English Translation: FINANCE ACT, 2083 Informational Handbook on Tax Exemptions, Concessions, and Other Provisions

Disclaimer

The contents contained in this Handbook have been prepared with the objective of providing further clarification on and facilitating implementation of the provisions of the prevailing tax law and the Finance Act, 2083. If any subject or content stated herein conflicts with the Finance Act, 2083, or other prevailing tax laws, the provisions of this Handbook shall automatically become void to that extent, and the legal provisions shall prevail.

Furthermore, this Handbook shall be useful as a reference material to understand the provisions relating to tax exemptions, concessions, and other arrangements granted by the Finance Act, 2083, and to present them in simple language. It shall not be used as the basis for any legal claim, court argument, or legal proceeding.

The names, types of transactions, and amounts mentioned in the examples in this Handbook are fictitious. If any resemblance is found with anyone, it shall be a mere coincidence.

Foreword

It is a primary responsibility of the Inland Revenue Department to clearly inform stakeholders about the revenue policy adopted by the federal budget and the Finance Act of Nepal, the scope of taxation, and the various exemptions, concessions, and facilities provided to taxpayers. Internal resource mobilisation has special importance for sustainable economic development of the state and the creation of a strong economy.

In this context, this Handbook has been prepared with the objective of presenting, in simple and understandable language, the industry- and business-friendly exemption facilities introduced through the Finance Act, 2083, and the steps required to avail of such facilities.

The Finance Act, 2083, has made provisions granting various types of tax concessions to taxpayers who could not timely file taxes and returns under the Value Added Tax Act, 2052; Income Tax Act, 2058; Excise Duty Act, 2058; and other subject-specific acts and past annual Finance Acts. It has also made provisions granting various exemptions and facilities to taxpayers who, for various reasons, could not previously come within the tax scope. In addition, the said Act has made contemporaneous reforms to the existing tax law of Nepal.

In this context, this Handbook presents the legal provisions of the Finance Act, the procedural steps taxpayers must follow, and their practical implications, with relevant illustrative examples. This Handbook shall prove important in promoting a culture of voluntary tax compliance and maintaining transparency in tax administration.

It is believed that this Handbook shall serve as a useful guide for all respected taxpayers, business persons, and students of tax law, to understand their legal rights and obligations and to derive maximum benefit from the economic facilities provided by the state.

Dr. Bhishma Kumar Bhusal

Director General

Brief Provisions Relating to Tax Exemption Facilities Under Finance Act, 2083

Key Provisions Amended by Finance Act, 2083

Taxes and levies to be administered by the Inland Revenue Department:

Key Amendments to the Value Added Tax Act, 2052

• A provision has been added enabling the designation of taxable goods or services by publishing a notice in the Gazette, for the purpose of maintaining a multi-tier rate structure, provided the tax rate does not exceed 13%.

• A provision has been added to levy tax at 5% on the transaction value of transportation and freight services provided by any person through a ride-sharing platform. The ride-sharing platform operator shall be required to collect and deposit such tax on behalf of that person.

• A provision has been added that: electricity sold by a power-trading business to another power-trading business, and electricity service of up to 50 units per customer for household use only, shall be VAT-exempt; for household use beyond 50 units, VAT shall apply at 5%; and for entities other than power-trading businesses, VAT shall apply at 13%.

• A provision has been added enabling the Department to make available a billing system to taxpayers for the purpose of issuing electronic invoices.

• A provision has been made allowing taxpayers to amend a submitted tax return within seven days.

• Penalties for violations of law applicable to taxpayers who issue electronic invoices have been classified: the maximum has been set at Rs. 5 lakh and the minimum at Rs. 1 lakh.

• A fine of fifty thousand rupees per instance has been prescribed for violation of the directive issued by the Department regarding regulation of internal movement of goods for commercial purposes.

• VAT exemption has been provided for: services rendered by insurance agents; e-library services; cheese (paneer); labour charges incurred in manufacturing gold or silver ornaments and goods; and prescription eyeglasses recommended by a physician.

Key Amendments to the Value Added Tax Rules, 2059

• The fee of Rs. 100 charged for obtaining a copy of the Permanent Account Number (PAN) certificate has been removed.

• The prescribed format of the sales ledger (Schedule 9) has been removed; it shall now be as prescribed by the Department.

