Amendment in Income Tax Act and Value Added Tax 2058 by Finance Bill 2075/76, 2018/19 English Version

First 350,000

@ 1%*

First 400,000

@ 1%*

Next 100,000

@ 10%

Next 100,000

@ 10%

Next 200,000

@ 20%

Next 200,000

@ 20%

Next 13,50,000

@ 30%

Next 13,00,000

@ 30%

Balance

@ 30*120% = 36%

Balance

@ 30*120% = 36%

Subject to Sub-section (3), the following persons shall be taxed as follows: (a)  The higher of the following amounts shall be taxed at the rates

specified in Section 1(1) or (2) as if only it were the taxable income of the individual or couple:

▪   The total of the natural person’s or couple's taxable income

less the gain;

▪    Rs. 3,50,000 in the case of natural person or Rs. 4,00,000 in the case of couple.

(b) The balance of the taxable income shall be taxed at the rate of 10

percent. Provided that,

1.  Where the disposed non-business chargeable asset (land, and land and building) is owned for 5 years or more, tax shall be levied at the rate of 2.5 percent.
2. Where the disposed non-business chargeable asset (land, and land and building) is owned for less than 5 years, tax shall be levied at the rate of 5 percent.
3. Tax shall be levied at the rate of 7.5 % on the gain on disposal of an interest in an entity listed in Nepal Securities Board.

Subject to Sub-section (3), the following persons shall be taxed as follows: (a)  The higher of the following amounts shall be taxed at the rates

specified in Section 1(1) or (2) as if only it were the taxable income of the individual or couple:

▪   The total of the natural person’s or couple's taxable income

less the gain;

▪    Rs. 3,50,000 in the case of natural person or Rs. 4,00,000 in the case of couple.

(b) The balance of the taxable income shall be taxed at the rate of 10

percent. Provided that,

(1)   Where the disposed non-business chargeable asset (land, and land and building) is owned for 5 years or more, tax shall be levied at the rate of 2.5 percent.

(2)   Where the disposed non-business chargeable asset (land, and land and building) is owned for less than 5 years, tax shall be

levied at the rate of 5 percent.

(3)   Tax shall be levied at the rate of 5 percent on the gain on disposal of an interest in an entity listed in Nepal Securities Board.

Where a resident natural person has procured an investment insurance, the annual premium paid for such insurance or Rs. 25,000, whichever is lesser,

shall be deducted from the taxable income and tax shall then be calculated on the remaining amount only, in accordance with this Section.

Where a resident natural person has procured an investment insurance, the annual premium paid for such insurance or Rs. 20,000, whichever is lesser,

shall be deducted from the taxable income and tax shall then be calculated on the remaining amount only, in accordance with this Section.

An annual tax as follows shall be collected from the owners of vehicles on hire

through the Transportation Management Office at the time of registration or renewal of vehicle

An annual tax as follows shall be collected from the owners of vehicles

on hire, and if the owner of the vehicle is an natural person, the tax so paid shall be final:

Category of vehicle

Annual tax payable per vehicle (Rs.)

Category of vehicle

Annual tax payable per vehicle (Rs.)

1. Car, jeep, van, micro-bus:

1. Mini-bus, mini-truck, truck, bus

3,000

a.   Up to 1,300 cc

4,000

2. Car, jeep, van, micro-bus

2,400

b.   1,301 to 2,000 cc

4,500

3. Three-wheeler, auto-rickshaw, tempo

1,550

c.   2,001 to 2,900 cc

5,000

4. Tractor, power tiller

1,000

d.   2901 to 4,000 cc

6,000

e.   More than 4,000 cc

7,000

2. Mini-truck, mini-bus, water tanker

6,000

3. Mini-tripper

7,000

4. Truck, Bus

8,000

5. Machinery apparatus like dozer, excavator, loader, roller, crane

12,000

6. Oil tanker, gas bullet, tripper

12,000

7. Tractor

2,000

8. Power tiller

1,500

Auto-rickshaw, three-wheeler, tempo

2,000

Where an individual has fully engaged in the operation of special industry as mentioned in Section 11 of the Act throughout any year, tax shall be levied

at the rate of 20 percent on the taxable income that is otherwise subject to the rate of 30 %.

