The Finance Minister Lyonpo Namgay Tshering said there there are two ‘beautiful things’ within the Property Tax Bill of Bhutan 2020.
The first being the obvious part where the current property transfer tax for land or building has been reduced from five percent to three percent. Also, the vehicle transfer or sale will only be one percent down from the five percent.
The minister said that both the rates above were reduced to ensure better compliance. He said that the old rates had been based on the outdated 1992 Taxation Policy.
The expectation of the government is that with this reduction more people will come forward to declare property transfers and also change the vehicle ownerships. Lyonpo said that aim here is to ensure better compliance.
On the second part, the minister pointed out that earlier property transfer tax was not applicable only within the immediate family- defined as being from parents to children and between a married couple.
This meant that all other property transactions within the family were taxed even when they had to do with inheritance.
Lyonpo said that earlier property taxes were applied even when children transferred property to their parents, when siblings who are the legal custodian of inherited property transferred it to other siblings, when grandparents gave property to grandchildren and after it was returned to the main house after the death of a family member.
The minister said that now all categories of family and inheritance related transactions would no longer be taxed.
This is in addition to the existing non taxation of property given from parents to children or between spouses.
In addition to this earlier taxed categories like splitting one share of the property under joint ownership and transferring property to a religious organization or a registered public benefit organization under CSO Act will also no longer attract the property tax.
Transfer of property between exempt international organizations is also not subject to tax.
The minister said the exemption list has been expanded to make it more beneficial.
The reduced vehicle transfer tax will also encourage people to transfer vehicles to the real owners as earlier people avoided doing it due to the high five percent tax.
He said a Property Bill in its own right would make things more updated, clear and transparent than what it was before.