Doing Business in Bhutan

Do you want to expand your business into Bhutan or hire employees there? Find out the key things you need to know about Bhutan expansion below.

Bhutan Economy Overview

Currency

Ngultrum (BTN)

Working hours

40 hours/week

Public/bank holidays

23 public holidays

Capital

Thimphu

Languages

Dzongkha, Sharchhopkha, Bumthangkha, Khengkha, Kurtoepkha

Population

~795,700

Minimum hourly salary

3,750 BTN

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

In Bhutan, labor market laws require that workers be classified correctly. Employers who misclassify employees as independent contractors can face penalties, including back payment of taxes and possible fines.

Fun fact

Bhutan is the only country in the world that measures its success by Gross National Happiness (GNH) instead of Gross Domestic Product (GDP)

The Kingdom of Bhutan is a small Himalayan country sandwiched between Tibet and India. With only 780,000 people in the country, this nation has a small footprint both geographically and economically. However, it’s also a country rich in resources.

It has managed to use its isolation to its advantage by maintaining a high-end tourism industry that invites visitors to appreciate its dramatic landscape and culture. At the same time, the country has some of the world’s largest potential for hydroelectric power, which it largely sells to India. Though unemployment shot up to 5.9% last year, this figure is back under control at just 3.5%, meaning that the labor market is healthy and Bhutanese people are mostly gainfully employed.

In this article, we’re going to look more at Bhutan, its economy and people, and the factors you’ll need to consider if you’re thinking of doing business in this mountain kingdom.

Table of Contents show

Overview of Bhutan’s Economy

Bhutan’s economy is largely driven by the hydropower, forestry, agriculture, and tourism sectors. Currently, the country’s GDP is $3.15 billion, which, though small, has represented a 4.5 times increase over the past 20 years. Except during the global pandemic when its tourism industry was effectively shut down, Bhutan’s economy has been showing annual growth of between 3.3 and 11% during this period, making it one of the most durable economies in Asia.

Agriculture is the main occupation for at least half of the Bhutanese population. People produce grains, animal products, fruit, and especially rice for export. The country is also 71% forested and has a growing timber products and furniture industry. Tourism and hydroelectricity are the biggest contributors to the Bhutanese economy, however. Tourists pay a mandatory 100 USD tax per person per day in addition to jobs generated for guides, drivers, hoteliers, and restaurateurs across the country. Hydroelectric energy generation, too, produces a large amount of revenue which goes toward health care and education. The country currently produces 2,000 MW of electricity which it uses domestically and sells to India.

Sector/Industry	Contribution/Significance
Tourism	Represents around 10% of GDP; focuses on sustainable and high-value tourism attracting visitors to iconic sites like Paro Taktsang.
Banking & Financial Services	Contributes to economic growth through increased financial inclusion and government-backed initiatives for microfinance and investment.
Retail & Trade	Promotes local handicrafts and textiles, with export potential contributing to foreign exchange earnings.
Construction & Real Estate	Expanding infrastructure projects and urban development, supporting housing and tourism facilities.
Agriculture	Accounts for around 12% of GDP; provides employment to the majority of the rural population, producing rice, maize, and livestock.
Renewable Energy	Hydropower dominates, contributing over 20% of GDP; Bhutan exports electricity to neighboring India.
ICT & Innovation	Emerging sector with initiatives like Digital Drukyul to drive digital transformation and e-governance.

India is Bhutan’s largest trading partner by far. Over half of its exports go to India, and roughly 75% of imports come from this bordering country. However, Bhutan does essentially no trade with China to the north. Its other major exporting partners include Hong Kong and Bangladesh, and it imports products from Japan and Sweden in addition to India. Bhutan’s currency, the ngultrum, is also tied to the value of the Indian rupee, and one BTN (ngultrum) is worth about 0.012 USD.

Bhutan is also well known for creating an alternative measure of success to challenge GDP. Its measure is known as Gross National Happiness or GNH and is designed to measure the quality of life based on four pillars:

sustainable and equitable socio-economic development,
environmental conservation,
preservation and promotion of culture,
and good governance.