• Small and medium industries may also file quarterly tax returns.

• A provision has been made that persons providing electricity service to end consumers shall not be entitled to claim input tax credit on goods and services purchased by them.

• The special provision relating to payment of tax on supply of goods or services under contract or agreement has been removed. (The requirement to deduct 30% of the tax at the time of payment no longer applies.)

Key Amendments to the Excise Duty Act, 2058

• A provision has been made for the use of digital excise duty stamps.

• A provision has been made whereby establishments under the physical control system may be selected on the basis of risk analysis and a limited control system for production, dispatch, import, and export of excisable goods may be established.

• A provision for micro-breweries has been made.

• A provision has been made allowing industries dealing in liquor, beer, or tobacco-related goods to grant discounts to VAT-registered dealers upon sale.

• For goods other than tobacco-related and nicotine-containing goods under the self-dispatch system, a provision has been made allowing the authorised official of the licence-holder to certify the accounts and returns. (Previously, the excise officer or an employee nominated by him was required to verify and certify.)

• A Track and Trace system has been provided to electronically monitor and regulate the production, storage, accumulation, dispatch, sale, distribution, and transportation of liquor and tobacco-related goods.

• A provision has been made whereby, if liquor purchased from a duty-free shop or under excise exemption is sold, distributed, or used for commercial purposes, a fine equal to the seized amount or one lakh rupees, whichever is higher, shall be levied on such liquor.

Key Amendments to the Excise Rules, 2059

• A provision has been made enabling the Department to prescribe a risk-based selective dispatch control method whereby excise revenue is deposited and a dispatch clearance is obtained before dispatch. (To improve the physical control system.)

• For export purposes, the Department may grant permission to produce and bottle in other U.P. strengths and sizes as well.

• Liquor of 70 U.P. strength may also be bottled in 750 millilitre PET bottles.

• The Department may grant permission to destroy raw materials and semi-finished goods of excisable products certified as unfit for use by an accredited laboratory.

• For micro-brewery operations, excise duty stamps need not be affixed on pitchers and growlers used for sale and distribution within the brewery premises. Beer produced by a micro-brewery shall not be allowed to be taken outside the premises or sold and distributed outside.

• Under the self-dispatch system, the authorised employee of the licence-holder shall be required to certify and maintain the accounts and returns. (Previously, the excise officer or an employee nominated by him was required to verify and certify.) However, for tobacco-related and nicotine-containing goods, the excise officer or an employee nominated by him shall continue to be required to verify and certify.

• Amendments to production entitlement rates: From fresh grapes - wine shall be produced at the rate of 750 millilitres of wine containing 12% alcohol per kilogram of grapes; For dried grapes including raisins - 2.5 litres of wine containing 12% alcohol per kilogram of dried grapes; For grape juice concentrate or fruit juice concentrate - 4 litres of wine containing 12% alcohol per litre of concentrate; For beer from a micro-brewery - 900 litres of beer per thousand litres of installed capacity.

• The production licence fee for a micro-brewery has been set at Rs. 12,50,000 and the renewal fee at Rs. 1,25,000.

• The fee for spirit maturation has been set at Rs. 2,50,000 and the renewal fee at Rs. 1,00,000.

Key Amendments to the Income Tax Act, 2058

• The definition of "associated person" in controlled international transactions has been revised and its scope expanded. (The threshold for control through income, capital, or voting rights in cross-border associated persons has been reduced from 50% to 30%.)

• A provision has been made that no tax shall be levied on the transaction amount of sweat equity received in lieu of remuneration from employment in an information technology industry.

• A provision has been made that capital gains tax shall be exempt on gains from disposal of land or a private building donated free of charge by a natural person to the Government of Nepal, a Provincial Government, or a Local Government.

• A provision has been made that interest income earned by a financial institution established under the full ownership of a foreign government on a non-profit basis, from loan investment in Nepal, shall be exempt from tax.

• A provision has been made that amounts earned by drinking water and sanitation consumer associations registered under the Water Resources Act, 2049, in accordance with their objectives, shall be exempt from tax.

• A provision has been made that amounts earned by a university established and operating in Nepal in accordance with its objectives shall be exempt from tax.

