Arthabichar Nepal - Guide to Entrepreneurs, Startups, and Business Enthusiast

Nepal government has announced significant tax waivers for the industry which have been hard hit by Covid such as hotels, travels, trekking, film industry, party palace, transportation industry, etc. Besides it has also provided relief to businesses having turnover up to Rs. 1 crore, additional loss set off and allowed a deduction for contribution to Corona Fund set up by Nepal Government and assistance in the construction of hospitals or purchase of medical equipment. Here's the detail that is applicable for Income Year 2077/78: Tax Waiver 90% tax waiver for business having a turnover up to Rs. 20 Lakh and profit of Rs. 2 Lakh that have opted for Presumptive tax. 75% tax waiver for business having a turnover above Rs. 20 lakh up to Rs. 50 lakh that have opted for turnover basis taxation. 50% tax waiver for business having turnover up to Rs. 1 crore. 1% tax on taxable income for hotels, travel, trekking, film development (development, distribution, and movie halls), party palace, m...

There are numerous reforms made by the Finance Ordinance 2078 in the Income Tax Act 2058. The biggest winner seems to be Small businesses having turnover up to NRs. 1 crore as they are now covered under the presumptive tax/turnover basis taxation. Unlike earlier, the condition of not having registered in VAT has also been removed. It has somewhat the lessened tax burden but doesn't mean one should refrain from keeping from books of accounts. Earlier such presumptive tax was available only for a resident person having income from business up to NRs. 20 lakh and profit of NRs. 2 lakh. Now, it has been increased to NRs. 30 lakh and taxable income of NRs. 3 lakh.  Similarly, turnover tax has been increased from earlier NRs. 50 Lakh to NRs. 1 crore in case of a business. Now, the new slab applicable is as follows: Turnover above NRs. 30 lakh up to NRs. 50 Lakh conducting Gas & Cigratte business with 3% commission or value addition: 0.25% of turnover other business:  0.3% of tur...

Presumptive taxation involves the use of indirect means to ascertain tax liability, which differs from the usual rules based on the taxpayer's accounts. The term "presumptive" is used to indicate that there is a legal presumption that the taxpayer's income is no less than the amount resulting from the application of the indirect method. Presumptive techniques may be employed for a variety of reasons. Simplication in relation to the compliance burden on taxpayers with very low turnover (from the tax office perspective administrative burden of auditing such taxpayers) Providing relief from the detailed calculation of tax liability thereby reducing the requirement to go through tedious paperwork reducing the cost to hire a professional. Combat tax avoidance or evasion by widening the tax bracket while making it user friendly Presumptive taxpayers have fixed tax amounts. In Nepal, there are two kinds of presumptive tax in existence: For business For vehicle owners In this...

Every year one has to go through thousands and thousands of documents before coming up with the final tax return that gets submitted to Inland Revenue Department. All these piles of documents need to be properly archived for future reference. Depending on the number of years and the volume of transactions, the documents that require storage might a just few index files to buildings full of archived documents. The cost is really huge to taxpayers, be it a natural person or an entity. Hence, the question always pops up. What can we do to minimize the burden while remaining compliant with the statutory requirements? Can we dispose of some of these documents and make room for new ones? When it is safe to throw old tax documents into the dustbin. Nepalese Income Tax has defined the period under Section 81 . It reads as follows: "Every person, who is required to keep accounts and records, is also required to keep these records and accounts safely for five years starting from the follo...

We see lots of posts on Facebook, Instagram, and TikTok around how to become a millionaire or billionaire. Most of them repeat the same thing; start your business, begin investment early, get into the real estate flipping business, be a stock trader, etc. I don't think there is anything new there. We have heard these since we were young. At least, me. Let us talk about something new today. And, believe me, everything we will be unrevealing here is 100% legal. Yes, it is possible to become a millionaire. You must be wondering how? All you have to do is catch some bad dudes trying to evade or have evaded taxes and report to the Inland Revenue Department. Yes, stop wondering about jobs, start your own hustle, work as an informant to the tax office. It will help you get substantial rewards. However, you should be careful, do remember that sharing false information can also get you in trouble. Who can inform and how?  An informant can be an individual or group of people who give particu...

We all are aware that taxes needs to be paid on any income earned from the income generating activities. There is no way we can remain untouched. There is a famous quote that only two things are certain in this life 1) Death 2) Taxes There is huge compliance cost when it comes to taxation. Keeping a proper books of accounts, making sure that it is auditable and filing of periodic tax return. It notly only takes a lot of your time, money but also gives us a fear whether we haave done everything rightly or not? Whether there will be finess and penalities?  I have seen people who are actually afraid to face tax officers and right letters to tax department. Most common reason is fear. We fear that anything we do or say will be held against us. We fear that we will not be given an opportunity to explain. But, that is not so true. Nepalese Income Tax Act, 2058 has assured certain rights for every taxpayer. These are fundamentals rights which we can exercise: 1) Right to respectful behavi...

Applicability of tax depends on the residential status as defined by Income Tax Act.  It has nothing to do with citizenship status. A natural person might be a citizen of Nepal but a non-resident for the purpose of taxation. Similarly, foreign nationals might be residents of Nepal. We have three yardsticks to test whether a natural person is a resident or non-resident of Nepal. 1) Natural Person stays in Nepal for 183 days or more in a consecutive period of 365 days. 2) Natural Person is an employee of Nepal Government 3) Natural Person normal place of abode is Nepal. The question above doesn't specify whether a natural person is working for a foreign company out of Nepal or outside of Nepal.  Opinion A: Let us assume that a natural person stays abroad & has not been in Nepal for more than a year or so, in such a case, there will not be any tax liability in Nepal. Why? Because the person doesn't full any of the criteria listed above and thus, is non-resident and for non-r...

The income tax liability of a person depends on the residential status in Nepal. What we need to understand is that it has nothing to do with the actual citizenship of an individual. A person who is a citizen of Australia or a green card holder of the USA might be resident in Nepal for taxation purposes for a particular Income Year. Similarly, a citizen of Nepal might end up as a non-resident. It all depends on the criteria specified by the Nepalese Income Tax Act. So, the question important question,  How to determine residential status? Nepalese Income Tax has defined resident person under Sec. 2(kanga). In other words, persons meeting the criteria listed below will be taxed in Nepal as a resident person and all the rest will be treated as a non-resident person. Residential Status for Natural Person First Criteria: Whose Normal Place of Abode is in Nepal Income Tax Act has not defined what is a normal place of abode means so we are taking a reference from the double taxatio...

Who gets taxed in Nepal? Isn’t that straight forward question? The simple answer would be whoever earns an income. But, believe me.. it isn’t that simple. Income Tax Act, 2058 uses the term “ person ” for those who will be taxed in Nepal . It, actually, bifurcates the person into two categories: 1) Natural Persons 2) Entity (Artificial Person) 1) Natural persons are further classifie d into four border categories. a) Single natural person b) Couple who opted to be taxed as a single person Clarification: For the purpose of taxation, each of the spouses is treated as a single natural person unless they opt to file tax jointly as a couple. Figure 1: Answer to who gets taxed in Nepal? c) A widow or widower with dependent, and Clarification: For the purpose of taxation, a widow or widower with dependents is treated as a couple. d) Sole proprietorship firm. 2) Entity , on the other hand, have many categories: a) Partnership firm Clarification: The partnership form sh...