Where an individual has fully engaged in the operation of special industry as mentioned in Section 11 of the Act throughout any year, tax shall be levied

at the rate of 20 percent on the taxable income that is otherwise subject to the rate of 25 %.

While calculating tax on the taxable income from export of a natural person in an income year:

▪   a concession of 25 % shall be provided on the income that is

otherwise subject to the rate of 20 %; and

▪    a concession of 50% shall be provided on the income that is otherwise subject to the rate of 30 %.

While calculating tax on the taxable income from export of a natural person in an income year, tax shall be levied at the rate of 15 percent on the taxable income that is otherwise subject to the rate of 25 percent

Tax shall be levied at the following rate on the transaction amount under

Section 4(4Ka) of the Act:

(a)  for the natural person dealing on goods like gas, cigarette by adding commission or markup of up to 3 percent, 0.25 % of amount of

transaction;

(b) for the natural person dealing in business other that mentioned in clause (a), 0.75 % of amount of transaction;

(c)  for the individual dealing on service business, 2 % of amount of

transaction.

Provided that, if the tax calculated under clause (a), (b) and (c) becomes less than Rs. 5,000, (tax shall be) Rs. 5,000.

Tax shall be levied at the following rate on the transaction amount under

Section 4(4Ka) of the Act:

(a)  for the natural person dealing on goods like gas, cigarette by adding commission or markup of up to 3 percent, 0.50 % of amount of

transaction;

(b) for the natural person dealing in business other that mentioned in clause (a), 1.5 % of amount of transaction;

(c)  for the individual dealing on service business, 2 % of amount of

transaction.

Provided that, if the tax calculated under clause (a), (b) and (c). becomes less than Rs. 5,000, (tax shall be) Rs. 5,000.

The taxable income of a bank, financial institution or general insurance

business or of an entity carrying on the transaction of  telecommunication, internet service, money transfer, capital market business, securities business, merchant banking business, commodity future market, securities and commodity brokerage business, cigarette, bidi, cigar, chewing tobacco, khaini, gutka, pan masala, liquor, beer or of an entity dealing in petroleum business as per Nepal Petroleum Act, 2040 for an income year shall be taxed at the rate of 30 percent.

The taxable income of a bank, financial institution or general insurance

business or of an entity carrying on the transaction of cigarette, bidi, cigar, chewing tobacco, khaini, gutka, pan masala, liquor, beer or of an entity dealing in petroleum business as per Nepal Petroleum Act, 2040 for an income year shall be taxed at the rate of 30 percent.

“Non-business chargeable asset” means land, building and interest or

security in an entity, other than the following assets:

(1)   Business assets, depreciable assets or trading stock;

(2)   A private building of a natural person that has been–

(a)   owned continuously for 10 years or more; and

(b)   lived in by the individual continuously or intermittently for a total of 10 years or more;

Explanation: For the purpose of this clause, “private building” means building and land equal to the area covered by the building or 1 ropani land, which is lower.

(3)   An interest of a beneficiary in a retirement fund;

(4) Land, land and building, and private building of a natural person that is disposed of for less than Rs. 10 Lakh; or

(5)   An asset (of a natural person) that is disposed of by way of transfer other than sales and purchase within three generations.

“Non-business chargeable asset” means land, building and interest or

security in an entity, other than the following assets:

(1) Business assets, depreciable assets or trading stock;

(2)   A private building of a natural person that has been–

(a)   owned continuously for 10 years or more; and

(b)   lived in by the individual continuously or intermittently for a total of 10 years or more;

Explanation: For the purpose of this clause, “private building” means building and land equal to the area covered by the building or 1 ropani land, which is lower.

(3)   An interest of a beneficiary in a retirement fund;

(4)   Land, land and building, and private building of a natural person that is disposed of for less than Rs. 30 Lakh; or

(5)   An asset (of a natural person) that is disposed of by way of transfer other than sales and purchase within three generations.

Rent means all payments including premium made under a rent and lease of a tangible asset including house rent.

Provided that this term does not include a natural resource payment or an amount derived in respect of house rent by a natural person other than a proprietorship firm.

Rent means all payments including premium made under a rent and lease of a tangible asset including house rent.

Provided that this term does not include a natural resource payment.