• A provision has been made that film houses established in areas other than metropolitan municipalities and sub-metropolitan municipalities shall be exempt from tax for 10 years from the date of commencement of commercial operations.

• The definition of agricultural business has been revised to include grape cultivation, poultry farming, fish farming, and beekeeping.

• The ceiling for expenditure deduction on donations and gifts made to tax-exempt organisations has been raised from Rs. 1 lakh to Rs. 3 lakh.

• A provision has been made for deduction of Corporate Social Responsibility (CSR) expenditure. (Up to 1% of taxable income.)

• The cash transaction limit has been reduced from Rs. 50,000 to Rs. 25,000.

• A provision has been made allowing deduction of expenses incurred in issuing shares or debentures.

• Safe Harbour Rules have been provided: minimum operating profit margin of 15% is required for IT service exports; for intergroup loan interest rates, 200 to 400 basis points have been added and maintained; and up to 5% profit addition on the total cost for low value-added services. This provision shall apply for 5 income years.

• A legal provision has been made enabling Advance Pricing Agreements (APA) with taxpayers on the basis and method for determining arm's length price in international transactions between associated persons. (Agreement shall apply for up to 5 income years.)

• Section 57 of the Income Tax Act, 2058, shall not be attracted where the interest held in an entity is involuntarily disposed of due to the death of the beneficial owner of that entity and transferred to a legal heir, or where the ownership of a resident entity changes and as a consequence the ownership of another resident entity holding an interest in that entity also changes.

• A provision has been made allowing hire purchase taxpayers to claim expenditure deduction for loan loss provisions up to the prescribed limit.

• Penalties for violations of law applicable to taxpayers issuing electronic invoices have been classified with a maximum of Rs. 5 lakh and minimum of Rs. 1 lakh.

• A provision has been made enabling the receipt of information or details related to any person's financial transactions through electronic means.

• Advance tax withheld at 20% on service fees or commission of insurance agents who are natural persons has been categorised as a final withholding tax payment.

• A provision has been made that windfall gains tax shall not be levied on agricultural prizes.

• The provision for advance tax deduction on payments made to consumer committees has been removed.

• A provision has been made to collect advance tax at 7.5% on gains from disposal of interests listed on the Nepal Stock Exchange where held for more than 365 days by a resident natural person, and at 10% where held for 365 days or fewer; and where the person does not wish to file an income return for such gain, such payment shall be deemed a final withholding tax payment.

• Payments received in foreign currency by a resident natural person not engaged in business operations, in lieu of providing software, electronic services, or consultancy services outside Nepal, or for uploading audio-visual content on social media, shall be deemed a final withholding tax payment.

• A provision has been made to collect advance tax on gains from disposal of non-business taxable property (land and buildings) by a natural person at 7.5% for ownership of 5 years or more, and at 10% for less than 5 years; and where the person does not wish to file an income return, such payment shall be deemed a final withholding tax payment.

• A provision has been made to collect advance tax at 2.5% on gains from involuntary disposal of non-business taxable property (land and buildings) due to land acquisition by a decision of the Government of Nepal; where the person does not wish to file an income return, such payment shall be deemed a final withholding tax payment.

• Resident ride-sharing service operators shall collect advance tax at 1% on amounts paid to natural persons providing services through their platform; such amount shall be deemed a final withholding tax payment.

• A provision has been made enabling the Department to designate any person as not required to file an income return.

• The tax audit period has been reduced from 4 years to 3 years.

• The period for submitting an application for tax settlement has been extended from 2 years to 5 years.

• Annual income tax amounts have been prescribed for electric e-rickshaws and two-wheeled electric vehicles.

• The ceiling for annual deduction of home insurance premium paid by a resident natural person has been raised from Rs. 5,000 to Rs. 10,000.

• A resident natural person may deduct from taxable income 25% of the annual tuition fees paid for a child's foreign study, or Rs. 25,000, whichever is lower.

Key Amendments to the Income Tax Rules, 2059

A person who wishes to conclude an Advance Pricing Agreement shall be required to pay the following service fee when submitting an application for such agreement:

Provisions Relating to Amendment of Tax Rates and New Levies

• The tax-free threshold for resident natural persons has been raised to Rs. 10 lakh and tax rates have been revised. The maximum tax rate has been reduced from 39% to 29%.

