Taxation is the biggest risk for any international investor willing to work and invest in Nepal. Ease of doing business ranks Nepal in 175 for paying tax, implying the complexity businesses face in paying tax and resources required.
The principal taxes in Nepal are the income tax (corporate and individual) and indirect taxes, such as value added tax (VAT), customs duty and excise duties. Capital gains form part of normal business income. In case of natural persons, charge on gain on non-business chargeable assets is almost synonym to the concept of capital gain.
Tax incentives focus mainly on establishments in special zones, industries such as Information Technology, Hydropower etc, and encouraging investments in undeveloped areas. The incentives are normally in the form of rebates in income tax rates.
Inland Revenue Department under Ministry of Finance administers income tax, VAT and excise duties
while Department of Custom administers custom charges.
This doing business portal
In 2016 we initiated Nepal Tax Online to provide up-to-date Nepal tax related information and resources, especially tax circulars, rulings and judiciary decisions from Supreme court and revenue Tribunal. Almost of of these resources are in Nepali as that is the official language used in court and tax department. While Nepal Tax Online is popular among Nepalese tax payers, this portal takes the concept further by providing interpretation on queries that a foreign investor usually have before making their investment decision. Foreign investors need to know the tax risk involved and compliance requirement before they decide on appropriate entry strategy or sometimes before bidding for a tender.
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