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

Question:  If an employee is not enrolled in any retirement fund but has paid 40,000 for life insurance or 10,000 for health insurance, should these insurance payments be subtracted from their taxable income or not?  (this was posed in one of the facebook group) Answer:  Regardless of whether an individual has contributed to a retirement fund, they remain eligible to reduce Rs. 40,000 for life insurance and Rs. 10,000 for health insurance from their taxable income. You might be wondering how?  Let's delve into the deductions permitted by the Nepalese Income Tax Act, 2058, regarding life, health, and property insurance premiums. This blog should help you understand how insurance payments can impact your taxable income. 1) Life Insurance Deduction: For residents holding life insurance, you can claim a deduction of up to Rs. 40,000 or the actual annual premium amount (whichever is lower) from your taxable income. Refer to Annex-1, Clause 12 for this provision. 2) Health...

Hey fellow entrepreneurs! Ever heard of FP&A and wondered what it means for your business?  FP&A stands for Financial Planning & Analysis. It's basically like having a financial GPS for your business. ️ It helps you: ** Plan your future:** Set realistic goals and budgets. Forecast revenue and expenses. Identify potential risks and opportunities. ** Analyze your performance:** Track your progress towards goals. Identify areas for improvement. Make data-driven decisions. ** Optimize your finances:** Allocate resources efficiently. Manage cash flow effectively. Maximize profitability. So, how does this benefit you as a founder? Peace of mind: You'll have a clear understanding of your financial health and future prospects. Better decision-making: You'll be able to make informed decisions based on data, not just gut feeling. Increased efficiency: You'll be able to allocate resources more effectively and avoid costly mistakes. Improved performa...

Introduction Nepal's transformation into a federal state with seven provinces has brought about a distinct shift in governance. Each province now wields the power to establish its own laws, creating a unique administrative setup. Unique Tax Systems in Each Province Since the shift to federalism, an intriguing trend has emerged. Each province has independently set its own tax rates and devised specific procedures for blue book renewals in the transport sector. It's like having a mosaic of rules that don't always align seamlessly. While transport ministers from all provinces initially discussed the possibility of standardizing vehicle tax rates, progress has been slow. Despite an agreement allowing vehicle owners to pay taxes in a province of their choice, regardless of where their vehicle is registered, little has changed. This initiative was handed over to the Federal Ministry of Physical Infrastructure and Transport to oversee ( source ). The Need for Progress Unfortunatel...

In my reflections as a blogger, I often wonder why, despite my best efforts, I consistently end up paying fines during vehicle tax payment and blue book renewal. My understanding was rooted in the belief that taxes should be settled within a specified period during the Fiscal Year. Perhaps, my immersion in Income Tax matters led me to assume that we had a generous 90-day window at the close of the Fiscal Year to fulfill our obligations. As many of you know, the Fiscal Year in Nepal commences on Shrawan 1 and concludes at the end of Ashad. Accordingly, the standard due date would be at the end of Ashoj. However, my recent visit to the Transport Management Office proved otherwise. I was confident that I wouldn't have to dig too deep into my pockets to cover fines. To my surprise, I was slapped with a hefty 20% fine for tax and a whopping 100% fine for Blue Book renewal. It felt exorbitant and left me with an additional Rs. 6,400 less in my hard-earned money, all due to my confusion a...

The Permanent Account Number (PAN) is a unique identification provided to every taxpayer in accordance with Section 78 of the Nepalese Income Tax Act 2058 and Rule 23 of the Nepalese Income Tax Rules 2059. This number is assigned to individuals and entities registered with the Inland Revenue Department, enabling them to file returns, submit statements, and process documents. As outlined in Rule 24 of the Nepalese Income Tax Act 2059, any alterations in the details associated with the Permanent Account, such as changes in address, must be reported within 15 days of the modification. Following the receipt of the application, a new PAN Certificate reflecting the updated information will be issued to the taxpayer. While individuals refer to it as Personal PAN, for entities, it is simply known as PAN, as per the categorization established by the Tax Act. In our upcoming articles, we'll discuss the process of acquiring a PAN for both individuals and entities, including foreign nationals ...

Introduction: Determining whether a business can claim VAT against food expenses depends on the nature and purpose of the expenditure. Let's walk through a checklist to find the answer: 1) Was it a Business Expense?      If yes, proceed to question 2. Otherwise, VAT cannot be claimed. 2) Was it for Entertainment Purposes?      If yes (e.g., staff retreat, gatherings, farewells), VAT cannot be claimed. Otherwise, it may be eligible. VAT Act and Regulations: Rule 41 of VAT Regulation specifies that certain services or goods are not eligible for input tax credit under Sec 17 of the Nepalese Income Tax Act. These include: 1) Beverages (excluding mineral water, as clarified in the directive) 2) Alcohol or alcohol-based beverages like whiskey and beer 3) Petrol for vehicles 4) Entertainment expenses In the case of food expenses, it's crucial to determine whether they fall under the category of entertainment expenses. This encompasses activities that provide perso...

