Non Corporate Business structure
(Individuals, partnership and
cooperatives) and related laws
Form and Formation
Types of Business (ownership):
• Sole proprietorship
• Partnership and Joint Venture
• Cooperatives
Types of Business ( Employment and
Investment):
Scale of Industry
Employment size
Micro (Cottage)
1 to 4
Investment
(Million)
<1
Small
5 to 19
1-10
Medium
20 to 99
10 -100
Large
100+
>100
(Cottage, Small and Medium Industry Policy of The Kingdom of Bhutan,
2012)
 Industry is classified into service, manufacturing
and contract.
Registration Procedure:
Documents and clearances:
Industry may require clearances from other
agencies such as the:
National Environment Commission,
Bhutan Agriculture & Food Regulatory
Authority or
 Drug Regulatory Authority.
Industrial license from the Regional Trade
& Industry Office:
• Produce the following documents when visiting the RTIO.
 Filled Application for Industrial License (Form III), with endorsement
from the concerned Dzongkhag or Municipal Authority
 Original Citizenship Identity Card
 Two copies of recently taken passport sized photographs
 A legal stamp
 A valid Security Clearance Certificate.
 Copy of clearance(s) from the concerned sector(s) – if required by
law
 Printed as well as a soft copy of the business plan
• If all the required documents and clearances are submitted, the
license will be issued within a working day.
• The cost of the license for small-scale is Nu. 3,100; and for cottage
is Nu. 1,600.
Industrial activities allowed in the
country:
• All types of business activities are allowed in the country
with the exception of the following:
1. Activities that violate any relevant laws of the country,
2. Activities that threaten national security and public order,
3. Activities that has harmful effects on public health,
environment and Bhutanese morals and culture
4. Arms, ammunition’s and explosives,
5. Production of hazardous chemicals,
6. Activities based on imported waste,
7. Production, display and sale of pornographic materials,
8. Gambling and betting.
Obligations of Registration:
• The Business activities shall comply with all the rules of the
Government in the conduct of trade.
• The Business activities shall set up business only in areas
designated/permitted by respective Dzongkhag and
municipal authorities.
• The Business activities shall not lease/sub-lease his
business/Registration Certificate to another party.
• The Business activities shall cooperate and provide any
information as required by
• the Ministry or its authorized representatives.
• The Business activities shall allow unfettered access to the
authorized representatives of the Ministry to inspect its
premises.
PENALTIES:
• The Business activities shall be liable to penalties for
any violations and dealt with as per the relevant
provisions contained in the “General Guideline for
Industrial and Commercial Ventures in Bhutan (1997)”
or any other relevant rules and regulations in vogue.
• Penalty in equivalent amount as per the policy shall be
levied for violation of any provisions of this Regulation.
• Repeat violation shall result in the cancellation of the
registration.
• Non-renewal of the Registration Certificate shall result
in the cancellation of the certificate”.
• However, a grace period of six months shall be given
for genuine cases.
Liability and risk associated with non
corporate business :
•
•
•
•
•
•
Unlimited Liability. ...
Failure to Raise Capital. ...
Inability to Secure Customers. ...
Challenging Succession Plans
Mismanagement
Market dynamic
Management and administration:
• The sole proprietor has full and complete
authority to manage and control the business.
• Every Member is entitled to take part in the
management of the business; however, a
partnership agreement or SOP for Cooperative
may provide the participation in
management.
Taxes:
• BIT is a non-corporate business tax.
• It is levied @ of 30% on net profit.
• BIT is payable by all unincorporated business
entities holding a trade license or registration
certificate issued by the Ministry of Economic
Affairs (MoEA) or any other competent
authority.
• The tax returns can be either filed online or by
visiting the RRCO where you are registered as
BIT payer.
Taxes Cont……
• Every business must register with the Regional
Revenue & Customs Office (RRCO) from where the
trade license or permit is issued or wherever the Head
office is located within 3 months from the date of
obtaining such trade license or permit in case of BIT
entities.
• Taxpayer Number (TPN) is a system generated number
allotted to the taxpayers by the RRCO. It is issued in
order to identify all tax transactions relating to a
particular tax entity. TPN must be quoted as a
reference in all the correspondences with the
department to identify the taxpayer.
Tax Filing:
• Every business must file the tax returns (FORM BIT-2 for
BIT) on a self assessed basis to the RRCO of registration
before 31st March following the end of the income year.
 Tax return must have the following documents:
 Annual Business Income Tax Return as per FORM BIT-2.
 Annual Accounts as per Rule No. 5.1 of the General
Provisions.
 Evidences of any taxes paid in installments or TDS Such
income tax should bear the name, signature, seal and
address of the license holder and the accountant who has
prepared the accounts.
 Failure to file the income tax returns as required shall result
in fines and penalties as per the provisions under Chapter 5
of the General Provisions of the Income Tax Act of the
Kingdom of Bhutan, 2001.
Assignment:
1. Explain the legal and regulatory advantages and
disadvantages of carrying on a business as a sole
trader
2. Identify the necessary elements of legal partnerships and
explain the difference between partnerships and joint
ventures
3. Explain the legal and regulatory advantages and
disadvantages of carrying on a business in a partnership
4. Explain the legal and regulatory advantages and
disadvantages of carrying on a business in a cooperative
Group of two people.
Date of submission Sunday 30 January 2022.