The tax payable on the basis of transaction by a resident natural person under Section 3(a) in an income year who meets the following conditions

shall be equal to the amount calculated according to the rate mentioned in

Section 1(17) of Schedule-1:

(a)   The income of the individual for the income year consists exclusively of the income from business having a source in Nepal;

(b)   The annual turnover of the business is more than Rs. 20 lakhs but less than Rs. 50 lakhs;

(c)   Not registered in Value Added Tax; and

(d)   Not having income against consultancy and expert services to be provided by individual including doctor, engineer, auditor, legal professional, sports person, artist, consultant.

(e)   Not  claimed  tax  credit  for  medical  treatment  expenses  under

Section 51;

(f)    Not claimed adjustment for advance tax under Section 93;

The tax payable on the basis of transaction by a resident natural person under Section 3(a) in an income year who meets any of the following

conditions shall be equal to the amount calculated according to the rate mentioned in Section 1(17) of Schedule-1:

(a)   The income of the individual for the income year consists exclusively

of the income from business having a source in Nepal;

(b)   Not claimed tax credit for medical treatment expenses under Section

51;

(c)   Not claimed adjustment for advance tax under Section 93;

(d)   The annual turnover of the business is more than Rs. 20 lakhs but less than Rs. 50 lakhs;

(e)   Not registered in Value Added Tax;

(f)    Not having income against consultancy and expert services to be provided by individual including doctor, engineer, auditor, legal professional, sports person, artist, consultant.

Income derived during an income year by a person from a special industry

and information technology industry is taxed as follows:

▪   If direct employment is provided throughout the year to 100 or more

Nepalese citizens, at 90 percent of tax applicable to the income of that year;

▪   If direct employment is provided throughout the year to 300 or more

Nepalese citizens, at 80 percent of tax applicable to the income of that year;

▪     If direct employment is provided throughout the year to 500 or more Nepalese citizens, at 75 percent of tax applicable to the income of that year;

▪     If direct employment is provided throughout the year to 1,000 or more Nepalese citizens, at 70 percent of tax applicable to the income

of that year;

Provided that, if direct employment is provided throughout the year to more than 100 Nepalese citizens including at least 33 % for women, dalit or disabled, additional concession of 10 % on the payable tax shall be provided.

Income derived during an income year by a person from a special industry

and information technology industry is taxed as follows:

▪  Special industry and information technology industry that provides direct employment throughout the year to 300 or more Nepalese

citizens, at 90 percent of tax applicable to the income of that year;

▪  Special industry that provides direct employment throughout the year to 1,200 or more Nepalese citizens, at 80 percent of tax applicable to the income of that year;

▪  Special industry that provides direct employment throughout the year to more than 100 Nepalese citizens including at least 33 percent for women, dalit or disabled, at 80 percent of tax applicable to the income of that year.

Deleted

Special industry, agriculture based industry and tourism industry that provide direct employment throughout the year to Nepalese citizens only, at

70 percent of tax applicable to the income of that year;

Provided that only an industry which provides employment to at least 100 persons shall avail such facility.

Special industry, agriculture based industry and tourism industry that

capitalize their accumulated profit (into share) for expansion of the capacity of the industry, a concession of 100 % of the dividend tax applicable as dividend distribution on such capitalization.

Special industry, agriculture based industry and tourism industry that

capitalize their accumulated profit (into share) for expansion of the capacity of the industry, a concession of 100 % of the dividend tax applicable as dividend distribution on such capitalization.

A person engaged in the transaction of invention and excavation of mineral,

petroleum and natural gas, if operates commercial transaction within

Chaitra 2080, shall avail full income tax exemption for first 7 years from

the date of operation of transaction and thereafter a concession of 50 percent of income tax for 3 years.

A person engaged in the transaction of invention and excavation of

petroleum and natural gas, if operates commercial transaction within Chaitra

2075, shall avail full income tax exemption for first 7 years from the date of operation of transaction and thereafter a concession of 50 percent of income

tax for 3 years.

If a company having paid up capital of 50 crore or more which has been

operated as a private company is operated after being converted into a public company, a concession of 10 % of applicable tax shall be provided for 3 years from the date of such conversion into the public company.