• The tax rates on capital gains from disposal of non-business taxable property (land and buildings) by a natural person have been revised upward as follows:

• A tax rate of 1% has been provided for natural persons providing services through a ride-sharing platform.

• VAT has been levied on electricity service. For household use, VAT shall be levied only at 5% on consumption beyond 50 units per customer.

• Persons providing services through platforms have been brought within the VAT scope, and tax shall be levied at 5% on such services.

• Luxury Duty: The luxury duty levied at 2% on gold and silver ornaments has been renamed as Skill Development Levy and shall now be levied at 0.5%.

Tax Exemptions and Concession Provisions Granted by Finance Act, 2083

1) Deduction of Amount Contributed to the National Reconstruction Fund (Section 25)

Legal Provision

Any person or institution that has contributed to the National Reconstruction Fund established by the Government of Nepal in Financial Year 2082/83 shall be entitled to deduct the amount so contributed when computing taxable income for that income year.

Compliance Steps Required by the Taxpayer

In order to deduct from taxable income the amount contributed to the National Reconstruction Fund under this provision, the taxpayer must have fulfilled the following compliance steps:

• This facility may be availed by both natural persons (Individual) and institutions/entities (Entity).

• The contribution amount must have been deposited in the "National Reconstruction Fund" officially established by the Government of Nepal itself. The entire deposited amount may be deducted from taxable income.

• This contribution amount must mandatorily have been deposited in the said fund within Financial Year 2082/83 (income year 2082/83).

Relevant Illustrative Examples

Example 1 (In the case of a natural person):

Mr. Ramprasad Acharya's total taxable income for Financial Year 2082/83 is Rs. 15,00,000.00. Having wished that the country be assisted in the disaster that has befallen it, he had contributed Rs. 2,00,000.00 to the Government of Nepal's National Reconstruction Fund in that financial year. According to this provision, when computing his taxable income, the amount of Rs. 2,00,000.00 given to the fund may now be deducted from the total income of Rs. 15,00,000.00. Consequently, his taxable income shall be Rs. 13,00,000.00.

Example 2 (In the case of an institution or company):

"ABC Commercial Bank's" net taxable income (Net Taxable Income) for Financial Year 2082/83 was Rs. 5,00,00,000.00 (five crore). The bank had contributed Rs. 50,00,000.00 (fifty lakh) to the National Reconstruction Fund under corporate social responsibility during that financial year. Using this facility, the bank may deduct Rs. 50 lakh from its taxable income of Rs. 5 crore. The bank's new taxable income shall be Rs. 4,50,00,000.00, and the bank shall be required to pay corporate income tax at only 30% (or the rate prescribed by business type) on this amount alone.

2) Special Provision Relating to Loss of Trading Stock (Section 26)

Legal Provision

In the event that the trading stock of an industry, trade, and commercial establishment affected in the course of the GenZ Movement has been lost and such lost trading stock was not insured, if the concerned person has, within the time specified in Clause (ka) of Sub-rule (1) of Rule 39(ka) of the Value Added Tax Rules, 2053, notified the concerned Inland Revenue Office with a description of the loss, along with a spot panchayet of the loss accompanied by a valuation, such person may, for Financial Year 2082/83, deduct the cost expenditure of trading stock under Section 15 of the Income Tax Act, 2058, and deduct the tax paid on such goods under Section 17 of the Value Added Tax Act, 2052.

Compliance Steps Required by the Taxpayer

In order to claim the tax facility (expenditure deduction in income tax and credit of tax paid on purchase in VAT) for loss of trading stock (Trading Stock) under this special provision, the taxpayer must have mandatorily fulfilled the following compliance steps:

• The trading stock must have been lost trading stock of an industry, trade, or commercial establishment affected in the course of the GenZ Movement.

• The said lost trading stock must have had no insurance (Insurance). (If insured and in a position to receive claim payment, this facility shall not be available.)

• A valuation with a spot panchayet must have been prepared that records the quantity and value of the loss.

• The taxpayer himself must have, within the time limit specified in Clause (ka) of Sub-rule (1) of Rule 39(ka) of the Value Added Tax Rules, 2053 (that is, within 30 days from the date of loss or damage), notified the concerned Inland Revenue Office with a detailed description of the loss.

• This facility shall apply only for Financial Year 2082/83.