GNH is taken seriously in Bhutan, and project proposals are evaluated based on their potential contribution to national happiness. However, while Bhutan created and developed this measure, it isn’t the happiest country in the world but is, instead, ranked 95th out of 156 countries measured in the 1999 World Happiness Report.

Taxes

Employer tax: 5%

Bhutan does not have a comprehensive social security system covering retirement pensions, health insurance, or labor funds as seen in some other countries. Therefore, the total mandatory employer contribution is primarily the 5% provident fund contribution, along with the annual gratuity contributions.

Employee tax: 18-23%

Retirement Pension Contribution

5% of salary

Income Tax (Personal Income Tax – PIT)

Personal income tax for residents in Bhutan is progressive, with rates applied to annual taxable income as follows:

Taxable Income (BTN)

Up to 250,000
250,001 to 500,000
500,001 to 1,000,000
Above 1,000,000

Tax Rate

Overview of Bhutan’s Business Regulation

Doing Business in Asia or anywhere else in the world can be a big challenge for foreign-based companies. Not only do businesses have to decide if and how they’ll enter markets, they also need to learn about the many rules and regulations that will govern their business activities and protect local workers. Bhutan has extensive laws that help to maintain workers’ rights and cultural norms that you’ll need to be aware of when doing business in this country.

Registration and Compliance

If you want to register a business in Bhutan, you’ll first need to decide which kind of business to register. Choices include sole proprietorships, general or limited partnerships, private limited companies (like LLC), or public limited companies.

To set up a new company, foreign founders need to submit their personal information and notarized copies of their passports. They can then apply for company name approval by choosing a unique name in Bhutan. They must also apply for a foreign direct investor (FDI) registration certificate from the Department of Industry.

They can then file their application for incorporation. They must then apply for a business license from the Regional Trade and Industry Office where they want to set up businesses.

Taxes and Investments

Following incorporation, all businesses must apply for Corporate Income Tax (CIT) registration through the Ministry of Finance. In Bhutan, CIT is 25% of net profits for private and public companies and 30% for state enterprises.

Dividends are subject to 10% taxation, while interest and royalties are taxed at just 5%. Employers contribute 5% of workers’ salaries to social security programs that include old age, invalidity, and survivors’ benefits, and workers match these contributions.

Employment Laws

Workers in Bhutan are protected by important statutes, including the Labour and Employment Act of Bhutan 2007 and the Regulations on Working Conditions 2022. Employees work eight hours a day and normal hours are not more than 48 hours/week.

They receive 30-minute meal breaks after four hours of work and a ten-minute rest break after two hours of work. If they work more than 48 hours/week, they must be paid at least their normal rate, and overtime at night (10 p.m. to 8 a.m.) must be paid at 150% of their normal rate.

Workers are entitled to 18 working days of paid leave per year as well as nine paid public holidays. Maternity leave is eight weeks long, and fathers receive five days of paternity leave upon the birth of a child.

Learn more about Employee Benefits in Bhutan

Intellectual Property

The Department of Intellectual Property protects IP rights in Bhutan. In this country, trademarks can be registered for ten years and can then be renewed again every ten years. Copyrights generally last for the author’s lifetime and another 50 years, while patents last 20 years.

Benefits of doing business in Bhutan

If you’re thinking about doing business in Bhutan, there are a lot of benefits you can realize. The advantages of setting up a business in Bhutan include:

Renewable energy opportunities: While Bhutan currently produces around 2,000 MW of electrical power, its capacity has been estimated at 30,000 MW.
Political stability: Bhutan is a constitutional monarchy with a stable ruling dynasty in power for over 100 years.
Cultural richness: This country takes its cultural heritage seriously and has instituted numerous policies to maintain its culture, including clothing, house decorations, and language initiatives among others.
Growth: Bhutan has shown consistent, sustained economic growth for several decades.
Affordability: With a low minimum wage of 3,750 BTN/month (around 45 USD), Bhutanese workers can be highly affordable for foreign employers.

What Are the Downsides of Doing Business in Bhutan?

