Because everyone's told to smile?

Seriously, though, I think it is because it has a good natural environment and strong extended families. But that is about to change with their new planned city.

Bhutan is not ranked in the World Happiness Report, and at least one source (https://www.vox.com/policy/471950/gross-domestic-product-eco...) says that international comparative data contradicts the Bhutanese government's claim that their people are particularly happy.