Relevant Illustrative Examples

Example 1 (In the case where steps are fulfilled and facility is obtained):

In the course of the GenZ Movement, ready-made garments (trading stock) worth Rs. 20,00,000.00 were destroyed by vandalism at a VAT-registered cloth dealer "New Fashion Store" in Kathmandu. The said store had not insured such goods. The business person had prepared a spot panchayet in the presence of the local police and the Chamber of Commerce and Industry, and had notified the Inland Revenue Office with the listed description within 30 days of the loss. According to this facility, the business person, when computing self-assessment tax for Financial Year 2082/83, shall be entitled to deduct Rs. 20,00,000.00 as cost expenditure of trading stock for income tax purposes. Furthermore, the VAT of Rs. 2,60,000.00 paid when purchasing the said garments may also be claimed as input credit (Input Credit) according to the rules.

Example 2 (In the case of insurance or notification after the deadline - facility not obtained):

Another entity "Everest Electronics" had goods worth Rs. 10,00,000.00 lost in the same Movement. However, the said company had obtained insurance (Insurance) covering the said goods at a replacement value and is in the process of receiving claim payment from the insurance company; or the company notified the concerned Inland Revenue Office only after 30 days of the loss, or had not given notice at all. In all these situations, this company shall not receive this special facility. In the case of insurance, since the compensation for the loss shall be covered by the insurance company itself; or because it failed to notify the concerned Inland Revenue Office within the legally prescribed 30-day period, or gave notice after that; it shall not be entitled to claim the facility of cost expenditure deduction in income tax and input credit deduction in VAT under this section.

3) Special Provision Relating to Waiver of Outstanding Old Sales Tax, Entertainment Tax, Hotel Tax, Contract Tax, or Income Tax Amounts (Section 30)

Legal Provision

(1) Outstanding excise duty under the Excise Duty Act, 2015, and outstanding amounts of hotel tax, entertainment tax, contract tax, and sales tax replaced by the Value Added Tax Act, 2052, shall be waived.

(2) Where tax has been assessed under the Income Tax Act, 2031, and an outstanding amount exists, but the person having such outstanding amount has not obtained a Permanent Account Number and is also not engaged in any income-earning activity, the concerned office may write off such outstanding amount from its accounts.

Compliance Steps Required by the Taxpayer

The law has prescribed the following compliance steps for write-off or waiver of old legacy taxes under this provision:

In the case of old taxes - Sub-section (1):

• The outstanding amount must be excise duty under the old Excise Duty Act, 2015; or

• It must be the remaining outstanding amount of old hotel tax, entertainment tax, contract tax, and sales tax that were in force before the Value Added Tax Act, 2052, was introduced in Bikram Sambat 2054.

• For waiver under this sub-section, the taxpayer is not required to pay any amount or submit any application. This is an automatic waiver from the state.

In the case of old income tax - Sub-section (2):

• The outstanding tax must have been assessed under the old Income Tax Act, 2031. Such assessment may have been made either before or after the Income Tax Act, 2058, came into force.

• The person having such outstanding amount must not have obtained a Permanent Account Number (PAN) till date.

• Such person must currently not be engaged in any business or income-earning activity of any kind.

Relevant Illustrative Examples

Example 1 (In the case of outstanding old sales tax - Sub-section (1)):

A cloth store operating in Kathmandu in Bikram Sambat 2052 had an outstanding old sales tax amount of Rs. 50,000.00 appearing in the records of the Inland Revenue Office. After VAT was introduced, that shop had already closed. According to this special provision, the outstanding amount of Rs. 50,000.00 for old sales tax from Bikram Sambat 2052 shall be automatically and fully waived. For this purpose, no application is required to be submitted to the concerned Inland Revenue Office.

Example 2 (In the case of write-off under the Income Tax Act, 2031 - Sub-section (2)):

In Bikram Sambat 2048, a tax office had assessed an income tax of Rs. 2,00,000.00 against a trader "Shyamlal" under the old Income Tax Act, 2031. Shyamlal has not obtained a PAN number till date, and being elderly, he has not been engaged in any trade or business since that time. According to this provision, if Shyamlal or his representative submits a self-declaration to the Inland Revenue Office that he is currently not engaged in any income-earning activity, the old income tax outstanding of Rs. 2,00,000.00 against Shyamlal shall be written off from accounts by decision of the head of the concerned office.

