MoF exempts tax for small and micro businesses

Tax collectors will not visit businesses in high Covid-19-risk areas: DRC

MB Subba

The Department of Revenue and Customs (DRC) has exempted business income tax (BIT) to small and micro businesses that are located and operate outside the four dzongkhag thromdes and dzongkhag headquarter throms.

This will be applicable until December 31, 2024, the DRC notified recently, citing the Fiscal Incentives Act.

However, registered micro and small businesses that are ineligible for the exemption must file their tax return using the revenue administration and management information system (RAMIS) or the DRC’s BIT Estimated Tax App (BETA).

The BIT payment App, which the DRC says will be launched soon, will also be useful for small and micro-businesses, including those that are exempted from BIT, to obtain tax clearance certificates online.

Unlike in the past years, DRC officials will not visit businesses located in high Covid-19 risk areas given the current pandemic situation and health protocols, the DRC’s notification states.

Finance Minister Namgay Tshering said that those businesses that did not have income in 2020 need not pay BIT. “The tax is only for those businesses that made profits in the assessment year. It’s as simple as that,” he said.

According to the finance minister, there are more than 23,000 registered small and micro-businesses in the country,   of which 12,400 are in rural areas.

The tax exemptions come at a time when the country’s domestic revenue has seen a record fall.

According to the finance ministry, the domestic revenue for the fiscal year 2020-21 is estimated at Nu 33,189 million (M), which is 14 percent lower than that of the previous year mainly contributed by the Covid-19 situation.

The government sacrificed Nu 32 million (M) in taxes to small and micro-businesses in rural areas last year, according to the finance ministry.

However, this tax exemption notification is not applicable to tour and ticketing agents, construction, logging, goods and passenger transport, consultancy and hiring businesses.

The BIT exemption is also not applicable to cable, exports, sand, boulder, aggregates, mining, quarrying, stone crushing and powdering, and mobile sawmill businesses.

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