Provided that, no company which is required to be incorporated as a public company under Section 12 of Companies Act, 2063 shall avail the concession under this Sub-section.

None

An industry producing and processing domestic tea, a dairy industry

transacting dairy products and an industry producing garment shall avail a concession of 50 % on the rate of tax applicable on the income derived from selling their products.

None

A concession of 20 % shall be provided on the tax applicable on the taxable income of health organization operated by community

organization.

None

A full tax exemption shall be provided to a micro entrepreneurship for 5 years from the date of commencement of business or transaction. If such

micro entrepreneurship is operated by women, a full tax exemption shall

be provided for additional 2 years.

None

“Micro entrepreneurship” means a micro entrepreneurship classified

under Section 15(1)(a) of Industrial Enterprises Act, 2073.

None

…no deduction is allowed for:

(b) Tax payable under the Act and fines and similar penalties paid to the government of any country or a political subdivision of the

government for breach of any law or regulations or byelaws framed

under such law;

Provided that tax paid to provincial government and local bodies shall be allowed to be deducted as expense.

…no deduction is allowed for:

(b)  Tax payable under the Act and fines and similar penalties paid to the government of any country or a political subdivision of the

government for breach of any law or regulations or byelaws framed

under such law;

For the purposes of calculating retirement payment income of an individual from a contributory based interest in an approved retirement fund or from retirement payment made by the Government of Nepal, the following provisions shall apply:

For the purposes of calculating retirement payment income of an individual from an interest in an approved retirement fund or from retirement payment made by the Government of Nepal, the following provisions shall apply:

The Department may, after prescribing standards and procedures, permit a person to issue invoice through electronic medium and to maintain the documents referred to in Section 81(1) through electronic medium.

The Department may permit a person to maintain the documents referred to in Section 81(1) through electronic medium.

(1) In the case of the retirement payment made by the Government of Nepal or contributory based retirement payment made by an approved retirement

fund, at the rate of 5 percent on the gain calculated under Section 65(1)(b);

(1) In the case of the retirement payment made by the Government of Nepal or an approved retirement fund, at the rate of 5 percent on the gain

calculated under Section 65(1)(b);

(5)  Payment of rent having a source in Nepal by a resident person, at the rate of 10 percent;

Provided that,

(a)  Tax shall be withheld at the rate of 1.5 percent on payment made to a person carrying out the business of renting motor vehicle and

registered in VAT in respect of rent of such motor vehicle.

(b) No tax is required to be withheld on the amount derived by natural person in respect of house rent.

(5) Payment of rent having a source in Nepal by a resident person, at the rate of 10 percent;

Provided that, tax shall be withheld at the rate of 1.5 percent on payment made to a person carrying out the business of renting motor vehicle and registered in VAT in respect of rent of such motor vehicle.

(8) Payment of rent in respect of transport service, at the rate of 2.5%.

None

Notwithstanding Sub-section (1), a resident bank, financial institution,

cooperative or any other entity issuing debentures or a company listed under prevailing law shall, in making payment of interest or any amount for

interest as follows to an individual in respect of a deposit, bond, debenture

or government bond, withhold tax at the rate of 5 percent on total amount of payment:

▪   Having a source in Nepal; and

▪   Not related with the operation of a business.

Notwithstanding Sub-section (1), a resident bank, financial institution or any other entity issuing debentures or a company listed under prevailing law

shall, in making payment of interest or any amount for interest as follows to an individual in respect of a deposit, bond, debenture or government bond,

withhold tax at the rate of 5 percent on total amount of payment:

▪   Having a source in Nepal; and

▪   Not related with the operation of a business.

Payment in respect of an article published in a newspaper  and payment in respect of setting question papers or checking answer books;

Payment in respect of an article published in a newspaper and payment in respect of setting question papers or checking answer books;

In making payment of premium to non-resident insurance company or

commission (which is paid out of premium) to be received from non- resident insurance company in respect of insurance, 1.5 %;

In making payment of premium to non-resident insurance company, 1.5 %;

Tax shall be withheld @ 1.5 % on a payment exceeding Rs. 50 Lakh made for carrying out work through consumption committee.