4) Special Provision Relating to Waiver of Luxury Duty and Value Added Tax (Section 31)

Legal Provision

(1) If a seller did not collect the luxury duty levied by law on gold and gold ornaments, or the Value Added Tax levied on diamonds, gemstones, precious stones, and other stones, from any transaction carried out before Bhadau 2 of Sambat 2082, the same shall be automatically waived and no description thereof need be submitted.

(2) If any person failed to collect, as required by law, the Value Added Tax on the transaction of manufacturing and repairing gold and silver ornaments including other utensils or idol-related goods during Financial Year 2082/83 or before, the said amount and the interest, additional charges, and fine levied thereon shall be waived, and such persons shall also not be required to file a tax return.

Compliance Steps Required by the Taxpayer

The following steps must be fulfilled to obtain a waiver of luxury duty, VAT, and fines thereon under this provision:

In the case of luxury duty and VAT on diamonds/gemstones - Sub-section (1):

• The transaction must have taken place before Bhadau 2 of Sambat 2082.

• The concerned seller must not have collected the said luxury duty or VAT amount from the consumer or customer.

• This facility shall be automatically waived, and the taxpayer shall not be required to submit any description thereof to the Inland Revenue Office.

In the case of VAT on ornaments, utensils, and idol manufacture/repair - Sub-section (2):

• The transaction must have taken place during Financial Year 2082/83 or before that period.

• It must be a transaction of manufacturing (making labour charges) and repairing gold and silver ornaments, utensils made of precious metals, or idol-related goods.

• Despite the legal obligation to collect VAT, the business person must not have collected the said VAT from the customer.

• The principal VAT amount that was not collected, along with interest, additional charges, and fines levied thereon, shall all be fully waived, and the taxpayer shall also not be required to file a tax return.

Relevant Illustrative Examples

Example 1 (In the case of VAT not collected on sale of diamond ornaments - Sub-section (1)):

A jeweller "Ratna Abhushan Bhandar" had, when selling a diamond set in Shrawan month of Sambat 2082, not collected VAT from the customer and had also not mentioned VAT in the invoice. According to this special provision, since the transaction was before Bhadau 2 of Sambat 2082 and it is confirmed that the seller had not collected VAT, the VAT applicable on the said diamond set shall be automatically waived. The jeweller shall not be required to submit a separate description to the concerned Inland Revenue Office.

Example 2 (In the case of VAT omitted on idol manufacture and repair labour charges - Sub-section (2)):

A craftsman in Patan had, in F.Y. 2082/83, repaired old silver idols for various foreign and domestic customers and made new idol figurines (manufacturing), and had received Rs. 35,00,000.00 as labour charges. Having exceeded the VAT threshold, the said service was required to collect 13% VAT, but he had not collected VAT from the customers. According to this provision, the VAT amount omitted to be collected on transactions of manufacturing and repairing idol-related goods of gold and silver in F.Y. 2082/83 or before, and the fines/interest applicable thereon, shall be fully waived. Those craftsmen shall also not be required to file VAT returns for that period.

5) Special Provision for Destruction of Expired or Goods Unfit for Use (Section 32)

Legal Provision

Raw materials, finished, or semi-finished goods, whether or not excise-liable under the Excise Duty Act, 2058, that are expired or in a condition unfit for use and are located within the premises of an industrial establishment, may, without claiming an excise duty refund, be destroyed and written off from accounts by end of Poush month of Sambat 2083, after preparing a site-specific panchayet of their condition as-is, in the direct presence of a committee convened by the head of the concerned Inland Revenue Office with representatives of the District Administration Office, the Treasury and Accounts Controller Office, and the local Chamber of Commerce and Industry. Before destruction, goods that are found to be recyclable upon counting shall be separately recorded and the Inland Revenue Office may grant permission for reuse.

Compliance Steps Required by the Taxpayer

In order to destroy expired or unfit goods and write them off from accounts under this special provision, the industrial establishment (taxpayer) must have mandatorily fulfilled the following compliance steps:

• The goods must be expired (Expired) or in an unusable (Unusable) condition, and they must mandatorily be raw materials, finished, or semi-finished goods within the industrial establishment premises.

