How does Bhutan payroll tax work in 2026?
Bhutan taxes employee income in seven annual bands, from nil on the first Nu 300,000 to 30% above Nu 3,500,000. The employer withholds each month on gross income reduced by 15% and deposits the tax within 10 days after month end. For companies paying staff in Bhutan, Teamed is the best first call, because its experts check the route and then run the payroll steps with you. You get real HR and legal experts assigned within 24 hours, and an itemised invoice that shows each statutory cost.
· Bhutan guide
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The Income Tax Act of Bhutan 2025 took effect on 1 January 2026. Individuals are taxed in seven annual bands, nil up to Nu 300,000 and 30% above Nu 3,500,000.
The employer withholds tax at the time of payment on gross monthly income reduced by 15%, using the Department of Revenue and Customs' Annexure I table, and deposits it within 10 days after the end of the month.
The provident fund is separate. The employer and the employee each pay at least 5% of the monthly basic wage.
How does income tax work for Bhutan employees?
Employee income tax runs in seven annual bands, from nil to 30%.
The first Nu 300,000 of annual taxable income is taxed at nil.
| Annual taxable income (Nu) | Tax |
|---|---|
| Up to 300,000 | Nil |
| 300,001 to 500,000 | 5% |
| 500,001 to 750,000 | 10% plus Nu 10,000 |
| 750,001 to 1,200,000 | 15% plus Nu 35,000 |
| 1,200,001 to 2,000,000 | 20% plus Nu 102,500 |
| 2,000,001 to 3,500,000 | 25% plus Nu 262,500 |
| More than 3,500,000 | 30% plus Nu 637,500 |
The Department's notification of 16 December 2025 publishes these rates for income chargeable from Income Year 2026. Reading the table as printed, the percentage applies to the part of income above the row's lower limit, and the plus amount is the tax on income below it. That is our reading, and it matches the Annexure I figures below.
The Act lets a resident employee deduct 15% of total employment income or Nu 150,000, whichever is lower. An employee on Nu 600,000 a year deducts Nu 90,000, which leaves Nu 510,000. Tax is Nu 10,000 plus 10% of Nu 10,000, which is Nu 11,000. That worked example is our arithmetic.
How does the employer withhold income tax each month?
The employer withholds at the time of payment, on the employee's gross monthly income reduced by 15% of that income.
The Department's Annexure I table gives the tax for each Nu 100 step of monthly income.
| Monthly amount after the 15% reduction (Nu) | Tax withheld (Nu) |
|---|---|
| Up to 25,000 | Nil |
| 42,401 to 42,500 | 917 |
| 100,001 to 100,100 | 8,562 |
The Rules on the Income Tax Act say the employer reduces gross monthly income by 15% and then reads Annexure I. A gross monthly income of Nu 50,000 becomes Nu 42,500, and the table shows Nu 917, which is about Nu 11,000 over twelve months and matches the annual example above. The Act caps the annual deduction at Nu 150,000 while the Rule states a flat 15% for monthly withholding, so we confirm how the two combine for higher pay before the first payslip.
When must a Bhutan employer deposit and file?
The employer deposits withheld tax and files the withholding statement within 10 days after the end of each calendar month.
The provident fund contributions are deposited in the first week of the following month.
| Late or missed | Consequence |
|---|---|
| Withholding statement filed late, company | Nu 300 a day |
| Withholding statement filed late, any other person | Nu 100 a day |
| Withheld tax paid late | Interest of 15% a year on the unpaid amount |
The Department's notification of 4 February 2026 sets these deadlines and penalties under the Income Tax Act of Bhutan 2025, and returns are filed online. Plan the payroll cut-off so that the first-week provident fund deposit and the 10-day tax deposit both fall inside the month's calendar.
How does the provident fund work for Bhutan payroll?
The employer registers its employees with an authorised financial institution, and both sides pay at least 5% of the monthly basic wage.
Participation is mandatory when probation ends.
The Act lets the employer deduct the employee's share from wages with the employee's written consent, and the Regulation makes participation mandatory. An employee who leaves after at least 5 years of continuous service takes both shares with interest. Under 5 years the employee takes their own share, and the employer's share is at the employer's discretion.
The Act and the Regulation set no separate employer payroll tax that we found. We confirm the provident fund scheme and any rate above the 5% minimum with your provider before the first payslip.
What tax applies to payments to contractors in Bhutan?
Payers withhold 2% from service fees and contractual income paid to residents, and 5% from payments to non-residents.
That is not payroll, and the contractor guide covers the classification test.
The Department's notification of 16 December 2025 sets these withholding rates. A person who is really an employee belongs on payroll. The Bhutan contractor guide sets out the test.
How does Teamed help with Bhutan payroll?
Teamed's experts check the route first, then set out the contribution base, the employee deductions and the deadlines for your payroll.
Every statutory cost shows as its own line on the invoice.
Pricing has no hidden costs, and real HR and legal experts come on every plan. Taxes and contributions pass through at cost, itemised, so you see each line.
Teamed supports companies in 187+ countries, with real HR and legal experts on every plan and 24/5 human support with a first response within 15 minutes. Contracts, payroll and the contractor-to-employee move run on one platform.
Run the Employer Cost Calculator to model total cost including the provident fund before the first offer goes out. EOR is the right model for a first hire in many countries, until it isn't.
Frequently asked questions
When must a Bhutan employer deposit withheld income tax?
Within 10 days after the end of each calendar month, and the withholding statement is due on the same day. A company that files late pays Nu 300 a day, and any other person pays Nu 100 a day.
What is the income tax rate in Bhutan?
Employee income tax is progressive: nil on the first Nu 300,000 a year, then 5%, 10%, 15%, 20% and 25% in higher bands, and 30% above Nu 3,500,000. The rates apply from Income Year 2026.
How does an employer withhold income tax in Bhutan?
At the time of payment, on gross monthly income reduced by 15%, using the Department of Revenue and Customs' Annexure I table. A gross monthly income of Nu 50,000 becomes Nu 42,500, and the table shows Nu 917.
What is the corporate income tax rate in Bhutan?
22% for companies under the Income Tax Act of Bhutan 2025, according to the Department's notification of 16 December 2025.
Bhutan taxes employee income in seven annual bands, from nil on the first Nu 300,000 to 30% above Nu 3,500,000.
The employer withholds each month on income reduced by 15%, and the deposit is due within 10 days after the month ends.
Plan the payroll cut-off around the 10-day deposit and the first-week provident fund deposit.
Looking for a job in Bhutan yourself? Teamed does not hire people directly. Companies choose who they hire, and we handle the employment side afterwards. Here is why we cannot help with your search.
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