In this Insight, NRN Services & Consulting has dispensed a Complete Guide on How can NRN Calculate and File Income Tax in Nepal. NRN Services & Consulting has assisted its clients with Filing Tax, Auditing and more.

Do NRNs pay income tax in Nepal?

Yes, Non-Resident Nepalis (NRNs) are subject to income tax in Nepal on income generated within the country. The Income Tax Act of Nepal imposes taxation on income earned from various sources such as employment, business, property, and investments. NRNs are taxed on their income derived from Nepalese sources, including rental income, capital gains, and dividends.

What are the tax rates for NRNs?

The tax rates for NRNs in Nepal vary depending on the nature and amount of income. As of the latest information available, NRNs are subject to progressive tax rates ranging from 1% to 30% on their taxable income. The tax rates are structured in such a way that higher incomes are taxed at higher rates, with different thresholds for different categories of taxpayers.

How can NRN Calculate and File Income Tax?

NRNs can file their income tax returns in Nepal through various methods, including online and offline channels. To file taxes online, NRNs can utilize the e-filing system provided by the Inland Revenue Department of Nepal, where they can submit their tax returns electronically through the department’s website. Alternatively, NRNs can also opt for offline filing by submitting their tax returns manually at the tax offices designated by the government.

What documents are needed for tax filing?

NRNs must gather several documents and information to complete their income tax filing in Nepal. These documents typically include:

Personal identification documents such as passport or citizenship certificate.

Income statements, including salary slips, rental income receipts, and dividend statements.

Bank statements and records of financial transactions conducted in Nepal.

Investment statements, including details of shares, mutual funds, and other securities.

Documentation related to deductions and exemptions, such as receipts for charitable contributions or medical expenses.

Are there tax exemptions for NRNs?

Yes, there are certain tax exemptions available for Non-Resident Nepalis (NRNs) under the Income Tax Act of Nepal. These exemptions are designed to encourage investment, promote economic growth, and attract foreign income into the country. Some common tax exemptions available to NRNs include exemptions on income earned from certain types of investments, such as government bonds or infrastructure projects, as well as exemptions on income earned from specific industries or sectors identified by the government for incentivization. Additionally, NRNs may also be eligible for exemptions on income earned from foreign sources, subject to certain conditions and limitations outlined in the tax laws.

How to calculate taxable income?

Calculating taxable income for Non-Resident Nepalis (NRNs) in Nepal involves determining the total income earned during the tax year and subtracting allowable deductions and exemptions. NRNs must first identify all sources of income, including salary, rental income, business profits, capital gains, and other forms of income derived from Nepalese sources. Once the total income is calculated, NRNs can deduct eligible expenses and deductions permitted by the tax laws, such as business expenses, investment losses, charitable contributions, and certain exemptions available under the Income Tax Act. The resulting figure is the taxable income, which is then subject to applicable tax rates according to the progressive tax brackets outlined in the tax laws. NRNs should maintain accurate records of their income and expenses to facilitate the calculation of taxable income.

What are the deadlines for tax filing?

The deadlines for tax filing for Non-Resident Nepalis (NRNs) in Nepal vary depending on their individual circumstances and the type of income earned. Generally, NRNs are required to file their income tax returns within a specified period after the end of the tax year, which is typically the Nepali fiscal year ending on mid-July. However, specific deadlines may apply based on factors such as the taxpayer’s residency status, the type of income earned, and any extensions granted by the tax authorities.

Can NRNs get tax refunds?

Yes, Non-Resident Nepalis (NRNs) may be eligible to receive tax refunds in Nepal under certain circumstances. Tax refunds are typically issued when the amount of tax withheld or paid exceeds the actual tax liability owed by the taxpayer. NRNs may qualify for tax refunds if they have overpaid taxes due to excess withholding, tax credits, or deductions claimed on their tax returns. Common scenarios where NRNs may be entitled to tax refunds include situations where taxes are deducted at source on income such as salary or interest income at a rate higher than their actual tax liability, or when they are eligible for tax credits or exemptions that result in an overpayment of taxes.

How to pay taxes from abroad?

Non-Resident Nepalis (NRNs) can pay their taxes from abroad through various convenient methods provided by the Nepalese government. One common way is through electronic funds transfer, where NRNs can use international banking services to transfer funds directly to the designated bank accounts of the Inland Revenue Department of Nepal. Additionally, NRNs can utilize online payment platforms offered by Nepalese banks or third-party payment processors to remit their tax payments securely from overseas.

Are there penalties for late tax filing?

Yes, there are penalties for late tax filing in Nepal, which may apply to Non-Resident Nepalis (NRNs) who fail to file their income tax returns within the prescribed deadlines. The Inland Revenue Department of Nepal imposes penalties for late filing to encourage timely compliance with tax regulations and ensure the efficient collection of taxes. The penalties for late filing typically include fines or additional taxes levied on the outstanding tax liabilities owed by the taxpayer. The amount of penalties may vary depending on the duration of the delay and the taxpayer’s income level, with higher penalties imposed for prolonged delays or repeated non-compliance.

What is the process for tax audits?