None

(h) Meeting allowance of up to Rs. 20,000 per meeting, payment in respect of occasional (part-time) teaching, payment in respect of setting

question paper or checking answer books;

(h) Meeting allowance, payment in respect of occasional (part-time)

teaching;

(k) Payment in respect of motor vehicle or transport service of a natural person other than proprietorship firm.

None

Where a person other than a resident entity carrying on transaction of purchase and sale of securities upon being registered under prevailing law

derives a gain from the disposal of an interest in a resident entity, advance tax as follows shall be collected on such gain calculated under Section 37: (a)  In the case of gain from the disposal of an interest in an entity

enlisted in the Nepal Securities Board,

▪     at the rate of 7.5 % of the gain in the case of resident natural person;

▪    10 % of the gain in the case of resident entity; and

▪    25 % of the gain in the case of others,

by the entity performing the functions of the stock exchange;

(b) In the case of gain from the disposal of interest in an entity not enlisted in Nepal Securities Board,

▪    at the rate of 10 % of the gain in the case of resident natural

person;

▪    15 % of the gain in the case of resident entity; and

▪    25 % of the gain in the case of others,

by the entity of which interest is disposed of.

Where a person other than a resident entity carrying on transaction of purchase and sale of securities upon being registered under prevailing law

derives a gain from the disposal of an interest in a resident entity, advance tax as follows shall be collected on such gain calculated under Section 37: (a)  In the case of gain from the disposal of an interest in an entity

enlisted in the Nepal Securities Board, at the rate of 5 percent of the gain in the case of resident natural person and 10 percent of the gain

in the case of others, by the entity performing the functions of the stock exchange;

(b) In the case of gain from the disposal of interest in an entity not enlisted in Nepal Securities Board, at the rate of 10 percent of the gain in the case of resident natural person and 15 percent of the gain in the case of others, by the entity of which interest is disposed of.

Advance tax at the rate of 5 % on the value determined for the purpose of customs duty shall be collected on the customs point itself on the following

goods imported for business purpose:

▪     He buffalo, she buffalo, he goat, sheep, mountain goat falling under Chapter 1 of customs code;

▪    Live, fresh and frozen fish under Chapter 3;

▪    Fresh flower falling under Chapter 6;

None

(d) If the motor vehicle owner paying tax under Section 1(13) of Schedule-1

of the Act is a natural person other than a proprietorship firm, such natural person;

(d) If the motor vehicle owner paying tax under Section 1(13) of Schedule-1

of the Act is a natural person, such natural person.

(e) A natural person having income in respect of disposal of NBCA only

who does not want to file a return of income.

None

Section 10Kha. Liability of Payment of Tax of Joint Venture:

The persons involved in the joint venture shall be liable, collectively or individually, for the purpose of payment of tax liability of the joint venture

in which they invole.

None

Deleted

(1)(d) If an exempt organization fails to file financial statements within prescribed period, 0.1 % per annum of amount shown in income.

(3)      If a withholding agent fails to submit the return referred to in Section

90(1), such agent shall be charged a fee @ 2.5 % per annum of the tax to be withheld for each month and part of the month from the due date for submission of the return until the date on which such return is submitted.

(3)      If a withholding agent fails to submit the return referred to in Section

90(1), such agent shall be charged a fee @ 1.5 % per annum of the tax to be withheld for each month and part of the month from the due date for submission of the return until the date on which such return is submitted.

A person, whether registered or not, who is the recipient of services from a

person outside Nepal shall, at the time of payment or at the time of receipt of service, whichever comes earlier, assess and collect tax on the taxable value in accordance with the Act and Rules framed under the Act.

A person, whether registered or not, who is the recipient of services from an

unregistered person outside Nepal shall, at the time of payment, assess and collect tax on the taxable value in accordance with the Act and Rules framed under the Act.

If the goods or services transacted by a person become taxable or following

transactions are carried on, an application shall be made to the tax officer, in the prescribed format, for registration of such transaction, within 30 days of becoming taxable or commencement of the transaction:

(a) Production and transaction of bricks, operation of business relating to liquor distributor, wine shop, software, trekking,

rafting, ultralight flight, paragliding, tourist motorcade (;jf/L ), crusher, sand mine, slate and stone;

(b) Business of sanitary, furniture, fixture, furnishing, automobiles, motor parts, electronics, marble, educational consultancy, disco

theque, health club, massage therapy, beauty parlor, catering service, party palace business, parking service, drycleaners with machinery and apparatus, restaurant with bar, ice cream industry,

color lab, boutique, tailoring business with materials of suiting and shirting, supply of uniform to educational organization or

health organization or other entity.

