How to Register a Sole Proprietorship (གཙོ་བོ་ལས་ལོགས་) in Bhutan

Setting up as an independent contractor in Bhutan offers workers freedom to manage their own projects, clients, and income streams. A sole proprietorship (གཙོ་བོ་ལས་ལོགས་) provides a straightforward path to operate a business without the complexity of forming a company.

The process involves several administrative steps, including security clearance and sector-specific approvals, which can make registration time-consuming. Applicants often face challenges such as gathering documents from multiple agencies and renewing certificates each year.

Despite these requirements, the system is structured to keep costs relatively low, and individuals benefit from direct control over their business activities. This combination of flexibility, independence, and manageable expenses makes the གཙོ་བོ་ལས་ལོགས་ a practical option for many freelancers, consultants, and small-scale traders.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Bhutan?

In Bhutan, a sole proprietorship is officially called གཙོ་བོ་ལས་ལོགས་. Depending on the context, it may also be referred to as:

• Sole trader
• Self-employed worker
• Independent contractor

These terms all describe the same business model: one person legally running a business without forming a company.

How does a sole proprietorship (གཙོ་བོ་ལས་ལོགས་) work in Bhutan?

གཙོ་བོ་ལས་ལོགས་ vs. other business structures in Bhutan

While the གཙོ་བོ་ལས་ལོགས་ is the simplest and most common structure for small operators, it is not the only option. Entrepreneurs who want limited liability or plan to expand may consider forming a Private Limited Company (དབྱེ་བའི་དབང་བའི་ཚོང་ལས་). This structure provides stronger legal separation between personal and business assets. Here is how the two compare:

Step-by-step guide: How to register a sole proprietorship (གཙོ་བོ་ལས་ལོགས་) in Bhutan

Step 1: Check your eligibility

You generally need to be a Bhutanese citizen or hold appropriate residency/permits to run a business locally. Foreign nationals must comply with foreign direct investment (FDI) rules, which may include sectoral restrictions and the requirement of a Bhutanese partner.

Step 2: Choose your business name

You can check name availability during the company registration process. Name reservation costs BTN 2,000.

Step 3: Gather required documents

You will need to prepare the following:

• Bhutan Citizenship ID (CID) or valid identification
• Name clearance certificate, issued by the Registrar of Companies
• A project outline or business plan, required for certain activities, such as industry or manufacturing
• A declaration of compliance, which is a signed statement agreeing to follow all laws and regulations
• Security Clearance Certificate (SCC), issued by the Royal Bhutan Police through the Citizen Services Portal
• Two passport-sized photos
• Address proof

Step 4: Register with the Ministry of Economic Affairs

Applications can be filed online via the Integrated Business Licensing Service (IBLS) portal or submitted at a Regional Trade & Industry Office.

Step 5: Pay registration fees and contributions

Once your documents are accepted, you will need to pay the relevant fees. These include BTN 2,000 for name reservation and, depending on your business type, additional sector-specific license charges. Payments can be made either online or at designated offices, and you must keep receipts for your records.

Step 6: Complete post-registration obligations

After registration, you must obtain a Business Identification Code (BIC) from the Department of Revenue and Customs to begin tax reporting. You may also need a location clearance from your local municipality or urban administrative area if your business is premises-based. Record-keeping is mandatory, and you will need to file annual tax returns. SCCs must be renewed every year, and any changes to your business name, address, or operations must be reported promptly to the authorities.

Financial and tax obligations for sole proprietors (གཙོ་བོ་ལས་ལོགས་) in Bhutan

You are responsible for:

• Income: Sole proprietors (གཙོ་བོ་ལས་ལོགས་) pay progressive personal income tax ranging from 0%–30%. If your annual tax payable is Nu 1,000,000 or more, a 10% surcharge is applied to the tax amount. Filing is done annually with the Department of Revenue and Customs.
• Sales tax and customs duties: In 2020, Bhutan passed the Goods and Services Tax (GST) Act that introduced a 5% GST to replace sales tax. Implementation has been confirmed for January 2026. Until then, sole proprietors (གཙོ་བོ་ལས་ལོགས་) must comply with the existing sales tax regime, which applies different rates depending on the product or service category.
• Social security contributions: Sole proprietors are not automatically required to contribute unless they hire employees. If you employ staff, you must register with the National Pension and Provident Fund (NPPF) and contribute.
• Record-keeping: You must maintain accurate records of all business income and expenses, including invoices, receipts, and accounts. These records must be kept for at least five years, as the Department of Revenue and Customs may request them during audits.
• Invoicing: Every invoice must clearly include your BIC, business and client details, date, description of goods or services, and applicable taxes. Invoices should be sequentially numbered and retained for compliance.

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FAQs

What is the minimum capital required to start a གཙོ་བོ་ལས་ལོགས་ in Bhutan?
No minimum capital is required.

Do གཙོ་བོ་ལས་ལོགས་ need to register for sales tax?
Yes, if they sell taxable goods or services and exceed revenue thresholds.

How much are the standard monthly or annual contributions?
BTN 2,000 for name clearance, plus any sector-specific licensing fees.

Can a གཙོ་བོ་ལས་ལོགས་ hire employees?
Yes, provided labor laws and tax obligations are met.

How long does it take to register as a གཙོ་བོ་ལས་ལོགས་ in Bhutan?
Registration can take from a few days to several weeks, depending on clearances.

Can foreign nationals register as གཙོ་བོ་ལས་ལོགས་ in Bhutan?
Yes, but only under FDI regulations, and subject to sectoral restrictions.

Do གཙོ་བོ་ལས་ལོགས་ need a separate business bank account?
Not mandatory, but strongly recommended.

What happens if I stop working as a གཙོ་བོ་ལས་ལོགས་?
You must deregister with the Ministry of Economic Affairs, cancel licenses, and file final tax returns.

Are there incentives for new གཙོ་བོ་ལས་ལོགས་?
Yes, tax holidays and exemptions are available in priority sectors such as agriculture and tourism.

Can I use Deel as a གཙོ་བོ་ལས་ལོགས་ to get paid internationally?
Yes. Deel enables safe, compliant international payments.

Does Deel generate compliant invoices for གཙོ་བོ་ལས་ལོགས་?
Yes, invoices are automatically compliant with Bhutan’s legal and tax rules.

Can Deel help me with taxes as a གཙོ་བོ་ལས་ལོགས་ in Bhutan?
Yes. Deel provides detailed tax reports for easier compliance.

Does Deel offer contracts for freelancers and གཙོ་བོ་ལས་ལོགས་?
Yes. Contracts are locally compliant and protect both parties.

Can I access benefits through Deel as a གཙོ་བོ་ལས་ལོགས་?
Yes. Deel offers optional benefits such as insurance and retirement plans.