Verified Facts
The tax rates in Nepal range from 1% to 36% for individuals and 25% for corporations, with various deductions and exemptions available for both residents and non-residents.
Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. This is a general guide only.
Quick Facts
Tax System Overview
Nepal has a territorial taxation system, where residents are taxed on their worldwide income, while non-residents are taxed only on their Nepal-sourced income. To be considered a tax resident in Nepal, an individual must have a permanent home in the country, or be present in Nepal for at least 183 days in a fiscal year. The tax system in Nepal is governed by the Income Tax Act, 2002, and the Value Added Tax Act, 1996.
The tax authorities in Nepal, namely the Inland Revenue Department, are responsible for collecting taxes, enforcing tax laws, and providing tax-related services to taxpayers. The tax year in Nepal runs from April 1 to March 31, and taxpayers are required to file their tax returns by July 31 of each year. Nepal has a relatively complex tax system, with various tax rates, deductions, and exemptions available to residents and non-residents.
Personal Income Tax
| Income Bracket (NPR) | Tax Rate |
|---|---|
| 0 - 400,000 | 1% |
| 400,001 - 700,000 | 10% |
| 700,001 - 1,000,000 | 20% |
| 1,000,001 - 1,500,000 | 25% |
| 1,500,001 - 2,500,000 | 30% |
| 2,500,001 and above | 36% |
| Taxpayers in Nepal are allowed to claim various deductions and allowances, such as a basic allowance of NPR 400,000, a dependent spouse allowance, and a child allowance. Taxpayers are also required to file their tax returns electronically, and pay any tax due by the deadline to avoid penalties and interest. |
Corporate & Business Tax
- The corporate tax rate in Nepal is 25%, applicable to all companies, including foreign companies with a permanent establishment in Nepal.
- Small businesses with an annual turnover of less than NPR 5 million are eligible for a reduced tax rate of 20%.
- Nepal has several free zones, including the Bhairahawa Special Economic Zone and the Simara Special Economic Zone, which offer various tax incentives and exemptions to businesses operating within these zones.
- Foreign companies must register with the Inland Revenue Department and obtain a permanent account number (PAN) to operate in Nepal.
- Companies are also required to file their tax returns electronically, and pay any tax due by the deadline to avoid penalties and interest.
VAT / Sales Tax
- The standard VAT rate in Nepal is 13%, applicable to most goods and services.
- A reduced VAT rate of 6% is applicable to certain goods and services, such as agricultural products and basic necessities.
- Certain goods and services, such as education and healthcare services, are exempt from VAT.
- Foreign tourists are eligible for a tourist refund scheme, which allows them to claim a refund of VAT paid on certain goods and services.
For Expats & Foreign Workers
- Expats and foreign workers are considered tax residents in Nepal if they are present in the country for at least 183 days in a fiscal year.
- Nepal has double taxation treaties with 10 countries, including India, China, and the United Kingdom, which help to avoid double taxation of income.
- Expats and foreign workers are required to obtain a work permit and register with the Inland Revenue Department to work in Nepal.
- Expats and foreign workers are also required to pay social security contributions, which are used to fund various social security schemes, such as pension and healthcare schemes.
- Expats and foreign workers are allowed to remit their foreign earnings abroad, subject to certain conditions and restrictions.
- Expats and foreign workers are also eligible for various tax deductions and allowances, such as a foreign earned income exclusion and a housing allowance.
Crypto & Investment Income
- Investment income, such as dividends, interest, and capital gains, is taxable in Nepal, and subject to the same tax rates as ordinary income.
- Cryptocurrency is considered a commodity in Nepal, and is subject to capital gains tax at a rate of 25%.
- Dividends received by shareholders are taxable in Nepal, and subject to a withholding tax rate of 5%.
- Interest income earned by individuals is taxable in Nepal, and subject to a withholding tax rate of 5%.
- Nepal has a tax amnesty scheme in place, which allows individuals to declare their undisclosed income, including investment income and cryptocurrency, and pay a reduced tax rate.