While the advantages to doing business in Bhutan are clear, there are also some disadvantages to consider when hiring Bhutanese workers or incorporating a new business, including:

Limited infrastructure: This Himalayan country has only one airport and a very challenging road network. Telecommunications technology is also limited by its geography.
Small market size: With less than a million people in the country, the domestic market is quite limited.
Isolated location: While Bhutan does a great deal of business with India, it is essentially closed to Chinese business. It’s also landlocked, meaning it has limited opportunities to bring products to the global market.
Language barriers: While many people in the tourism industry speak English and other foreign languages, most Bhutanese people have limited abilities to communicate in these languages.

International expansion into Bhutan

When you want to hire Bhutanese workers or set up shop in this country, you have a few different options at your disposal. The most common ways to do business in Bhutan include:

Bhutan Employer of Record (EOR)

An EOR can hire Bhutanese workers on your behalf if you don’t own an entity in the country. The EOR contracts them directly to work for your company and manages their HR concerns over the long term.

Learn more about EOR in Bhutan

Recruitment Agencies

Recruitment agencies in Andorra help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Andorran labor laws.

For businesses looking to grow in Andorra, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

Learn more about Recruitment Agencies in Bhutan

Bhutan Professional Employer Organization (PEO)

You can work with a PEO to assist you with your HR and compliance needs in Bhutan. While you’ll still need to incorporate your own entity, you can outsource some or all of your HR functions (payroll, admin, leave, benefits) to the PEO to help you manage your Bhutanese workers effectively.

Subsidiary Incorporation

Most foreign investors choose to incorporate private limited companies or public companies in Bhutan. According to the World Bank, the registration process involves eight main steps and can take as little as 12 days. Founders typically need to:

Conduct a name search and reserve a business name.
Obtain a security clearance certificate from the police.
Submit a project proposal to the Industrial Department Division (IDD) of the Ministry of Economic Affairs.
Register articles of incorporation.
Obtain a business license.
Obtain a Business Identifier Code (BIC) for tax purposes.
Make a company seal.
Open a company bank account.

Branch Registration

If you want a simpler option for entering the Bhutanese market, you can consider registering a branch of your current company that’s registered abroad. Branch offices can be set up to represent their parent companies in Bhutan independently or as joint ventures with local Bhutanese businesses. While a branch’s business activities are limited, it can operate with tax exemption status in some special economic zones.

Business Opportunities in Bhutan

Bhutan, known for its pristine environment and unique focus on Gross National Happiness, offers a range of business opportunities for entrepreneurs looking to expand into emerging markets. While the nation prioritizes sustainability and cultural preservation, sectors like tourism, hydropower, agriculture, and renewable energy present significant potential for growth. With government incentives to attract foreign investment and an increasing interest in eco-friendly industries, Bhutan is an attractive destination for businesses aligned with sustainable development and innovation.

Business Opportunity	Reason for Opportunity
Sustainable Tourism	Bhutan’s high-value, low-impact tourism model limits visitors, creating demand for luxury, eco-tourism, and cultural experiences.
Hydropower Development	Bhutan’s abundant rivers offer untapped potential for hydropower projects, with export opportunities to neighboring countries.
Organic Agriculture	Bhutan aims to become the world’s first 100% organic nation, driving demand for organic farming, processing, and exports.
Renewable Energy Projects	The government promotes investments in wind, solar, and biomass energy to complement hydropower and reduce seasonal shortages.
IT and Digital Services	With improving internet infrastructure, Bhutan is looking to develop its digital economy, creating room for tech and IT ventures.
Handicrafts and Textiles	Bhutanese crafts are renowned globally; investing in local artisans and expanding exports supports cultural preservation and trade.
Healthcare and Wellness	Rising interest in holistic wellness, combined with Bhutan’s serene environment, makes the country ideal for wellness retreats.
Education and Training	Bhutan’s focus on skill development opens opportunities for private education, vocational training, and e-learning platforms.

Expanding into Bhutan offers businesses the chance to participate in an economy that values sustainability, community well-being, and long-term growth. While the market may be niche, the opportunities align with global trends like eco-tourism, renewable energy, and organic agriculture. For businesses ready to engage with Bhutan’s unique economic landscape, the rewards extend beyond profits—fostering meaningful contributions to the country’s development and cultural preservation.

Are you interested in doing business in Bhutan? Remote People can help.