Bhutan Investment Income Guide: Dividends 10%, Interest 10%, Royalties 10% 2026

Q: What is the procedure for claiming treaty relief?

Submit a Treaty Relief Application and Certificate of Tax Residency to the payer. The reduced rate applies at source. If over-withheld, file a refund claim with the DRC.

Bhutan applies a uniform 10% withholding tax rate on investment income paid to non-residents: dividends, interest, and royalties are all taxed at 10%. Residents are generally exempt from withholding tax on dividends and interest. Double Taxation Treaties (with India and Bangladesh) may reduce these rates. Here is how investment income is taxed in 2026.

The taxation of investment income in Bhutan distinguishes between resident and non-resident recipients. Residents are generally exempt from withholding tax on dividends and interest, while non-residents face a flat 10% WHT on all three categories (dividends, interest, royalties) subject to treaty reduction. The DRC administers withholding tax obligations — the payer (the Bhutanese company or individual) is responsible for withholding and remitting the tax. Cross-border tax guide →

Real-world example: A Bhutanese company pays BTN 1,000,000 in dividends to a non-resident shareholder (from a non-treaty country). WHT at 10% = BTN 100,000, net payment = BTN 900,000. If the shareholder is resident in India (treaty partner), the WHT may be reduced to 5% = BTN 50,000, net = BTN 950,000. A resident Bhutanese shareholder receives dividends without any WHT. Interest of BTN 500,000 paid to a non-resident lender: WHT 10% = BTN 50,000. Royalties of BTN 300,000 to a US company: WHT 10% = BTN 30,000 (no treaty relief). Corporate tax overview →

Withholding Tax Rates on Investment Income

Dividends — residents: 0% WHT — dividends paid to Bhutanese resident individuals and companies are exempt
Dividends — non-residents: 10% WHT — may be reduced under DTT (India/Bangladesh)
Interest — residents: 0% WHT — interest paid to Bhutanese residents is exempt
Interest — non-residents: 10% WHT — may be reduced under DTT
Royalties — residents: 10% WHT — domestic rate applies to residents
Royalties — non-residents: 10% WHT — may be reduced under DTT

The uniform 10% rate on all three categories for non-residents is simple and relatively low by international standards. Many countries impose 15-30% on outbound dividends and royalties. The rate is competitive compared to India (20% on dividends, 15-20% on interest and royalties) and Bangladesh (20% on dividends, 10-15% on interest).

Double Taxation Treaty Network

Bhutan has only two DTTs, but the India treaty is significant:

India-Bhutan DTT: Comprehensive treaty covering all income categories. Dividends: reduced to 5-10% depending on shareholding. Interest: reduced to 10%. Royalties: reduced to 10%. The treaty provides for mutual agreement procedures and exchange of information
Bangladesh-Bhutan DTT: Limited treaty with reduced WHT rates and standard OECD Model provisions
No treaty with other countries: Payments to residents of most countries face the domestic 10% WHT rate without reduction

Treaty benefits require the recipient to be the beneficial owner and provide a Certificate of Tax Residency from the treaty jurisdiction. Given the close economic ties and currency peg, the India-Bhutan DTT is particularly important for cross-border investment.

Taxation of Other Investment Income

Bank interest: Interest on savings accounts earned by residents is not subject to withholding tax. Non-residents may be subject to 10% WHT
Government bonds: Interest on Bhutanese government securities may have specific tax treatment, often exempt for non-residents
Capital gains on investments: 0% CGT on all assets for individuals

Compliance and Reporting

Bhutanese companies paying dividends, interest, or royalties to non-residents must withhold the appropriate tax and remit it to the DRC within the prescribed timeframe (typically by the 15th of the following month). The payer must also file an annual withholding tax return. Recipients seeking treaty relief must provide: a Certificate of Tax Residency from their home country tax authority, a declaration of beneficial ownership, and any other documentation required by the DRC. Failure to withhold correctly results in the payer being liable for the unpaid tax plus penalties.

Are dividends from Bhutanese companies exempt for residents?

Yes. Dividends paid by Bhutanese resident companies to Bhutanese resident individuals or companies are exempt from withholding tax. This encourages domestic investment within the Bhutanese economy.

What is the procedure for claiming treaty relief?

The non-resident recipient must submit a Treaty Relief Application to the Bhutanese payer, along with a Certificate of Tax Residency from their home country (India or Bangladesh only). The payer then applies the reduced rate at source. If tax has been over-withheld, the non-resident can file a refund claim with the DRC.