Property Tax in Nepal: Types, Rate & Process

Introduction to Property Tax in Nepal

Property tax is an important source of revenue for local governments in Nepal. It is a tax levied on immovable property like land and buildings owned by individuals and businesses. The Local Government Operation Act 2017 authorizes municipalities and rural municipalities to impose and collect property tax within their jurisdictions.

The property tax system in Nepal has undergone reforms in recent years to make it more systematic and effective. Previously, separate land and house taxes were collected. Now, an integrated property tax is implemented that combines the tax on land and buildings.

Property tax is calculated based on the value of the property as determined by the local government. The tax rates vary between different municipalities but generally range from 0.05% to 0.5% of the property value. Proper filing and payment of property tax is mandatory for property owners in Nepal.

Types of Property Subject to Taxation

The local government determines which properties fall under the property tax net within their jurisdiction. The main types of property subject to property tax in Nepal are:

1. Land – This includes all types of land owned by individuals or entities within municipal areas. Both developed and undeveloped land is taxable.
2. Residential buildings – Houses, apartments and other residential structures are subject to property tax.
3. Commercial buildings – Office buildings, shops, factories and other commercial properties are taxed.
4. Institutional buildings – Properties owned by institutions like schools, hospitals etc. are taxable.
5. Agricultural land – Land used for farming within municipal boundaries is subject to property tax, though often at lower rates.
6. Mixed use properties – Buildings with both residential and commercial components are taxed accordingly.
7. Leased properties – Property tax is applicable on leased land and buildings as well.

Procedure for Property Tax Filing

• Step 1: Determine Property Value
• Step 2: Calculate Applicable Tax Rate
• Step 3: Gather Necessary Documents
• Step 4: Complete Property Tax Forms
• Step 5: Submit Forms and Pay Tax

The process for filing property tax in Nepal typically involves the following steps:

Step 1: Determine Property Value

The first step is to determine the value of the taxable property. This is usually done through a valuation carried out by the local government authority. The valuation takes into account factors like:

• Location of the property
• Size of land and built-up area
• Type of construction
• Age of the building
• Current market rates

Property owners can also self-declare the value, but this is subject to verification by municipal officials.

Step 2: Calculate Applicable Tax Rate

Once the property value is determined, the applicable tax rate needs to be calculated. The tax rates vary between municipalities and are usually structured in slabs based on property value. For example:

• 0.05% for property valued up to NPR 5 million
• 0.15% for property valued between NPR 5-10 million
• 0.25% for property valued above NPR 10 million

The exact rates are set by each local government in their annual budget. Property owners need to check the current applicable rates in their municipality.

Step 3: Gather Necessary Documents

The following documents are typically required for property tax filing:

• Citizenship certificate
• Land ownership certificate
• Building permit (for buildings)
• Previous year’s tax payment receipt
• Valuation report (if available)

Step 4: Complete Property Tax Forms

Property owners need to fill out the designated property tax return forms provided by the municipality. These forms require details like:

• Owner’s personal information
• Property location and details
• Self-declared property value
• Calculation of tax amount

Most municipalities now provide options to fill these forms online through their websites.

Step 5: Submit Forms and Pay Tax

The completed forms along with supporting documents need to be submitted to the revenue section of the municipality. The calculated tax amount can be paid at the municipal office or through online payment gateways where available.

Upon payment, a tax clearance certificate is issued which serves as proof of property tax payment for that fiscal year.

Documents Required for Property Tax Filing

The documents required for property tax filing in Nepal include:

1. Citizenship Certificate – This proves the identity and citizenship status of the property owner.
2. Land Ownership Certificate (Lalpurja) – This document issued by the Land Revenue Office confirms legal ownership of the land.
3. Building Permit – For properties with buildings, the approved building permit is required.
4. Previous Tax Receipts – Receipts of property tax paid in previous years need to be submitted.
5. Property Valuation Report – If a valuation has been done by approved valuers, the report can be submitted.
6. Lease Agreement – For leased properties, a copy of the lease deed is required.
7. Property Insurance Documents – If the property is insured, insurance policy documents may be needed.
8. Citizenship of Family Members – Some municipalities require citizenship certificates of family members as well.
9. Photographs – Recent photographs of the property may be required by some local governments.
10. Map of Property – A sketch map showing property boundaries is sometimes requested.

Property Tax Rate in Nepal

Property tax rates in Nepal are not uniform across the country. Each municipality has the authority to set its own tax rates within certain limits. The rates are usually progressive, increasing with higher property values.