If the goods or services transacted by a person become taxable, an

application shall be made to the tax officer, in the prescribed format, for registration of such transaction, within 30 days of becoming taxable or commencement of the transaction.

Deleted

The Department may order taxpayers to give invoice by using a cash

machine or computer. Other procedures on so giving invoice by using cash machine or computer shall be as prescribed by the Department

Section 14KA. Electronic Invoice:

(1) A taxpayer may issue electronic invoice with the prior approval of the Department.

(2) Notwithstanding Sub-section (1), the department may, by publishing

a notice, order the taxpayers prescribed in such notice to compulsorily issue invoice through electronic medium and to link (cfj4 ) such electronic medium with the Central Billing Monitoring System (CBMS) of the Department.

(3) The Department shall prepare and implement work method (sfo{ljwL

) regarding the security and reliability of software or apparatus from which invoice is issued through electronic medium. Concerned

producer, distributor and user shall comply with such work order.

None

Notwithstanding Sub-section (1) and (2), Government of Nepal, a Provincial government, a local body or an international organization or mission situated in Nepal, or public corporation carrying out transaction of value added tax exempt goods shall have to recover tax at the time of sale of value added taxable goods or services.

Notwithstanding Sub-section (1) and (2), a local body or an international organization or mission situated in Nepal or the Government of Nepal, or public corporation carrying out transaction of value added tax exempt goods shall have to recover tax at the time of sale of value added taxable goods or services.

Notwithstanding Sub-section(1), a taxpayer in a district where there is no

Inland Revenue Office or Taxpayers Service Office may furnish the amount of tax and tax return to be paid and submitted by him with the Office of

Treasury and Account Controller of the same district within fifteenth day of

the month in which he has to submit the tax return. The Office of Treasury and Account Controller shall forward the details of tax returns and tax

payment so received to the Inland Revenue Office or Taxpayers Service

Office within 7 days.

Notwithstanding Sub-section(1), a taxpayer in a district where there is no

Inland Revenue Office may furnish the amount of tax and tax return to be paid and submitted by him with the Office of Treasury and Account

Controller of the same district within fifteenth day of the month in which he

has to submit the tax return. The Office of Treasury and Account Controller shall forward the details of tax returns and tax payment so received to the

Inland Revenue office within 7 days.

If any goods are re-exported and payment is received in advance in convertible (foreign) currency, the amount paid for VAT by the concerned person on purchase shall be refunded to him.

Provided that no facility of tax refund under this Section shall be provided in exporting or re-exporting any goods on which facility of tax refund under Schedule-1 has been claimed.

If any goods are re-exported and payment is received in advance in convertible (foreign) currency, the amount paid for VAT by the concerned person on purchase shall be refunded to him.

Provided that no facility of tax refund under this Section shall be provided

in exporting or re-exporting any goods on which facility of tax refund under

Schedule-1 has been claimed.

S29(1)(Chha3) If a person producing, installing or operating software or apparatus for issuing electronic invoice does not comply

with the work method issued by the Department under

Section 14Ka, Rs. 500,000.

None

S29(1Ga)       A seller who issues invoice without transferring goods or

service, 50 % of issued invoice value.

None

S 29(2) If a person commits any of the following offences, the tax officer may impose on such person a fine of cent percent of the amount of tax or an imprisonment for up to 6 months or both punishments:

(a)  Preparing false account or invoice or other document; (b) Evasion of tax by fraud;

(c)  If an unregistered person acts on if he were a registered

person;

(d) If sale is made after under-invoicing;

(e)  Carrying out transaction by violating Section 30.

S 29(2) If a person commits any of the following offences, the tax officer may impose on such person a fine of cent percent of the amount of tax or an imprisonment for up to 6 months or both punishments:

(a)  Preparing false account or invoice or other document; (b)  Evasion of tax by fraud;

(c)  If an unregistered person acts on if he were a registered

person;

(d)  Violating Section 23Ga;

(e)  Carrying out transaction by violating Section 30.