How can an Umbrella Company Help with Contracting in Nepal?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Nepal. Even better, most are experts in Nepal and expat tax law, meaning they’ll also help you optimise your earnings in Nepal.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Nepal.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Nepal, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Nepal and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Nepal
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 in Nepal
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 Filing as a Contractor 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|
How to File Taxes in Nepal as a Contractor
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(link is external) by clicking ‘Application For Registration’ and filling out the required details.
Step 3: Click the Income Tax login(link is external) 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.
Tax Figures in Nepal
|Currency||Nepalese Rupee (NPR)|
|Tax-free Threshold in Nepal||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.|
|Income Tax Rates||
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
Tax Residency in Nepal
When do you become a tax resident in Nepal
You become a tax resident in Nepal when:
- 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.
Does the 183 day rule apply in Nepal
Am I taxed on my global income in Nepal
Yes, resident individuals are subject to tax on their worldwide income. Non-residents are only subject to tax on income sourced in Nepal.
Can you set up your own Limited Company in Nepal?
|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.|
Tax Calculator in Nepal
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 in Nepal
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 in Nepal
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!
A Contractor’s Guide to Work Permits in Nepal
Immigration is one of the primary concerns for any contractor hoping to start working in Nepal. Permanent employees will find it easy to get their Nepalese work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Nepalese work visa, known more commonly as the Nepal Non-Tourist Visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Nepal is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Nepal (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Nepal. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Nepal and match contractors with the right company for them. If you’ve already secured a contract in Nepal, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).