Assess whether a fund vehicle under ss. 13O, 13OA or 13U is preferable or complementary, bearing in mind the 31 December 2029 approval deadlines in those sections.
7. Consider philanthropic plans in light of s. 37AA.
8. Monitor the Gazette for the commencement notification for s. 13T and the accompanying regulations, which will define "related" shareholders and any other conditions.

Frequently asked questions

Can I claim the section 13T exemption now?

No. Section 13T commences on a date appointed by the designated officer by Gazette notification (s. 1(3)(n)). No date has been appointed in the Act itself. The definition of related shareholders and any other conditions will be set by regulations under s. 13T(3).

Does the company have to be incorporated in GMC?

Section 13T does not say so expressly; "company" includes a company incorporated elsewhere (s. 2(1)). Regulations may add conditions, and a GMC-incorporated company with a resident director is the natural vehicle.

Is all of the company's income exempt?

No. Only "relevant income" as defined in s. 13T(3) is exempt: specified GMC-source investment income under s. 13(1)(zd)–(zl) and foreign-source income received in GMC of the kind covered by s. 13(7A). Other income is taxed at the company rate of 15% (s. 43(1)(a)).

What happens if one share is transferred outside the family?

If that breaches the related-shareholder requirement in a basis period, s. 13T(4) removes the exemption for every subsequent basis period, even if the shares are transferred back. The exemption cannot be regained.

Key takeaways

• Section 13T is a purpose-built exemption for family-owned investment holding companies, but it is not yet in force and its key definitions await regulations.
• The exemption covers listed categories of investment income only, not all income of the company.
• A single failure to meet the definition ends the exemption permanently (s. 13T(4)), so ownership and activity controls are essential.
• The fund exemptions in ss. 13O, 13OA and 13U, and the donation deduction in s. 37AA, are the related provisions; the fund exemptions are also not yet commenced and have 31 December 2029 approval deadlines.
• Non-Bhutanese family members are taxed at 0% until 31 December 2030 (s. 43(1)(ba)), so the immediate value of s. 13T is at the company level and beyond 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.

References

• Income Tax Act 2025 (Law No. 6 of 2025), ss. 1(3), 2(1), 2AA, 13(1)(zd)–(zl), 13(7A), 13O, 13OA, 13T, 13U, 13W, 37AA, 42, 43(1), Second Schedule Part A
• Companies Act 2025 (Law No. 1 of 2025), s. 145(1)
• Financial Services Act 2025 (Law No. 5 of 2025), Schedule 1, Part 1 para 3, Part 2 paras 56, 59, para 77