Tax in Nepal

Who is the tax authority and where do filings live?

Inland Revenue Department (IRD), under the Ministry of Finance, is Nepal's tax authority [SC1]. Customs is administered by Department of Customs. Filings flow through the IRD's Taxpayer Portal and progressive expansion of e-services. Substantive law: Income Tax Act 2058 (2002 with subsequent amendments), Value Added Tax Act 2052 (1996 as amended), Tax Administration Act, and successive Finance Acts (annually issued). Nepal is a SAARC member and party to the SAARC Limited Multilateral Agreement on Avoidance of Double Taxation.

What is the tax year and when are returns due?

The individual tax year (income year) runs 16 July to 15 July (Nepali fiscal year, Sambat-equivalent). Personal income tax returns are due Ashwin-end of the year following the income year (typically late October of the calendar year following) [SC1]. Wage earners' income tax under the Tax Deduction at Source (TDS) regime is fully withheld monthly by employers. Corporate fiscal years align with the income year by default; corporate annual returns are due 3 months after fiscal year-end. Quarterly advance income tax instalments apply: 40/70/100 percent of estimated tax due. VAT returns are filed monthly by the 25th of the next Nepali month under the standard regime.

Who is a Nepali tax resident?

Under Section 2(t) of the Income Tax Act 2058, an individual is tax resident in Nepal in an income year if (a) the individual's normal place of residence is in Nepal, OR (b) physically present in Nepal for an aggregate of 183 days or more in any 365-day period that includes part of the income year, OR (c) being a Nepali employee posted abroad by the Government of Nepal [SC2]. Residents are taxed on worldwide income; non-residents on Nepal-source income at flat or schedular rates (typically 25 percent on most categories with treaty rates applying).

What are the personal income tax rates?

The personal income tax brackets under the Finance Act 2024 are: 1 percent up to NPR 500,000 (social-security tax band); 10 percent on NPR 500,001-700,000; 20 percent on NPR 700,001-1,000,000; 30 percent on NPR 1,000,001-2,000,000; and 36 percent above NPR 2,000,000 (effective via 30 percent base + 20 percent additional tax) [SC1]. Personal allowance NPR 500,000 standard / NPR 600,000 couples. Mandatory Provident Fund and Social Security Fund contributions apply. Dividends 5 percent WHT (final). Capital gains 5 percent flat (10 percent unlisted shares; 7.5 percent on real estate held over 5 years).

How does Nepal's corporate tax work?

The corporate income tax rate is 25 percent for resident companies [SC2]. Specific industry rates: 30 percent for banks, financial institutions, insurance, telecoms, cigarettes, cement, beverages; 20 percent for special-industry export entities; entity-specific tax holidays for hydroelectric, agricultural, and priority-sector projects. Withholding on non-resident dividends 5 percent (treaty rates apply). Pillar Two not yet transposed. Tax losses 7 years (10 years hydroelectric; 12 years export-oriented industrial); carryback unavailable.

What about VAT?

The standard VAT rate is 13 percent under the VAT Act 2052 [SC3]. Zero-rated on exports. Registration required above NPR 5m goods / NPR 3m services. Reverse-charge on imported services. Foreign B2C digital services subject to VAT under Finance Act amendments. Electronic Billing System (EBS) mandatory for VAT-registered taxpayers.

How are cryptoassets taxed?

Nepal Rastra Bank (NRB) banned cryptoasset transactions in 2017 and reaffirmed prohibition in 2021 [SC2]. CIB enforces criminal sanctions on unauthorised cryptoasset activity. IRD has not issued cryptoasset tax guidance. Where gains arise in informal contexts, they fall outside the formal tax framework. Nepal remains one of South Asia's most restrictive cryptoasset jurisdictions.

What is the treaty network and what are the audit triggers?

Nepal has approximately 11 active double tax treaties [SC4]. SAARC member and party to SAARC Limited Multilateral Agreement on Avoidance of Double Taxation. Nepal has not yet signed the OECD MLI. Audit triggers include disproportionate VAT credits and EBS-bypass detection, transfer-pricing non-compliance, undeclared bank deposits via CRS (Nepal in implementation phase). Standard SOL 4 years; extended for fraud.

What are the common penalties and pitfalls for foreigners?

The Nepali penalty framework imposes administrative-fine sanctions for late filings, failure to file, incorrect declarations (50-100 percent surcharge), and failure to maintain records [SC5]. Default interest at NRB rate plus margin. Tax-evasion criminal exposure under specific provisions. Common foreign-national pitfalls: (1) Nepali fiscal year (16 July - 15 July) creates calendar-conversion complexity; (2) Quarterly advance 40/70/100 percent framework; (3) NRB cryptocurrency prohibition; (4) Pillar Two not transposed; (5) limited treaty network (11 DTCs); (6) MLI not signed; (7) industry-specific 30 percent CIT for banks/telecoms/cigarettes; (8) priority-sector tax holidays require register-compliance; (9) post-Finance-Act-2024 36-percent top-rate via 30 + 20 additional surcharge structure; (10) EBS mandatory invoicing.