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Tax Guide

Financial Year – 17th July to 16th July
Currency – NPR

Corporate Tax Summary

Residence – A company in respect of an income year is resident in Nepal if any of the following criteria fulfills:

  • it is incorporated under the law of Nepal or,
  • the management of which is effective in Nepal in an income year or
  • Government of Nepal or Provincial government

Basis of Taxation – Resident Company are taxed on the income generated by them regardless of the source of the income and non-resident Company are taxed on the income generated by them within the extend that the sources of income is in Nepal.

Reference
Corporate Income Tax Rate (%) 25% flat rate for normal entities However in following cases the rates are as-
Bank and Financial Institution- 30%
General Insurance Companies- 30%
Telecommunication and Internet Service, Money transfer, capital market business, entity dealing in cigarette, beedi, cigar, tobacco, khaini, guthka, betel paan, masala, liquor, beer or entity engaged in the business of petroleum products-30%
Branch Tax Rate (%) 25%
Withholding Tax Rate:
Dividends – Franked 5% Payment of dividend, payment of gain in respect of investment insurance or payment of gain from unapproved retirement fund paid by resident person is all deemed Final Withholding Tax
Dividends – Unfranked 5%
Dividends – Conduit Foreign Income 5% On reparation of the income by foreign permanent establishment
Interest 15% Source in Nepal paid by resident person. However In case of Interest paid to Natural person 5% final tax is applicable
Royalties from Intellectual Property 15% Source in Nepal paid by resident person
Fund Payments from Managed Investment Trusts 15% However Payment of gain from unapproved retirement fund paid by resident person- 5%
Branch Remittance Tax
Net Operating Losses (Years)
Carry back Its allowed only in case of Global Contract as per Section 25 of Income Tax Act of Nepal
Carry forward 7 years and in case of BOOT(Built Own Operate Transfer) it is 12 years

Individual Tax Summary

Residence – A natural person in respect of an income year is resident in Nepal if any of the following criteria fulfills:

  • Normal Place of abode is in Nepal or
  • who is present in Nepal for 183 days or more in a period of 365 days, or
  • Employee of government of Nepal deputed in any foreign country.

Basis of Taxation – Resident Individual are taxed on the income generated by them regardless of the source of the income and non-resident Company are taxed on the income generated by them within the extend that the sources of income is in Nepal.

Filing Status – Each taxpayer shall file a return of income for an income year within 3 months after the end of the such income year. Application for extension for up to 3 months can be given.

Personal Income Tax Rates

Taxable Income Tax Payable – Residents Tax Payable – Non Residents
upto 400,000(individual)/ 450,000(couple) 1% 25% flat rate
next 100,000 10%
next 200,000 20%
next 1,300,000 30%
Balance exceeding 2,000,000 36%

Goods and Services Tax (GST)

Rate 13% VAT Rate
Taxable Transactions In case of goods- NPR. 5 ,000,000
In case of services- NPR. 2 ,000,000
Registration The general conditions for mandatory registration as per Nepal’s VAT Act 2052 are as follows:

  • People obtaining business loans exceeding NPR 1,000,000.
  • The threshold for registration in the case of a goods business is annual turnover exceeding NPR 5,000,000, while in the case of services or mixed goods and services it is NPR 2,000,000 annually.

VAT registration must take place within 30 days of the above conditions coming into effect.
The above conditions apply to all types of transactions that are not listed in Schedule 1 (reference: VAT Act 2052) which have been exempted from VAT registration.

Filing Under the VAT Act 2052, each person and business registered for Value Added Tax is mandatorily required to submit either monthly, bimonthly or quarterly VAT returns. The VAT return must be filed within a period of 25 days following the end of the of Nepali calendar month to which the VAT belongs. In case of tourism service providers, the returns must be submitted bimonthly, provided that an application for such bimonthly VAT returns has been approved. Some businesses, such as publication, broadcasting media, electronic or other media, brick producers etc. can submit VAT returns every 4 months.
Payment The amount of VAT payable must be paid within the same 25-day filing period for it to be approved by the tax authorities. Amounts above NPR 1 million should be paid by cheque, draft or through banking channels.

Other Taxes Payable

Tax Reference
Payroll Tax Given as above payroll taxes are levied on an individual’s salaries, wages and benefits given by the employer according to the various slab rates as prescribed subject to deductions and rebates as allowed as per the Income Tax Act of Nepal.
Stamp Duty Similarly Stamp duty taxes in Nepal is governed by the Stamp Duty Act as is levied on various documents and deeds of transfer, deeds of loans, or deeds of sale of goods etc. as prescribed in the section 4 of the said Act and as recognized by the Government of Nepal.
Land Tax Land tax in Nepal is levied as per the province and local government body’s rates as determined from time to time and published notice.

Last updated: 28.06.2020

Contact us:

Accountant in Bogota
Yuddha Raj Oli
FCA – Senior Partner
Mobile: +977 1 9801047283