Tax Compliances for Companies under Income Tax Act in Nepal
11 November 2023
Companies as business entities are subject to various tax compliances including filing income returns, advance tax and Tax Deducted at Source (“TDS”) under the Income Tax Act, 2002 (“Income Tax Act”). The self-assessment system is followed to file tax returns in Nepal.
a. Filing of income returns
Companies are required to file their income returns within 3 months after the end of every fiscal year at relevant Inland Revenue Office as per Income Tax Act. Further, the timeline of filing income returns can be extended up to a maximum of next 3 months upon the submission of an application for extension.
The applicable rate of corporate income tax are as follows:
| S.N. | Corporate Entity | Applicable Tax Rate (In Percentage) |
| 1 | General companies | 25% |
| 2 | Bank and Financial Institutions; Insurance companies; Companies engaged in the business of cigarette, tobacco, cigar, chewing tobacco, alcohol and beer; Telecom and internet service providers; Companies engaged in money transfer, capital market or securities and commodities businesses. | 30% |
The income returns have to be signed by the manager or relevant authorities of the companies covenanting that it is true and complete.
b. Advance Tax
Companies are required to file advance tax on an installment basis pursuant to Income Tax Act as follows:
- For normal taxpayers
| Installment | Due Date | Amount Payable |
| First installment | by end of the month of Poush | Amount to be paid from 40% of estimated tax |
| Second installment | by end of the month of Chaitra | Amount to be paid from 70% of estimated tax |
| Third installment | by end of the month of Ashad | Amount to be paid from 100% of estimated tax |
2. For taxpayers on transaction basis
| Installment | Date Payable | Amount Payable |
| First installment | by end of the month of Poush | Tax at prescribed rate on the transaction up to 20th Poush |
| Second installment | by end of the month of Ashad | Tax at prescribed rates on [actual turnover up to 20thAshadh plus estimated turnover till Ashad end] minus tax paid up to the end of Poush. |
c. TDS
The person making the payment under various headings is required to withhold the applicable tax rate pursuant to the Income Tax Act.
The applicable tax rates for TDS are as follows:
| S.N. | Transaction | Withholder | Withholdee | Rate (in percent) | Withholding/Final withholding payment |
| 1. | Salary | Employer | Employee | On the basis of slab rate of Income Tax Act | Withholding payment |
| 2. | Retirement payment | Government of Nepal or approved retirement fund | Beneficiary | 5 | Final withholding payment |
| 3. | Commission | Resident Company | Non-resident person | 5 | Withholding payment |
| 4. | Lease of aircraft | Lessee | Lessor | 10 | Withholding payment |
| 5. | Service charge | Resident Person | Service provider registered in VAT | 1.5 | Withholding payment |
| 6. | Rent except for natural person | Company | Resident person | 10 | Final withholding payment |
| 7. | Vehicles in rent | Resident person | Person registered in VAT | 1.5 | Withholding payment |
| 8. | Payment of returns of mutual fund | Mutual fund | Individual | 5 | Final withholding payment |
| 9. | Payment for use of satellite, bandwidth, optical fiber, tools related to communication or electricity transmission line | Service Receiver | Service Provider | 10 | Withholding payment |
| 10. | Payment for carriage service | Resident person | Service Provider | 2.5 | Withholding payment |
| 11. | Payment for carriage service | Resident person | Service Provider registered in VAT | 1.5 | Withholding payment |
| 12. | Payment of interest rate of loan in foreign currency | Resident bank and financial institutions | Foreign banks | 10 | Final withholding payment |
| 13. | Payment of dividend | Company | Shareholder | 5 | Final withholding payment |
| 14. | Benefit payment of insurance service | Insurance company | Insured | 5 | Final withholding payment |
| 15. | Benefit payment from unapproved retirement fund | Unapproved retirement fund | Beneficiary | 5 | Final withholding payment |
| 16. | Payment of interest including deposits, bonds and debentures | Resident bank, financial institution, cooperative organization or any other body issuing bonds | Individual | 5 | Final withholding payment |
| 17. | Windfall gain | Resident person | Recipient | 25 | Final withholding payment |
| 18. | Payment of contract exceeding fifty thousand rupees | Resident person | Party | 1.5 | Withholding payment |
| 19. | Payment of deed or contract | Resident person | Non-resident person | 5 | Withholding payment |
| 20. | Commission in payment of a premium | Resident person | Non-resident person | 1.5 | Final withholding payment |
| 21. | Premium of reinsurance | Non-resident insurance company | Resident person | 1.5 | Withholding payment |
| 22. | Payment for work exceeding five million rupees | Resident person | Consumers committee | 1.5 | Withholding payment |
| 23. | Except for provided transactions including interest, service fees and royalty | Resident person | Person having source of consideration in Nepal | 15 | Withholding payment |
Companies are required to submit the statements of Withholding tax within 25 days from the end of month in specified format at relevant Inland Revenue Office. The statement of TDS can be submitted through electronic medium, commonly known as e-TDS.
Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The firm shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein. The copyright of the contents of this article is vested with Imperial Law Associates.
Contact Us Now
Related Professionals
SURENDRA TIWARI
MANAGING PARTNER
DEEPESH OJHA
FOUNDING PARTNER
RUKMANI KHADKA
SENIOR ASSOCIATE
Contact us
Phone: +977 9803888924, +977 9849093540
Email: [email protected]
Location: 4th Floor, Gravity Center (Big Mart Complex), Anamnagar-29, Kathmandu 44600, Nepal
Office Hours
09:00 AM – 06:00 PM
Sunday- Friday