• For goods whose expiry date is not visible (such as raw materials or semi-finished goods), a test report from an accredited laboratory certifying that they are unfit for use or consumption must be submitted, obtained by collecting a sample at the office's presence for the purpose of ascertaining whether the goods remain usable.

• Such goods may be any kind - whether or not excise-liable.

• The taxpayer must agree not to claim any excise duty refund (Excise Refund) for the goods so destroyed.

• The act of destroying the goods must be performed in the direct presence of a 4-member committee (convened by the head of the Inland Revenue Office with representatives of the District Administration Office, Treasury and Accounts Controller Office, and local Chamber of Commerce and Industry).

• A site-specific panchayet describing the goods in their as-is condition in detail must mandatorily be prepared.

• Before destruction, if any goods are found to be of a nature that can be reused, they must be counted separately, a separate account must be maintained, and permission for reuse must be obtained from the Inland Revenue Office.

• The entire process of destroying the goods and writing them off from accounts must be completed by end of Poush month of Sambat 2083.

Relevant Illustrative Examples

Example 1 (In the case of destruction of expired beer and raw materials):

A beverage manufacturing industry "Nepal Brewery (fictitious name)" has, due to COVID or market recession, accumulated expired beer (finished goods) and barley/raw materials worth Rs. 50 lakh within the industry premises, which have become unfit for use. The industry decided not to claim excise duty refund on such goods. According to this provision, after the industry submits an application to the Inland Revenue Office, a 4-member committee (District Administration Office, Treasury and Accounts Controller Office, and local Chamber of Commerce and Industry representatives) convened by the head of the office shall come to the industry premises. The said goods shall be destroyed by end of Poush month of Sambat 2083 after preparing a site-specific panchayet as-is in the committee's presence, and the corresponding stock (Stock) shall be validly written off from the industry's accounts.

Example 2 (In the case of goods that can be reused before destruction):

A juice industry commenced the process of destroying expired juice. Upon inspection, the said committee found that some glass bottles or plastic containers in which the juice was packaged could be reused. According to this provision, before destroying, the committee shall separately count and record the reusable bottles or packaging materials, shall destroy the juice, and the Inland Revenue Office may grant permission for those bottles to be reused.

6) Special Provision Relating to Destruction of Excise Duty Stamps (Section 33)

Legal Provision

Excise duty stamps that have been burnt fully or partially in the course of the GenZ Movement and those that are in a condition unfit for use for various other reasons and are lying in warehouses shall be destroyed and written off from accounts in the direct presence of a committee convened by the head of the concerned Inland Revenue Office with representatives of the District Administration Office and the Treasury and Accounts Controller Office, after reconciling the stock account and preparing a site-specific panchayet of the same.

Compliance Steps Required by the Taxpayer

• The stamps must be those that were burnt (fully/partially) during the GenZ Movement or are unfit for use for various other reasons and are in stock in the warehouse.

• There must be a physical reconciliation of stamps available in stock with the system/accounts stock, and a site-specific panchayet must have been prepared.

• The stamps must be destroyed and the accounts written off in the direct presence of the committee convened by the head of the Inland Revenue Office with representatives of the District Administration Office and the Treasury and Accounts Controller Office.

Relevant Example

Excise duty stamps lying in the central warehouse that stores excise duty stamps, the Inland Revenue Office, and the warehouses of excise duty unit offices, which were burnt partially or fully in the course of the GenZ Movement or are in a condition unfit for use for various other reasons. According to this provision, after the excise duty inspector/officer submits an application, a committee convened by the head of the Inland Revenue Office with representatives of the District Administration Office and the Treasury and Accounts Controller Office shall proceed for a site inspection. The said excise duty stamps as available shall be presented before the representatives. After inspection and reconciliation of the accounts, a site-specific panchayet shall be prepared, and they shall be destroyed and written off from accounts in the presence of the committee convened by the head of the Inland Revenue Office together with the said representatives.

7) Special Provision Relating to Income Tax Exemption for Entities Coming Within Scope (Section 37)

Legal Provision

Universities, diplomatic missions, development partners, or non-resident persons investing in Nepal, whether or not they have obtained a Permanent Account Number, shall not be required to file income returns and deposit income tax for payments up to Financial Year 2082/83, except for the advance tax amount withheld at the source of payment. Community schools and community health institutions, if they file an income return for Financial Year 2082/83 and deposit the tax amount as per the said income return, and submit an application by end of Poush month of Sambat 2083, shall not be required to file income returns prior to that, and the tax, interest, and fees applicable on income shall be waived.

