Updates to Tax Laws in Nepal, 2023

Updates to Tax Laws in Nepal, 2023 are the changes and amendments made to the existing tax laws and regulations by the government of Nepal for the fiscal year 2023/24 (2080/81). The updates to tax laws are announced through the Finance Bill, which is presented by the finance minister along with the annual budget. The updates to tax laws are intended to increase the revenue collection, promote economic growth, encourage investment, support social welfare and align with international standards and practices.

Some of the major updates to tax laws in Nepal, 2023 are:

•  Income tax: The income tax rate for individuals earning more than Rs 5 million annually has been increased from 36 percent to 39 percent. The income tax rate for businesses exporting goods produced in Nepal has been increased from 10 percent to 16 percent. The income tax rate for agricultural businesses has been increased from 10 percent to 20 percent. The income tax rate for businesses receiving foreign currency from business process outsourcing and software programming has been increased from 1 percent to 10 percent. The income tax exemption for donations made to the Covid-19 relief fund has been extended till mid-July 2024.

•  Luxury tax: A new luxury tax of 2 percent has been introduced on services provided by high-end hotels, restaurants, and resorts. The same tax rate has been applied to imported alcohol and precious metals worth more than Rs 1 million, such as diamonds, pearls, and gold jewelry embedded with stones or made of precious metals.

•  Education service tax: A new education service tax of 2 percent has been introduced on students pursuing education in foreign countries. The tax will be collected by banks and financial institutions at the time of providing exchange facilities.

•  Health risk tax: The health risk tax on tobacco products has been increased by Rs 5 per packet for cigarettes and Rs 2 per packet for bidis. The health risk tax on chewing tobacco, khaini, paan masala, and gutkha has been increased by Rs 2 per packet.

•  Tourism fee: A new tourism fee of 5 percent has been introduced on foreign tour packages sold by travel agencies.

•  Foreign employment service fee: A new foreign employment service fee of 1 percent has been introduced on the amount charged by recruitment agencies from persons going for foreign employment. The fee will be deposited in the foreign employment welfare fund.

•  Withholding tax: The withholding tax rate on interest received from deposits in banks, financial institutions and cooperatives has been increased from 5 percent to 6 percent. The withholding tax rate on payments received in foreign currency by individuals who do not operate a business, such as YouTube and TikTok creators, has been increased from 1 percent to 5 percent.

These are some of the updates to tax laws in Nepal, 2023 that will affect the taxpayers and the tax administration in Nepal. It is advisable to consult a qualified tax professional or advisor before filing or paying taxes in Nepal.