Thimphu Thromde faces land tax collection dilemma amidst pending executive order

Dratshang, National Housing Development Corporation Limited, and Thimphu Thromde are the highest land and building tax payers.

Thimphu Thromde has encountered a challenging situation as they grapple with a delay in implementing new tax rates. According to a recent announcement, taxes for land and buildings were supposed to have been collected by 31 March 2023. However, due to a pending executive order from the Ministry of Finance (MoF) regarding the new tax rates, the situation remains uncertain.

On 20 March 2023, MoF notified the local government to collect land and building/house taxes for the calendar year 2022, along with the outstanding amounts at the existing approved rates as per the Revised Taxation Policy 1992, by 31 March 2023, after which the new land tax rates will be applied in accordance with the Property Tax Act of Bhutan 2022.

In a statement issued by the Thimphu Thromde, it was revealed that while they have successfully collected taxes from those who came forward to pay based on the old tax rates, they have not yet initiated the collection of property taxes at the new rates. However, there is a delay attributed to the awaited executive order, which is expected to provide clarity on the implementation of the updated tax rates from MoF.

As of now, the highest tax payers in Thimphu Thromde are Dratshang, National Housing Development Corporation Limited, and Thimphu Thromde, with tax amounts ranging from Nu 1.5 to Nu 2.2 million as per the old rates set in 1992.

The situation is further compounded by the fact that out of 6,757 taxpayers, 593 individuals and entities have not paid their taxes for the year 2022. The consequences for these tax defaulters are governed by the MoF notification and the Land Act of 2007. These consequences include penalties for late payment, notices to pay taxes with arrears for non-payment exceeding three years, and the potential annulment of Thram for further non-compliance.

An official from Thimphu Thromde said that there are challenges in calculating the exact number of affected taxpayers. Moreover, even a single day’s delay in tax payment could result in a 20 percent annual penalty, as per the existing rules not set by the Thromde but enforced by external regulations.

This situation has left local authorities and taxpayers in a state of limbo, eagerly awaiting the long-awaited executive order from MoF to clarify the path forward for tax collection. In the meantime, the local government has encouraged taxpayers to stay informed about updates and take necessary steps to fulfil their tax obligations once the new rates are officially implemented.

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