The Bhutanese Leading the way.
The Finance Minister Lyonpo Namgay Tshering presented the Property Tax Bill of Bhutan 2022 today where he said that land tax will no longer be charged based on the area, but based on the value of the land and also the building.
He said that the valued based land tax will be based on the new updated Property Assessment and Valuation Agency (PAVA) rate which is an average of the market rate, bank rate and existing PAVA compensation rate. In short these three were added up and divided by three.
In the case of buildings, the tax rate will be calculated on the annual rental value, capitalization rate (rate of return or income on a real estate property) and assessed value or the financial worth of a property.
This will replace the 1992 property taxation policy under which people currently pay very nominal land and property tax rates.
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 currently 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.
With the new property tax of 0.1% on the actual value of the land the land taxes will be much higher than the above figures.
A 15% vacant land surcharge tax (on the total tax amount) shall be applicable to land in Schedule 2 which are the 10 Thromdes in Bhutan with civic amenities like Thimphu, Phuentsholing, Gelephu, Samdrupjongkhar, Samtse, Paro, Mongar, Trashigang, Punakha, Wangduephodrang Thromdes.
It is also for areas where urban services have been made available as prescribed in the Rules, the owner of the land is not restricted by law, including court order, or any prevailing rules or regulations from constructing a building on the land; and no development has been carried out on the land within two years from the date on which all of the urban services have been made available.
There are concessions too as 90% of the amount of land tax payable on land which is registered as Chuzing land under the Land Act of Bhutan 2007 shall be remitted.
90% of the amount of land tax payable on land shall be remitted for Highland Communities as identified by respective Dzongkhags and prescribed in the Rules.
Subject to any conditions prescribed in the Rules, a percentage not exceeding 50% of the amount of building tax payable on Traditional Houses which are used wholly for self-occupied residential purposes shall be remitted.
Subject to any conditions prescribed in the Rules, a percentage not exceeding 50% of the amount of building tax payable on Protected Traditional Houses in urban centers shall be remitted.
The Competent Authority shall prepare and maintain a Valuation List of all land and buildings which are subject to land tax and building tax respectively
All taxes under this Act are due and payable on 31 December of each year even if an objection or appeal has been made.
The taxes are applicable from 1 January 2023.
A late payment penalty of 24% per annum of the outstanding tax is payable on any tax under this Act.
If land tax on any land is not paid for three consecutive years, the Competent Authority shall serve a notice to the land owner requiring the owner to pay the tax and applicable penalties within three months of the notice.
If the owner does not comply with such notice, the National Land Commission Secretariat may annul the Thram of such land and take over the land as Government land or Government Reserved Forests land in accordance with the Land Act of Bhutan 2007.
The Finance Minister said that a thromde like Thimphu Thromde may have surplus revenue due to the property tax while other thromdes do not have enough and so the government will collect the property tax and distribute it among local governments.
The owner of any land or building may appeal against any decision made under this Act. Filing an appeal does not postpone the date for payment of taxes.
Where the appeal is unsuccessful, the appellant shall be liable for the amount of tax with a penal interest of 24% per annum from the payment deadline.
There will be appeal bodies at the regional office of the Department of Revenue and Customs consisting of three officers of the regional office and chaired by the regional director, an appeal committee at the head office of the Department of Revenue and Customs consisting of five members and an appeal board at the Ministry of Finance consisting of Two regular members from the Ministry of Finance, One regular member from the Ministry responsible for human settlement, One regular member from the National Land Commission Secretariat and One ad hoc member.
The quorum of the appeal board shall not be less than three members.
An appeal shall be filed before the appeal committee within 30 working days from the date of the decision which is objected against.
A dedicated Property Valuation Division shall be established under the Ministry of Finance.
The Division shall act as Secretariat to the PAVA taskforce members from the Agencies prescribed in the Rules.
Notwithstanding anything else to the contrary in any other provisions of law, a lawful owner of property who has paid taxes for such property for a period not less than 5 years shall enjoy security of ownership over such property and shall be immune from subsequent claims by any other person or entity.
