Bhutan’s Gelephu Mindfulness City (GMC) will open its doors to global family offices — firms that manage the wealth and investments of wealthy families — investment funds and fund managers from October 1, offering tax breaks and simpler rules to attract international capital.
Under the framework, single-family offices (SFOs) will not require a financial services licence and will only have to notify the Gelephu Financial Services Office (GFSO), GMC’s financial regulator. An SFO that engages the trustee services of a multi-family office will, however, need GFSO approval. An SFO with at least $10 million in assets under management (AUM), along with other qualifying conditions, can automatically access the tax incentive without making a separate application.
The framework draws on regulatory and tax practices in financial centres, including Singapore, Hong Kong, GIFT City and Dubai, according to GMC’s frequently asked questions. Investment managers already regulated in a recognised foreign jurisdiction can manage a GMC domestic fund without a separate local fund-management licence, subject to conditions and a “no-objection” from GFSO. The initial list of recognised jurisdictions includes Singapore, Japan, Abu Dhabi Global Market (ADGM), Dubai International Financial Centre (DIFC), Hong Kong and India.
The no-objection process is targeted for completion within four weeks. Managers seeking a full GMC licence can expect in-principle approval within two to three months, although they must fulfil additional conditions before commencing regulated activities.
Tax incentives are a key part of the framework. Approved funds can receive tax exemptions on income from designated investments for the life of the fund, while family offices can receive the exemption for up to 15 years. Investment managers can access a concessionary tax rate of 10 per cent for AUM below $25 million and 5 per cent for AUM of $25 million or more for an initial period of 10 years, renewable for up to 20 years. Managers approved by December 31, 2027, can receive a full tax exemption for the first five years. Carried interest received by an investment manager from a qualifying fund is also exempt.
For funds, the minimum AUM required to access tax incentives is $10 million for most sectors and $50 million for capital-intensive sectors such as real estate, energy and infrastructure.
“GMC’s fund management framework is simple by design, having drawn on best practices from jurisdictions such as Singapore, India and Dubai,” said Tushar Sachade, partner, Price Waterhouse & Co LLP. “Managers already regulated in a recognised jurisdiction can operate through a no-objection process, and the tax incentives include concessionary rates and exemption on carried interest.”
However, Sachade said regulatory simplicity and tax exemptions alone would not determine GMC’s success. “GMC’s success will depend on the investment opportunities in Bhutan’s domestic market, which is what drove India’s GIFT City’s early growth,” he said.
