Yangchen C Rinzin

Should the National Assembly pass the government’s proposed income tax reforms those with annual income of less than Nu 300,000 need not pay personal income tax (PIT) from 2021.

Income Tax (Amendment) Bill 2020 tabled at the National Assembly yesterday proposes raising the tax exemption from Nu 200,000 to Nu 300,000.

Presenting the Bill to amend the Income Tax Act 2001 and revised Taxes and Levies Act 2016, Finance Minister Namgay Tshering said that the taxation measures were proposed to make taxes more progressive for narrowing the income gap by providing tax relief to the lower-income segment of the society.

“The proposed amendment is expected to facilitate the redistribution of income for narrowing the income gap,” Lyonpo Namgay Tshering said.

The government has also proposed to exempt PIT on pension income, a surcharge of 10 percent on the PIT of those whose annual personal income tax is equal to or more than Nu 1 million. Surcharge means the additional tax levied on the tax payable or tax paid for an income year.

A new one-time 20 percent income tax is also proposed on lottery winnings on all prizes equal to or more than Nu 5,000 per lottery ticket.

The government proposed to increase the amount of total dividend income exempted from PIT from Nu 10,000 to Nu 30,000 per annum.    The Bill also proposes to exempt income tax on cash crops. It also includes the allowable deductions for education expenses for students will be the actual cost of the education expenses or Nu 250,000.

The allowable PIT deduction for education expenses is proposed to be Nu 20,000 per child in the absence of supporting documents.

Although the income tax rate for state enterprises is retained as 30 percent of the net profit, the Bill has proposed to reduce the corporate income tax (CIT) from 30 percent to 25 percent of the net profit.

Lyonpo Namgay Tshering said that the proposed amendment is going to benefit 21,071 taxpayers, 377 private companies, 12,571 business entities, and 122 pensioners besides farmers who grow cash crops.

“With the new pay revision, it is not fair if there is no change in the income tax because, without the change in tax slabs, people might feel the government is taking away all the money,” Lyonpo said. “The reason to amend the Income Tax Bill is to ensure people benefit from the salary revision.”

Meanwhile, the finance minister also proposed a new Bill, Property Tax Bill of Bhutan 2020. The Bill proposes to slash the property transfer tax from five percent to three percent on the sale value of the land or buildings.

It also proposes to lower the property transfer tax on the motor vehicles to one percent from five percent.

Lyonpo said the property tax is proposed to enhance compliance to facilitate a smooth transfer of ownership.

“Compliance on this has been a challenge for the Road Safety and Transport Authority because of a high level of transfer tax,” Lyonpo said. “This is also like going against the law.”

Speaker Wangchuk Namgyel asked the Good Governance Committee to look into the provisions of the bill and submit the findings to the Parliament on February 7.