Income Tax Rates 2079-80 (2022-23 A.D.)

Introduction

The Finance Act 2079 (2022 A.D.) ("Finance Act") has been passed by the Parliament of Nepal and received Presidential assent on July 15, 2022. The Finance Bill 2079 had been tabled at the Parliament by the Government of Nepal ("GON") on May 29, 2022 and encompasses all amendments required in various tax legislations and other measures regarding revenue collection. The Finance Act shall be enforceable for the fiscal year 2079-80 (2022-23 A.D.) with effective from July 17, 2022.

With respect to income tax, the Income Tax Act 2058 (2002 A.D.) ("ITA") forms the framework law. This Briefing highlights major aspects of ITA as amended by Finance Act.

Major Highlights

• Digital Service Tax: Two percent digital service tax shall be levied on the transaction price of digital services provided by a non-resident person to customers in Nepal.
• Incentives for Information Technology Based Businesses: One percent income tax shall be levied on earnings in foreign currency by a resident person on the basis of information technology-based business, such as, business process outsourcing; software programming, cloud computing, etc.
• Tax Relief for COVID-19 Affected Businesses: In continuation of measures since the fiscal year 2077-78 (2020-21 A.D.), the current Finance Act prescribes several income tax reliefs to the affected businesses, namely:
  • 75 percent exemption in income tax for the tax payer with annual turnover up to NPR 3 million for the fiscal year 2078-79 (2021-22 A.D.).
  • 50 percent exemption in income tax for the tax payer with annual turnover exceeding NPR 3 million and up to NPR 10 million for the fiscal year 2078-79 (2021-22 A.D.).
  • 50 percent exemption in income tax for the resident person having hotel, travels, trekking, cinema business (production, distribution and exhibition), party palace, media house, or transport services with annual turnover exceeding NPR 10 million for the fiscal year 2078-79 (2021-22 A.D.).
• Tax Amnesty to Regularize Tax Compliances: In the event a taxpayer, who has not paid taxes for fiscal years 2075-76 (2018-19 A.D., 2076-77 (2019-20 A.D.), and 2077-78 (2020-21 A.D.), obtains Permanent Account Number and pays the dues by January 13, 202, then the incurred charges and interests shall be waived.

The following tables provide rate of personal and corporate income tax, withholding tax, advance tax, and details of tax exemption and concession..........