What will your annual land tax be like after the Property Tax Bill 2022

After the presentation of the Property Tax Bill in Parliament a big question on the minds of many Bhutanese will be what the land tax rates will be like for them once the bill is passed, whether the land is in urban or rural areas.

The paper found that the steepest hikes in land taxes are in Thimphu Thromde and Phuentsholing followed by Paro and Gelephu  Thromdes since the land tax is now being charged as 0.1% of the value of the land unlike before when it was a flat rate of where the land was located and its type.

The value of the land is the updated Property Assessment and Valuation Agency (PAVA) rate or government compensation rate which is an average of the current market rate, bank valuation rate and the 2017 PAVA compensation rate.

So earlier in Thimphu and Phuentsholing the commercial land tax rate was Nu 217.5 per decimal and the residential land tax rate was Nu 108.75 per decimal.

In Thimphu the commercial land tax rate has shot up more than 1000% to be up to Nu 2,700 per decimal while in Phuentsholing it is 2,223.       

In Thimphu the residential land tax rate has shot up by around 700% to be up to Nu 795 per decimal while in Phuentsholing it is up to Nu 731.   

The above means that a person owning 10 decimals in a commercial area in Thimphu who earlier paid Nu 2,175 per year as total land tax will now have to cough up Nu 27,000 per year as just land tax.

Similarly, an owner of a 10 decimal residential plot in Thimphu who used to earlier pay Nu 1,087 will not have to pay up to Nu 7,950 in annual land tax.

The land tax revenue collected from a tax surplus Thromde like Thimphu will be shared with other Thromdes.

However, since the new land tax is based on value, remote thromdes like Zhemgang has seen decreases while there is not much change for Thromdes like Haa, Bumthang and only doubling or minor increases of land tax rates in other Thromdes (see box 2).

In case of non-commercial and non-residential precincts many smaller thromdes will even see a decrease in land tax rates.

The biggest hikes in the land taxes will be seen in the rural Kamzhing land divided into A, B, C and D categories based on distance from the municipal boundary (see box 4).

The Kamzhing land tax rate was Nu 12 per acre or Nu 0.12 per decimal and the Chuzing land was Nu 24 per acre or Nu 0.24 per decimal. However, now there are comparatively major increases for Kamzhing land here.

For example, in Paro a class A Kamzhing land will now attract land taxes of Nu 2,988 per acre or Nu 29.88 per decimal.

Even in remote Zhemgang a class A Kamzhing land will now attract land taxes of Nu 952 per acre or Nu 9.52 per decimal.

In the case of Chuzing land and high lands around 90% of the land taxes will be rebated which will mean minimal impact there.

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.

The new taxes will replace the 1992 property taxation policy under which people currently pay very nominal land and property tax rates.

A 15% vacant land surcharge tax (on the total tax amount) shall be applicable to urban land with civic amenities two years from when the civic amenities were provided.

The taxes are applicable from 1 January 2023.

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