Tax In Nepal

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in Nepal is complying with the country’s tax system. As well as paying tax in Nepal, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge. 

How do I calculate my taxable income: 

If you’re working in Nepal under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Nepal for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Nepal, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Nepal through PAYE is left with the prospect of doing everything themselves.

Do you know much about Nepalese Tax Law? Does Nepal have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Nepal can range from 1% to 35% percent, and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in Nepal, we can supply it to you free of charge. 

Using an Umbrella Company for Income Tax : 

Contractors in Nepal are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Nepalese umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Nepalese taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Nepalese tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in Nepal, many of whom are experts in tax and immigration laws. If you have any questions about tax in Nepal, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Nepalese work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Nepal but without the overhead of directly dealing with the Nepalese tax authorities. Get in touch with us today for some reliable advice on tax in Nepal!

 

When Do You Need to Lodge Your Tax Return?: 
Financial year ends on July 15. Tax returns may be lodged as soon as the financial year ends.
Tax Filing Deadline : 
October 15
Can you file it online? : 
Yes, https://it.ird.gov.np/taxpayer/app.html
Currency: 
Nepalese Rupee (NPR)
Tax-free Threshold in: 
350,000 NPR for an individual and 400,000 NPR for a couple. Note: a 1% social security tax is levied on this tax-free bracket.
Grossed Income: 
First 350,000 NPR for an individual and 400,000 NPR for a couple
Tax Rate: 
1%*
Grossed Income: 
Next 100,000 NPR
Tax Rate: 
15%
Grossed Income: 
Up to 2.5 million NPR
Tax Rate: 
25%
Grossed Income: 
Above 2.5 million NPR
Tax Rate: 
35%
How long does it take to set up: 
17 days
How much does it cost: 
19,780 NPR
Is it easy? : 
Starting a Business Rank: 109. Low ranking means that setting up a limited company in Nepal is difficult.
How to File Taxes in: 

Income tax is withheld by the employer and paid to the IRD (Inland Revenue Department) within 25 days of the end of the Nepali month. An employer submits an annual tax return for each employee showing total remuneration and paid deductions and the amount of tax due, deducted and deposited with the IRO.

Personal income tax is based on a self-assessment system in Nepal so anyone earning taxable income is required to calculate their tax liability and deposit tax. The process of filing tax returns in Nepal involves:

Step 1: Every person liable to pay instalment tax must file an estimated tax return within Poush end (15th January).

Step 2: To file an annual tax return, you must apply for a submission number here by clicking ‘Application For Registration’ and filling out the required details.

Step 3: Click the Income Tax login in the menu to fill in, enter and verify details of your income.

Step 4: Collect the required documents which usually includes:

  • Statements of income.
  • Transportation allowances, rent allowances, retirement contributions and payments and any fringe benefits
  • Documents relating to deductions including insurance or contributions to the Employees Provident Fund or Citizen Investment Trust.
  • Documents relating to medical expenses.

Step 5: Fill in the required fields.

Step 6: A tax return filed as per self-assessment is not final. The Tax Authority may revise the assessment within 4 years from the date of submission of the self-assessment. 

Notes: 

The above table of progressive rates only applies to residents. Non-residents are taxed at a flat rate of 25% on their total income.

*Social security tax

Does the 183 day rule apply in: 

Yes.

When do you become a tax resident in: 
  • A person who has resided in Nepal for a period of 183 days or more in any financial year.
  • A person whose normal place of Abode is Nepal.
  • Note: dual residence is not recognized for the purpose of Nepalese tax.
Am I taxed on my global income in: 

Yes, resident individuals are subject to tax on their worldwide income. Non-residents are only subject to tax on income sourced in Nepal.

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