VAT Mandatory in Nepal for Foreign Digital Companies Earning Over Rs 3 Million Annually

Kathmandu: The government has tightened rules for collecting Value Added Tax (VAT) on digital services provided in Nepal by foreign companies such as Facebook, YouTube, and Netflix. Through the third amendment to the Procedures Relating to Value Added Tax on Electronic Services Provided by Non-Resident Persons, 2079, the Inland Revenue Department has brought services like social media advertising, over-the-top (OTT) platforms, cloud services, gaming, and software into the tax net. The revised rules will be enforced from 2082 BS.

Under the new arrangement, any foreign individual or organization without a permanent office in Nepal, but selling electronic services to Nepali users with an annual turnover of more than Rs 3 million in the past 12 months, must register with Nepal’s tax system and pay 13 percent VAT. Once the turnover threshold is crossed and registration is completed, all subsequent transactions regardless of amount will be subject to VAT.

The procedure defines electronic services as those delivered automatically over the Internet with minimal human intervention. These include targeted online advertising, movies, music, cloud storage, mobile applications, software supply and updates, as well as data and photo downloads.

Tax administration will be handled by the Large Taxpayer Office. Foreign companies must apply for registration electronically within 30 days of crossing the Rs 3 million annual turnover limit. Required documents include the company’s registration and tax certificates from its home country, the passport of the authorized person, and a power of attorney. The registration process will be completed online within seven days.

Registered companies may issue tax invoices electronically without separate approval from the department. Tax returns must be filed online by the 25th of the following month after each Nepali month ends. Transactions in foreign currency must be converted into Nepali rupees at the exchange rate set by Nepal Rastra Bank on the date the details are submitted.

Strict penalties are in place for non-compliance. Failure to register on time can result in a fine of Rs 20,000 per entity. Not submitting details on time will incur a penalty of either 0.05 percent of the tax due per day or Rs 1,000 per tax period, whichever is higher.

Failure to pay tax on time will result in an additional 15 percent interest and a 10 percent annual fee as per the Act.

 

पछिल्लो अध्यावधिक: साउन २९, २०८२ १३:४७

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