Some examples of property tax rate structures used by municipalities in Nepal:

Kathmandu Metropolitan City:

• 0.05% for property up to NPR 5 million
• 0.15% for NPR 5-10 million
• 0.25% for NPR 10-20 million
• 0.35% for above NPR 20 million

Lalitpur Metropolitan City:

• 0.05% for property up to NPR 2 million
• 0.10% for NPR 2-5 million
• 0.15% for NPR 5-10 million
• 0.20% for above NPR 10 million

Pokhara Metropolitan City:

• 0.10% for property up to NPR 5 million
• 0.15% for NPR 5-10 million
• 0.20% for NPR 10-20 million
• 0.25% for above NPR 20 million

Rural municipalities generally have lower rates compared to urban areas. The rates are reviewed and can be adjusted annually by the local governments.

Property Tax Filing Deadlines in Nepal

The property tax filing deadlines in Nepal are set by individual municipalities, but generally align with the Nepali fiscal year which runs from mid-July to mid-July (Shrawan to Ashad in the Nepali calendar).

Common Tax Filing Practices in Nepal

• Many municipalities set the deadline as the end of the fiscal year (mid-July or Ashad end).
• Some local governments offer discounts for early payment, often if paid within the first 3 months of the fiscal year (by mid-October or Ashoj end).
• Late payment penalties usually start accruing from the beginning of the new fiscal year.
• Some municipalities allow payment in installments, with separate deadlines for each installment.

For example, Kathmandu Metropolitan City’s property tax deadlines:

• 10% discount if paid by Ashoj end (mid-October)
• Normal rate if paid by Chaitra end (mid-April)
• 10% penalty if paid after Chaitra end

Cost of Property Tax Filing in Nepal

The cost of property tax filing in Nepal consists of the following components:

1. The actual tax amount – This is calculated based on the property value and applicable tax rate.
2. Service charge – Many municipalities charge a small service fee for processing the tax filing.
3. Late payment penalties – If the tax is not paid by the deadline, penalties are added which can range from 10-25% of the tax amount.
4. Interest on late payment – Some local governments also charge interest on late payments, often around 15% per annum.
5. Valuation fees – If a new valuation of the property is required, there may be fees for this service.
6. Online payment charges – For online payments, a small transaction fee may be applicable.

The actual cost varies significantly depending on the value of the property and the specific rates and charges of each municipality. As an example, for a property valued at NPR 10 million in Kathmandu:

• Tax amount: NPR 15,000 (at 0.15% rate)
• Service charge: NPR 500
• Total: NPR 15,500

Laws and Authorities Governing Property Tax in Nepal

The legal framework for property tax in Nepal is primarily based on the following laws:

1. Local Government Operation Act 2017 – This act empowers local governments to impose and collect property tax.
2. Constitution of Nepal 2015 – It provides the overarching framework for local governance and taxation.
3. Land Revenue Act 1978 – This act governs land taxation aspects.
4. Property Tax Act 2019 – Some municipalities have enacted specific property tax acts.

The main authorities involved in property tax administration are:

1. Local Governments (Municipalities and Rural Municipalities) – They are responsible for valuation, assessment, collection and overall administration of property tax.
2. Ministry of Federal Affairs and General Administration – It provides policy guidance to local governments on property tax matters.
3. National Natural Resources and Fiscal Commission – This constitutional body recommends on revenue sharing between different levels of government.
4. Inland Revenue Department – While not directly involved in property tax, it coordinates on overall tax policy matters.

Property Tax Practices in Nepal

1. Self-declaration system – Many municipalities allow property owners to self-declare the value of their property, subject to verification.
2. Computerized systems – Larger municipalities have implemented computerized property tax systems for efficient management.
3. GIS mapping – Geographical Information System (GIS) is increasingly being used for property mapping and valuation.
4. Progressive tax rates – Most local governments use a slab system with higher rates for more valuable properties.
5. Incentives for timely payment – Discounts are often offered for early payment of property tax.
6. Periodic revaluation – Properties are supposed to be revalued every few years to reflect changing market values.
7. Exemptions for certain properties – Some types of properties like government buildings, religious institutions etc. are exempt from property tax.
8. Tax clearance certificates – These are issued upon payment and are often required for property transactions.
9. Door-to-door collection – Some municipalities conduct door-to-door tax collection drives.
10. Online payment options – Many local governments now offer online and mobile payment facilities for property tax.

Conclusion

Property tax is a significant source of revenue for local governments in Nepal and an important obligation for property owners. The system has been evolving with efforts to make it more efficient and equitable.

Property owners need to be aware of their tax obligations and the specific requirements of their local municipality. Timely filing and payment of property tax not only avoids penalties but also contributes to local development.

FAQs on Property Tax in Nepal