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Taxing expats in Nepal

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What kind of taxes does an expat face in Nepal?

1.Income Tax is due once per year in between September and November for Joint Venture Companies with a foreign shareholder or Companies that are owned by a foreigner. A company has to get a so called PAN certificate from the Tax Office in the District or City where the company is operating. Usually the Nepalese partner takes care of such paperwork and keeps the certificate up to date. If the foreign investor is the sole owner, he should get a Nepalese book keeper or book keeping firm employed ( fully or part time) They have the skills and knowledge about company audit rules , keep monthly records and trial balances and prepare an annual profit and loss balance sheet, the company asset and investment data and VAT (value added tax) overview of goods that are purchased or sold by the company.

2. Labor tax is to be paid for employees who’s salary exceed an annual income of more than 100,000 Nepalese Rupees (approx 980 to 1000 Euro at this moment; exchange rates are varying in Nepal all the time) This tax is quite low actually and clearance is necessary to keep the company sound.

3. Tax on source is to be paid if a house rent contract is made between a foreign investor and a landlord. After negotiating the rent price this tax should be paid to local tax office by the tenant….not by the landlord thus! That is the rule! (usually around 10 % of the annual rent.) If he does not do so, then the contract is actually not protected by law and thus illegal…but to my knowledge no one cares and no one has been punished yet for having broken this law. The reason may simply be that all the elites and Ministers themselves have (illegal) home contracts with their tenants…this is Nepal. Any law that is broken by the big shots will be broken by the citizens too! One does not need to elaborate why. So far most of the house owners try to avoid taxing their house rent income by making a private “home contract” with the tenant. This works quite well because the landlord is more than happy to have a foreigner in his house who is known to run a private enterprise, as this means long term guaranteed income. All taxes in Nepal change very often in percentage depending on which political party has majority in the parliament. Soft spoken…the tax system of Nepal is an absolute mess. There are a few improvements in the pipeline now. The Government Ministry of Finance want to make clear cut rules and let everyone declare his/her taxes electronically online in the near future. Still then, when the due is known one has to go to a special bank account by a state owned bank and deposit the dues personally. Some recent news articles suggest, that from 2010 onward any private bank in Nepal will be able to collect the taxes of their clients and forward it to the state covers.

4. Real Estate and land owned by foreign companies has to pay property tax which is in Nepal surprising low if the property is outside the cities. My company HRDSN for example pays approx . 600 rupees per year for 2 hectares of land with buildings in remote Lamjung District. In the cities that may be a bit more. I have no data about it. It almost seems a taboo to talk about property tax. The reason may be again that the leading elites of the country are eager to avoid to look deeper into that issue out of greed, because they are the largest property owners indeed. My advice: expats should inquire anyway about their property tax and pay it in time, if the own land or buildings in Nepal. Just to make sure that no one can give them trouble later on. Keeping update with the tax system is a must. Better be safe than sorry!

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
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2 Comments
Guest
Guest
7 years ago

Tax in Nepal is not mess as you said. It is not the tenant who pays tax on rent. It is the recipient, as it is his income tax. If your rent is Rs.10,000, you deduct 10% from the amount, pay Rs.9,000 to the landlord and deposit Rs.1000 in his name in tax office. It is clear! If you are running a business in Nepal, you have to deduct 10% on office rent amount compulsorily. The laxity is only in case of your residence, where tax collection is poor. And this has not been area of concern of tax office so far. Mukunda Dev Adhikari

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MadagascarNow
MadagascarNow
last year

Thanks, Makunda. I have more questions. I will try to send you an email on expat. but if not, please contact me.

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