Tax Filing Process in Nepal

Introduction to Tax Filing in Nepal

Tax filing is a critical process for individuals and businesses in Nepal to fulfill their financial obligations to the government. In Nepal, the tax system is governed by various laws and regulations, primarily the Income Tax Act 2058 (2002) and its subsequent amendments. The Inland Revenue Department (IRD) is the main authority responsible for tax administration in the country.

Tax filing involves submitting detailed information about income, expenses, and other financial transactions to the tax authorities. This process allows the government to assess the tax liability of individuals and entities, ensuring compliance with tax laws and generating revenue for public services and development initiatives.

In Nepal, the tax year runs from mid-July to mid-July of the following year, aligning with the Nepali fiscal year. Taxpayers are required to file their returns within three months of the end of the fiscal year, typically by mid-October. However, extensions may be granted in certain circumstances.

Types of Tax Returns

In Nepal, various types of tax returns must be filed depending on the nature of the taxpayer and their income sources.

Major Types of Tax Returns

1. Individual Income Tax Return: This is filed by resident individuals with taxable income. It covers income from employment, business, investments, and other sources.
2. Corporate Income Tax Return: Companies and other business entities file this return to report their business income, expenses, and tax liability.
3. Value Added Tax (VAT) Return: Businesses registered for VAT must file monthly returns detailing their sales, purchases, and VAT collected and paid.
4. Excise Duty Return: Manufacturers and importers of excisable goods are required to file this return.
5. Non-Resident Tax Return: Non-resident individuals or entities earning income from sources in Nepal file this return.

Procedure for Tax Filing in Nepal

• Step 1: Gathering financial information
• Step 2: Calculating taxable income
• Step 3: Completing tax forms
• Step 4: Submitting returns
• Step 5: Payment of taxes due

Step 1: Gathering financial information

Collect all relevant financial documents, including income statements, expense receipts, bank statements, and investment records. Organize these documents chronologically and by income source to facilitate accurate reporting. Ensure all information is complete and up-to-date for the tax year.

Step 2: Calculating taxable income

Determine your total income from all sources. Identify applicable deductions and exemptions as per the Income Tax Act. Calculate your taxable income by subtracting allowable deductions from your total income. Use the current tax rates and slabs to determine your tax liability.

Step 3: Completing tax forms

Obtain the appropriate tax forms from the Inland Revenue Department or their official website. Fill out the forms accurately, providing all required information. Double-check calculations and ensure all sections are completed. Attach necessary supporting documents as specified in the form instructions.

Step 4: Submitting returns

Submit your completed tax return to the designated Inland Revenue Office. For electronic filing, use the IRD’s online portal to upload your return and supporting documents. Retain a copy of the submitted return and any acknowledgment received from the tax office for your records.

Step 5: Payment of taxes due

Calculate the final tax amount due after accounting for any advance tax or withholding tax paid. Pay the remaining tax liability through authorized banks or online payment systems. Obtain and keep payment receipts as proof of tax payment for future reference.

Documents Required for Tax Filing in Nepal

1. Permanent Account Number (PAN) card or certificate
2. Citizenship certificate or passport for identification
3. Income statements or salary slips for employment income
4. Bank statements showing interest income
5. Dividend certificates for investment income
6. Rental agreements and income statements for rental income
7. Financial statements (balance sheet, profit and loss account) for businesses
8. VAT and excise duty returns (if applicable)
9. Receipts and invoices for claimed expenses and deductions
10. Tax Deduction at Source (TDS) certificates
11. Previous year’s tax returns and assessment orders

GFCS Tax Filing Services in Nepal

1. Individual Income Tax Filing: We assist individuals in preparing and submitting their annual income tax returns, ensuring all income sources are properly reported and allowable deductions are claimed.
2. Corporate Tax Filing: For businesses, we handle the preparation of corporate tax returns, including financial statement analysis, tax calculation, and submission of required documents.
3. VAT Return Filing: We help businesses registered for VAT to prepare and file their monthly VAT returns, ensuring compliance with VAT regulations.
4. Tax Planning and Advisory: Our experts provide guidance on tax-efficient strategies to help clients minimize their tax liabilities within the bounds of the law.
5. International Tax Services: For clients with cross-border transactions, we provide advice on international tax matters and assist with foreign tax credit calculations.
6. Tax Due Diligence: We perform tax due diligence for mergers, acquisitions, and other corporate transactions to identify potential tax risks and liabilities.

