Bhutan to Implement 5% GST in 2026: Key Rules for Non-Residents

October 13, 2025

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Replacing one tax regime with another is always a long and challenging process that involves many technical and legislative issues. After several years of addressing technical problems and delaying the reform of its Sales Tax regime, Bhutan announced that starting in 2026, it will transition to the GST regime.

Impact on Non-Resident Digital Services Providers

Starting January 1, 2026, Bhutan will introduce the long-awaited GST instead of the current Sales Tax. The 2025 GST Amendment Law confirmed that the standard GST rate will be 5%, which is lower than the initially proposed 7%. In addition to this, the GST Amendment Law maintains rules requiring non-resident providers of B2C imported services to register and pay GST in Bhutan.

The obligation for non-resident service providers to register for GST is triggered once their gross sales to Bhutanese consumers exceed BTN 5 million (around USD 56,600) over the past year, BTN 2.5 million (around USD 28,300) over the past six months, or are expected to exceed BTN 5 million in the coming year.

Notably, the Law provides a detailed definition of electronic services, encompassing a broad spectrum of digital activities delivered via telecommunications networks. This includes website hosting, remote software and equipment maintenance, software supply and updates, and any other services delivered electronically that qualify as imported B2C supplies.

Once registered, non-resident providers must issue tax invoices at the time GST becomes payable, containing all essential information such as date, supplier and customer details, and total amounts. Furthermore, if the sales are made through an electronic distribution platform, such as online marketplaces, the platform itself, as a deemed supplier, is responsible for collecting and remitting GST instead of the underlying supplier.

Conclusion

For those who fail to meet these requirements, the Law prescribes a 15% annual penalty for late payments. Additionally, repeated deliberate failures to file GST returns may amount to a criminal offence. Considering these penalties and the short period to prepare for the transition to the new tax regime, taxable persons, especially non-resident service providers, must act promptly and take necessary steps to be ready for 2026 and the implementation of new regulations.

Source: KPMG

When will Bhutan implement the new GST system?

Bhutan will officially replace its current Sales Tax regime with a new Goods and Services Tax (GST) system on January 1, 2026.

What is the standard GST rate in Bhutan under the new law?

The standard GST rate will be 5%, which is lower than the initially proposed 7%, as confirmed by the 2025 GST Amendment Law.

Who must register for GST in Bhutan?

Non-resident providers of imported B2C services must register if their sales to Bhutanese consumers exceed BTN 5 million annually, BTN 2.5 million in six months, or are expected to surpass BTN 5 million in the coming year.

What types of services are considered electronic services under Bhutan’s GST law?

Electronic services include website hosting, remote software and equipment maintenance, software supply and updates, and any digital services delivered through telecommunications networks.

How does Bhutan’s GST law treat online marketplaces?

When sales are made through an electronic distribution platform, the platform acts as a deemed supplier, taking responsibility for collecting and remitting GST on behalf of the underlying suppliers.

What penalties apply for failing to comply with Bhutan’s GST requirements?

Failure to meet GST obligations can result in a 15% annual penalty for late payments, and repeated intentional non-compliance may be treated as a criminal offence.

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