Tax laws Nepal
Nepal's taxation system is administered by the Inland Revenue Department (IRD) under the Ministry of Finance. The IRD is responsible for enforcing tax laws and administering various taxes, including Income Tax, Value Added Tax (VAT), and Excise Duty.
1. Income Tax:
Personal Income Tax: Nepal employs a progressive tax system for individual income. For the fiscal year 2022/23, the tax rates are structured as follows:
- Up to NPR 500,000: 1% Social Security Tax
- NPR 500,001 to NPR 700,000: 10%
- NPR 700,001 to NPR 1,000,000: 20%
- NPR 1,000,001 to NPR 2,000,000: 30%
- Above NPR 2,000,000: 36% (including an additional 20% on income above NPR 2,000,000)
Corporate Income Tax: The corporate tax rate varies depending on the nature of the company and its activities. For instance, non-resident natural persons are generally taxed at a rate of 25%. However, income from transporting passengers, mail, or cargo by sea or air that is embarked in Nepal is taxed at 5%, while income from services that do not originate in Nepal is taxed at 2%.
2. Value Added Tax (VAT):
VAT is an indirect tax levied on the value added to goods and services. Implemented in 1998, the standard VAT rate in Nepal is 13%. Certain goods and services may be exempted or subject to different rates.
3. Excise Duty:
Excise duties are imposed on specific goods, such as alcohol and tobacco products. The rates and regulations are subject to change, and businesses should consult the IRD for the most current information.
4. Customs Duties:
The Department of Customs is responsible for collecting customs duties, VAT, excise, and other taxes at border points and international airports. It aims to facilitate legitimate trade, protect society, and collect revenue.
5. Social Security Fund (SSF):
Established in 2011, the SSF mandates that every company/employer enroll their employees. The contribution rates are as follows:
- Employee Contribution: 11% of basic remuneration (10% Pension Fund + 1% Social Security Tax)
- Employer Contribution: 20% of basic remuneration (10% Pension Fund + 8.33% Gratuity + 1.67% Additional Contribution)
The SSF provides benefits such as medical, health, maternity protection, accident and disability safety, dependent family protection, and old-age protection.
Note: Tax laws and regulations are subject to change. For the most current information, it is advisable to consult the Inland Revenue Department or seek professional tax advice.
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