The Bhutanese Leading the way.
The Renewable Energy Tax Exemption Bill was introduced in the National Assembly (NA) on Friday by Finance Minister Lekey Dorji. The Bill was handed over to the Economic and Finance Committee and will be taken up for deliberation on 6th June.
The Bill aims to promote investment in renewable energy by providing targeted tax exemptions to support Bhutan’s transition to a greener economy, strengthen energy security, and encourage private sector participation in the sector.
It seeks to reduce the high upfront costs of renewable energy projects, which typically involve long development periods and delayed returns. The government expects that fiscal incentives during the construction phase will improve project viability, attract investment, and speed up implementation.
The proposed exemptions cover Goods and Services Tax, Customs Duty, Excise Tax, and Property Ownership Transfer Tax for approved renewable energy projects. These include hydropower, solar, wind, biomass, geothermal, green hydrogen, biofuels, and other sources identified by the Ministry of Energy and Natural Resources.
The Bill also sets out a regulatory framework covering eligibility criteria, approval processes, compliance requirements, audit powers, anti-avoidance measures, restrictions on misuse of exempted goods, and sunset provisions.
It does not alter the structure or rates of the Goods and Services Tax (GST). Instead, it provides a limited, time-bound exemption mechanism for specific approved projects.
Under the Bill, indirect taxes on key inputs used in the construction and installation of renewable energy projects will be exempted. Property Ownership Transfer Tax between project entities and the government will also be waived.
The policy is expected to benefit public agencies, private developers, joint ventures, independent power producers, contractors, and investors involved in renewable energy development.
Beyond reducing costs, the Bill is intended to expand Bhutan’s renewable energy capacity, improve energy reliability, diversify supply sources, and support long-term economic growth. It is also expected to encourage investment in energy-intensive sectors such as green manufacturing, data centres, digital industries, green hydrogen production, and sustainable tourism.
While the exemptions may reduce indirect tax revenue during the construction phase, the government expects longer-term gains through increased energy production, stronger energy security, reduced seasonal shortages, and higher electricity exports.
The Bill also aligns with broader national development plans, including efforts to position Bhutan as a hub for sustainable investment, such as initiatives like the Gelephu Mindfulness City.
To encourage private sector participation, the Bill aims to reduce financial risks and improve project feasibility. It also includes safeguards against misuse, including provisions for revocation of exemptions, cancellation of licences, seizure of goods, and criminal penalties where necessary.
