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Revision of Tourism Tax and Policy in Bhutan.

Updated: Dec 2, 2022

Paro Dzong, Bhutan. Photographer: Chencho Dorji

What is the Sustainable Development Fund(SDF)?

SDF is a scheme levied by the Royal Government of Bhutan to all tourists visiting the country as a means to promote responsible and sustainable travel under the Bhutanese tenet of "High value, Low volume" travel. SDF makes a positive impact on social welfare, economic development, environmental protection, and cultural promotion. It also provides an opportunity for the tourism sector to improve infrastructure and other amenities.

The fund scheme was initiated in 1991 and cost about 65 USD per night. The policy remained so for almost three decades until the pandemic significantly affected Bhutan’s socioeconomic development activities. Depending on the number of travellers and the time of year they were visiting. Visitors to Bhutan were also subjected to a Minimum Daily Package Rate (MPDR) of 200–290 USD per person each night which covered tax, transportation, tour, and lodging.

When the pandemic hit:

According to the Budget Report 2020, tourism-related revenue decreased by 41% in 2019-2020 compared to 2018-2019. In 2019, the tourism industry made up to USD 225 million in 2019 was only able to generate roughly USD 19 million in 2020 revenue. Many people who depended their livelihood on tourism industries such as tour operators, traditional handicraft shops, hoteliers, and lodging owners lost their jobs due to Covid-19. The Economic Contingency Plan was then immediately developed by the government. For this, the Tourism Council of Bhutan (TCB) created a Tourism Stimulus Plan in response to assist people who were directly impacted by the tourism industry and gainfully employ them. This included skilling, training, studies, and surveys for infrastructural development projects. However, to reclaim massive losses caused due to the virus, the government decided to revise the Tourism Tax and policies of Bhutan.

What changes were made?

The National Assembly of Bhutan passed the Tourism Levy Bill on June 24, 2022, which included increasing the amount of SDF fees for tourists from USD 65 per night to USD 200. The MPDR has also been removed.

As per the new bill passed, all foreign visitors to Bhutan will now be required to pay 200 USD as SDF per person each night along with additional payments for lodging, meals, transportation, and tour guides. Regional tourists from India, Bangladesh, Nepal, and Maldives, who were previously allowed to enter for free, are now charged a concessional SDF fee of 15 USD per night. Moreover, they will also have to pay for transportation and guide services.

Pros of the revised Tourism act:

According to Prime Minister Dr. Lotay Tshering, reinvesting in the SDF will raise the industry's overall standards for guides, lodging, food, hygiene, and other facilities.

A tweet from Prime Minister Dr. Lotay Tshering on the tourism levy bill

The revenue generated from the revised act is expected to be utilized in other priority sectors of Bhutan such as education, health, and agriculture. Furthermore, Bhutan is supposed to graduate from the list of Least Developed Countries in December 2023 and potential implications of graduating such as lack of funds will be a major issue. So, assistance in such cases is anticipated with the help of SDF.

Cons of the revised Tourism act:

All people did not fully well receive the decision to hike SDF fees for tourists. Netizens online who were mostly involved in the tourism sector directly or indirectly began to question and doubt the government's choice since they believe that this would only benefit luxury hotels that run their travel agencies eliminating opportunities for 3-star hotels and smaller travel companies. This also means that middle-income travellers will be discouraged from visiting Bhutan. Imposing unfair and expensive fees can also potentially decrease the number of visitors in the country and create employment issues the in the tourism sector.

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