Introduction: Ensuring you have a valid tax clearance certificate is crucial for both individuals and entities. Previously, obtaining it online was convenient, but now a visit to the tax office is required. In this article, we'll guide you through the process, focusing on individuals with salary income. Step-by-Step Guide: Obtain a Certified Salary Certificate: Your employer should provide a certificate detailing your annual salary, along with deductions like CIT, PF, Social Security Fund, and Insurance. Ensure the income and ETDS match the certification letter. Visit the Correct Tax Office: If your employer's location differs from your PAN registration, visit the tax office where your employer is registered. Complete the Application Form: Pick up the Tax Clearance certificate application form from the tax office's reception. It must be signed by the concerned person. If they're unavailable, provide an authorization letter matching the authorized person's identif...

I saw there is a lot of confusion and misconception around what a restaurant can charge. Many people are complaining over social media that restaurant owners are still charging Service Charge and VAT to them despite recent ruling from the Court. Let us clear the confusion today. Well, this story came into limelight because of journalist Madan Dhungana who filed the case in Kathmandu District Court against Green Valley Resort. In this case, Green Valley Resort had issued an invoice that was above the menu price.  Let's take an example to under what might have happened.  Restaurant had listed coffee as Rs. 200 on its menu, customer ordered it understanding it will cost him/her Rs. 200 but when S/he was given the bill at the time of payment, S/he saw that additional 10% Service Charge was levied followed by 13% VAT as applicable per VAT Act. Customer now ended up paying Rs. 248.60, Rs. 48.60 more than the listed menu price which court deemed as a cheating and not fair to consumer...

Nepal's Income Tax Act defines Windfall gain as a gain obtained by means of lottery, gift, prize, tips, share of earning in a game (जितौरी)  or any other gain acquired incidentally.  Let us explain by example what can potentially be Windfall Gain.  1) Let's say apple recently launched a iPhone 14 in Nepal. Part of such launch, company offered its customer who buys iPhone, an iPad for free. The market value of the iPhone is Rs. 214,000 and that of iPad is Rs. 189,000. In such case, customer who received Rs. 189,000 worth of iPad without any additional cost will be considered a prize hence, a windfall gain. 2) Recently DRS gaming won US$ 292,000 (approx. Rs 4 crore) for being runner's up in the grand finals of the PUBG Mobile Global Championship. Let's assume here that DRS gaming has not been registered as a company but simply represented by individuals. If I am not mistaken, there are 4 members in the team. So, each individual will have won Rs. 1 crore as share of earni...

It has been over a year since Nepal Rastra Bank allowed Nepalese Citizens and business houses to own a prepaid dollar card worth US$ 500 for the online transactions. The cap of US$ 500 is per annum. To get the dollar card, one must visit the bank (only Class A and B bank can issue such cards) and submit the following document: a)  Prepaid Dollar Card Application (this can be obtained from concerned bank customer service desk) b) Updated Know Your Customer (this can also be obtained from concerned bank's customer service desk) c) Copy of the PAN Card Number (Original must also be carried in person for verification) Once the necessary form is filled and verification of documents, bank will then create a linked dollar account. This is separate to any other accounts you maintain in the bank. Amount transferred will be equivalent Nepalese Rupee for US$ 500 as of the day when the bank approves such prepaid dollar card. It generally doesn't take more than a day. However, to receive a ...

Profit is a financial gain from the difference between Selling Price and Purchase Price. Higher the gap between selling price and purchase price, higher the profit. Thus, there is an infinite potential for profit. However, business cannot sell their goods if the price is too high and the customers targeted can't afford to pay the set price. At the same time, if the price is set too low, business might not recover all the costs incurred in importing or manufacturing goods or providing services; ultimately, have to close the shop. I must at this point, tell you that neither Income Tax nor Value Added Tax law determine how much profit a business can make. It is general understanding that necessary tax invoice shall be issued on the price the good or services is sold. Similarly, necessary taxes must be paid as defined by the Income Tax law. At this time, I think its important for us to understand how is purchase price and selling price determined. Let's start our discussion with pu...

Question: Where to submit the TDS of house rent if there is an agreement between entity and entity. a) Inland Revenue Office or b) Local Ward Office? Answer: TDS of house rent where agreement is between one entity and another shall be submitted to Inland Revenue office. Only those where landlord/house owner is an individual, shall be deposited to Local Ward Office. Plz leave your comment or reach us out on Instagram, Facebook and TikTok page for your queries. You can search for "Arthabichar Nepal". Our team of experts will try to resolve and get back to you as soon as possible. Thank you and have a nice day.