The process for tax audits in Nepal involves the examination and verification of taxpayers’ financial records and tax returns by the tax authorities to ensure compliance with tax laws and regulations. Non-Resident Nepalis (NRNs) may be subject to tax audits conducted by the Inland Revenue Department of Nepal to assess the accuracy and completeness of their income declarations and tax payments. The tax audit process typically begins with a notification from the tax authorities informing the taxpayer of the audit and requesting relevant documents and information for review. NRNs are required to cooperate with the tax authorities during the audit process, providing access to their financial records, supporting documentation, and any other information requested for examination. The tax authorities will then conduct a thorough review of the taxpayer’s records and may issue audit findings and recommendations based on their findings. NRNs should maintain accurate records and documentation to facilitate the tax audit process.

How to get tax advice in Nepal?

Non-Resident Nepalis (NRNs) can seek tax advice in Nepal from various sources, including professional tax consultants, chartered accountants, and legal advisors specializing in taxation matters. These professionals offer expert guidance and assistance to NRNs on various tax-related issues, including tax planning, compliance, and dispute resolution. NRNs can engage the services of tax advisors to receive personalized advice.

Can NRNs file taxes online?

Yes, Non-Resident Nepalis (NRNs) have the option to file their taxes online in Nepal. The Inland Revenue Department of Nepal has introduced an e-filing system that allows taxpayers, including NRNs, to submit their tax returns electronically through the department’s website. NRNs can register for online tax filing by creating an account on the department’s online portal and following the provided instructions to complete and submit their tax returns.  

Are there tax treaties for NRNs?

Yes, there are tax treaties or double taxation avoidance agreements (DTAAs) that Nepal has entered into with various countries to prevent double taxation and promote cross-border trade and investment. These tax treaties provide specific provisions and guidelines for the taxation of income earned by Non-Resident Nepalis (NRNs) in foreign countries and vice versa. The tax treaties typically address issues such as the allocation of taxing rights between the contracting states, the elimination of double taxation through tax credits or exemptions, and the exchange of information between tax authorities to prevent tax evasion and fraud. NRNs can benefit from tax treaties by availing reduced withholding tax rates, tax credits, or exemptions on income earned from foreign sources.

How to update tax information?

Non-Resident Nepalis (NRNs) can update their tax information in Nepal by submitting relevant documents and information to the Inland Revenue Department or through online channels provided by the department. To update tax information, NRNs may need to update their personal details such as address, contact information, and taxpayer identification number (TIN) by filling out the necessary forms or updating their profiles on the department’s online portal.

What are the tax benefits for NRNs?

Non-Resident Nepalis (NRNs) may be eligible for various tax benefits in Nepal, including exemptions, deductions, and credits, designed to incentivize investment, promote economic growth, and attract foreign income into the country. Some common tax benefits available to NRNs include exemptions on income earned from certain investments, such as government bonds or infrastructure projects, as well as deductions for business expenses, charitable contributions, and education expenses. Additionally, NRNs may benefit from reduced withholding tax rates or tax credits on income earned from foreign sources under tax treaties or double taxation avoidance agreements (DTAAs) entered into by Nepal with other countries.

How to handle tax disputes?

Handling tax disputes in Nepal involves a structured process aimed at resolving disagreements between taxpayers, including Non-Resident Nepalis (NRNs), and the tax authorities regarding tax assessments, liabilities, or other tax-related matters. NRNs facing tax disputes can initiate the resolution process by filing a written complaint or objection with the relevant tax authority, specifying the grounds for disagreement and providing supporting documentation or evidence to substantiate their claims. The tax authorities will then review the complaint and may conduct further investigations or audits to assess the validity of the taxpayer’s claims. If the dispute remains unresolved at the tax authority level, NRNs can appeal the decision to higher administrative or judicial authorities, such as the Tax Tribunal or the Courts, depending on the nature and complexity of the dispute.

Can NRNs appeal tax decisions?

Yes, Non-Resident Nepalis (NRNs) have the right to appeal tax decisions made by the tax authorities in Nepal if they disagree with the assessment, determination, or imposition of taxes or penalties. NRNs can initiate the appeals process by filing a formal appeal or objection with the relevant tax authority, specifying the grounds for disagreement and providing supporting documentation or evidence to support their claims. The tax authority will then review the appeal and may conduct further investigations or hearings to assess the merits of the taxpayer’s arguments. If the dispute remains unresolved at the tax authority level, NRNs can escalate the matter to higher administrative or judicial authorities, such as the Tax Tribunal or the Courts, for further review and adjudication.

Are there any tax relief programs?

Yes, there are tax relief programs available in Nepal to provide financial assistance and support to individuals and businesses facing economic hardship or adverse circumstances. These tax relief programs may include exemptions, deductions, rebates, or deferrals of taxes or tax liabilities, aimed at mitigating the financial burden and promoting economic recovery and stability. Non-Resident Nepalis (NRNs) may benefit from tax relief programs implemented by the Nepalese government in response to specific events or conditions, such as natural disasters, economic downturns, or public health crises. NRNs should stay informed about the availability and eligibility criteria of tax relief programs through official announcements or notifications.

How to correct tax filing errors?

Correcting tax filing errors in Nepal involves a systematic process aimed at rectifying inaccuracies, discrepancies, or omissions in the tax returns submitted by taxpayers, including Non-Resident Nepalis (NRNs). NRNs can correct tax filing errors by filing an amended tax return or rectification request with the relevant tax authority, specifying the nature of the error and providing corrected information or supporting documentation to rectify the mistake. The tax authority will then review the amended return or rectification request and may conduct further assessments or verifications to verify the accuracy of the corrections.