Property Tax Bill to revise land and building taxes untouched since 1992 to raise revenue

The government aims to revise rural and urban land taxes rates along with building tax rates through a Property Tax Bill drafted by the Ministry of Finance (MoF). This will replace the 1992 property taxation policy under which people currently pay very nominal land and property tax rates.

Finance Minister Namgay Tshering said the original plan was to bring in the Property Tax Bill in January 2020 along with the other tax reforms. However, the bill was held back since the government’s property value assessment rates were of 2017 under the Property Assessment and Valuation Agency (PAVA) and so the PAVA rates needed to be upgraded to 2020 before the summer session of 2020. This is because the taxes would be based on these rates.

The PAVA rate applies to both rural and urban areas and is normally used by the government to compensate people when their land is taken for public works or projects.

The MoF completed the updated PAVA valuation and the Bill was supposed to come in the summer session of 2020 but then COVID-19 struck and the summer session was shortened to only five days to pass the budget.

The winter session of 2020 also faced a shortened session where the bill could not be brought about.

The summer session of 2021 will not see the bill given that the government does not want to bring in new taxes right now due to COVID-19 but MoF aims to bring in the bill by the winter session of 2021.

Lyonpo said after the summer session the MoF will present the bill to the Cabinet and deliberate on it before bringing it to Parliament. He said it will all depend on the cabinet deliberations.

The Property Tax bill will charge a certain percentage of tax for rural property and another percentage for urban property. The value of the properties including buildings will be decided by PAVA.

However, PAVA rates will be of different values depending on the location of the land and distance from the Thromde. For example, dzongkhags thromdes without municipal services will see lower PAVA rates and hence lower taxes.

Land Taxes in Bhutan have not been touched since 1992 which is why in rural areas  Chuzing land tax is still Nu 24 per acre per year and Nu 12 per acre for Kamzhing land.

It ranges from Nu 65.4 per decimal to Nu 217 per decimal in most urban areas with varying rates. In Thimphu it is Nu 217.5 per decimal for commercial areas and Nu 108.75 per decimal for residential areas.

Committees have been formed in the past to revise land taxes upwards but it could never happen especially after the advent on electoral democracy from 2008 onwards.

Under the current government early in its term in 2019 faced with a massive resource crunch in the 12th plan and a long list of promises, it formed a task force led by the Department of Macroeconomic Affairs and Department of Revenue and Customs with some representation from Ministry of Works and Human Settlement, National Land Commission and Thimphu Thromde.

The Taskforce completed its report in 2019 itself and proposed to the Cabinet to base land taxes on the government’s Property Assessment and Valuation Agency (PAVA) rates.

A Local Government Rural Revenue Report done by the Department of Local Governance funded by the EU did some interviews with Ministry of Finance officials in 2020 where the tax proposals are laid out.

In the report one interview is conducted with Director General Department of Macroeconomics Lekzang Dorji and Tangbi of the Property Assessment Team.

Back in 2020 they said the government is looking into property tax, but not in the current parliamentary session.

They said the Department of Revenue and Customs is working on a proposal to make the tax value based.

They say the tax proposal must go through parliament and it is controversial.

“There have been many studies, but each government did not take it to parliament. But this government intends to take it there,” the two said.

According to them landlords with rental units and large land owners will be hurt but that will make the budget of cities more sustainable.

Under the new taxation proposals, the Nu 24 per acre tax for Chuzing land would increase by more than 20 times to Nu 500 per acre.

Similar increases can be expected in all categories of land taxes.

Similarly, currently buildings in urban areas pay a nominal rate of property tax based on number of rooms but the tax bill will not only increase the tax but also charge the tax based on square feet.

In rural areas the 2017 PAVA rate per decimal is different for Chuzing, Kamzhing and Cash crop land and differs from Dzongkhag to Dzongkhag. Also rural land closer to urban areas get a higher value. For example, in Paro, Kamzhing land which more than 6 km from the municipal boundary is valued at Nu 5,198 per decimal under the 2017 PAVA. In Thimphu rural land 1 km from the Thromde boundary is valued at Nu 80,990 per decimal.

In urban areas the land is classified into different areas based on use with Thimphu itself having 27 different types of uses.

In Thimphu Thromde core urban area PAVA values land as high as Nu 1.3 mn per decimal while in the neighbourhood node it is 349,812 per decimal.

The land taxes would be based on the above rates.

In the report Chief Policy and Planning Officer, of MoF Chencho Tshering says the government is already planning to increase the taxes but it is taking time since it has direct impact to the people, so they are trying to carry out detail analysis at the moment. 


The report also quotes, Program Officer of DLG Sangay Dorji saying increase in tax rates will be one of the main outcomes from the study which is definite.

Karma Lethu, the then Officiating DG of DRC said due to non-availability of proper system in place, the department is reviewing the rural property taxation which is under process and soon it will be submitted to the Parliament. 


Mr. Phurpa Wangchuck, Chief ICT Officer, NLC says they are waiting for a Parliament resolution. He says the Department of Macroeconomics will make recommendations on taxation after looking at tax base and assessment values.

He said the large land holders will oppose it but the Parliament must decide.

The report also quotes the former Thimphu Thrompon Kinlay Dorjee who says, “We are asking the government to revise the taxes. The revenues are too small and we cannot sustain on them. People are able and willing to pay as long as services are improved.”

Namgyel Wangchuk, Chief Budget Officer and Gawa Zangpo, Deputy Chief Budget Officer of the Department of National Budget said the taxes are collected based on the regulation of 1992 and it is really high time to revise the taxes.

The report says the ministries, departments and agencies of the RGoB are actively laying the groundwork for a modern property tax system with efforts to assess property and the introduction of the online payment system which can route proceeds back to the Gewog and identify non-payers which was recently instituted. Legislation is anticipated later this year.

In respect to Thimphu Thromde the report says at the moment, the NLC, MoF and Thimphu Thromde are investigating the feasibility of basing the tax on the assessed value of the property to create a modern property tax system which is fair and produces revenues capable of sustaining local governments.

The property taxes are supposed to remain with the local governments and help make them self sufficient. This in turn will lighten the financial load on the central government which heavily subsidizes local governments.