Tax Filing Deadlines in Nepal

Type of Return	Due Date
Income Tax Returns (Individuals & Businesses)	Within 3 months from the end of the fiscal year (typically by mid-October); Extension may be granted for an additional 3 months upon request
Advance Tax Payments
– First installment	By mid-January (end of Poush)
– Second installment	By mid-April (end of Chaitra)
– Final installment	By mid-July (end of Ashadh)
VAT Returns	Monthly: Within 25 days from the end of each month
Withholding Tax Returns	Monthly: Within 25 days from the end of each month
Excise Duty Returns	Monthly: Within 25 days from the end of each month
Annual Tax Return for Cooperatives	Within 6 months from the end of the fiscal year
Tax Clearance Certificate	Must be obtained within 3 months from the end of the fiscal year

Cost of Tax Filing Services

The cost of tax filing services in Nepal can vary depends on the complexity of the tax return, the type of taxpayer (individual or business), and the specific services required. We strive to provide transparent and competitive pricing for our tax filing services at GFCS

1. Type of Tax Return: Individual income tax returns are typically less expensive than corporate tax returns due to their lower complexity.
2. Business Size and Structure: Larger businesses with more complex operations generally require more extensive tax preparation work, resulting in higher fees.
3. Additional Services: Services such as tax planning, audit representation, or handling tax disputes may incur additional costs.
4. Urgency: Rush services for last-minute filings may be subject to premium rates.
5. Frequency of Service: Clients who require ongoing tax services throughout the year may benefit from package deals or discounted rates.

Relevant Tax Laws and Authorities

Tax Filing Laws in Nepal

Legislation / Agreement	Description
Income Tax Act 2058 (2002)	Primary legislation governing income tax in Nepal, covering individual and corporate income tax, capital gains tax, and withholding taxes
Value Added Tax Act 2052 (1996)	Regulates the application and administration of Value Added Tax (VAT)
Excise Duty Act 2058 (2002)	Governs the imposition and collection of excise duties on certain goods
Customs Act 2064 (2007)	Regulates import and export duties and procedures
Tax Clearance Rules 2076 (2019)	Outlines procedures for obtaining tax clearance certificates
Double Taxation Avoidance Agreements (DTAAs)	Nepal has signed DTAAs with several countries to prevent double taxation

Regulatory Authorities for Tax Filing in Nepal

Institution / Department	Description
Inland Revenue Department (IRD)	Main body responsible for tax administration in Nepal, operating under the Ministry of Finance
Large Taxpayers Office (LTO)	Handles tax matters for large corporate entities
Department of Customs	Manages customs duties and procedures
Ministry of Finance	Oversees fiscal policy and tax legislation
Revenue Tribunal	Hears appeals against tax assessments and decisions

Tax Filing Practices in Nepal

System / Requirement	Description
Self-Assessment System	Nepal follows a system where taxpayers calculate their own tax liability, and are responsible for accurate reporting and timely filing
Electronic Filing	The IRD offers an e-filing system for submitting tax returns and payments online, reducing paperwork and processing time
Permanent Account Number (PAN)	All taxpayers must obtain a PAN, which serves as a unique identifier for tax-related transactions and is required before filing returns
Record Keeping	Taxpayers must maintain financial records for at least five years to support tax return information
Tax Disputes and Appeals	Taxpayers can appeal against tax assessments they disagree with, with the process potentially escalating to the Revenue Tribunal

Conclusion

Tax filing in Nepal is a complex for the country’s tax laws and regulations. There are various types of tax returns, specific procedures to follow, and numerous documents required for accurate filing. The cost of tax filing services can vary, but professional assistance is necessary.

Green Financial Consultancy Services (GFCS) offers tax filing services to meet the diverse needs of individuals and businesses in Nepal. Our team of experienced professionals is well-versed in Nepali tax laws.

FAQs