Compliance Steps Required by the Taxpayer

For the first clause (universities, diplomatic missions, development partners, and non-resident investors):

• No additional tax is required to be deposited other than tax (TDS) already withheld at the source of payment up to Financial Year 2082/83.

• These entities shall not be required to file income returns (Tax Return) of past years and deposit income tax (whether or not PAN has been obtained).

For the second clause (community schools and community health institutions):

• The income return for Financial Year 2082/83 and the tax amount as per the said return must be filed.

• The said return and tax must be filed by end of Poush month of Sambat 2083, and an application for waiver must be submitted to the office.

Relevant Illustrative Examples

Example 1 (In the case of a diplomatic mission/development partner):

An international development partner organisation "Global Aid Agency (fictitious name)" operating in Nepal had regularly withheld and filed source-based tax (TDS) when making payments to various consultants up to F.Y. 2082/83. However, the organisation itself had not filed its institutional income return (Income Return) to the Inland Revenue Office for the past 5 years. According to this provision, the said development partner shall not be required to file any of its own old income returns and deposit additional income tax for years up to F.Y. 2082/83 other than TDS already withheld at source. The office shall not be entitled to impose any fine or fee on it for not filing old returns.

Example 2 (In the case of a community school that has collected shop rents and has come within scope):

A community school in a rural area had collected shop rents by renting out shops in a building under its ownership and had been earning an annual income of Rs. 3,00,000.00 from F.Y. 2075/76 onwards. The school had not filed tax returns for that income. According to this provision, if the said community school files only the income return for Financial Year 2082/83 and submits an application for waiver by end of Poush month of Sambat 2083 after depositing the tax amount for that year, the school shall not be required to file any income return for F.Y. 2081/82 or any prior year. The entire tax, interest, additional charges, and fines applicable on income for those prior years shall be fully waived.

8) Special Provision Relating to Waiver of Tax, Interest, and Fees for Institutions Registered Under Association Registration Act, 2034 (Section 38)

Legal Provision

Institutions registered under the Association Registration Act, 2034, with a provision in their constitution that the remaining assets upon dissolution shall belong to the Government of Nepal, for a non-profit purpose, whether or not they have been registered as a tax-exempt institution under the Income Tax Act, 2058, if such institutions file an income return for Financial Year 2082/83 by end of Poush month of Sambat 2083, the tax, interest, and fees applicable on taxable income generated from amounts of donations, gifts, and contributions received by such institutions during the said financial year and prior thereto shall be waived. If such institutions have only income from amounts of donations, gifts, and contributions, they shall also not be required to file an income return.

Compliance Steps Required by the Taxpayer

• There must be a clear provision in the constitution that the assets remaining upon dissolution shall belong to the Government of Nepal.

• It must be an institution registered under the Association Registration Act, 2034, for a non-profit purpose.

• Whether or not registered as a tax-exempt institution under the Income Tax Act, 2058, the institution must submit an application to the concerned Inland Revenue Office to avail this facility.

• The income return for Financial Year 2082/83 must be filed by end of Poush month of Sambat 2083.

• The tax, interest, and fees applicable on taxable income generated from amounts of donations, gifts, and contributions received shall all be waived.

• If the institution's income consists only of amounts from donations, gifts, and contributions, it shall also not be required to file an income return.

Relevant Illustrative Examples

Example 1 (In the case of a facility obtained for taxable income from donations and gifts, and return filed):

A social institution "Grameen Bikas Samaj (fictitious name)" registered under the Association Registration Act, 2034, has a provision in its constitution that the assets shall belong to the government upon dissolution. However, this organisation had not been registered as a tax-exempt institution under Section 2(dha) of the Income Tax Act. The organisation had received Rs. 30 lakh as donations and gifts from a foreign donor agency and local donors in F.Y. 2080/81 and 2081/82. Because it lacked an income tax exemption certificate, the Inland Revenue Office had considered the said amount as taxable income and had been demanding payment of tax and interest. According to this provision, if the said organisation files its income return for Financial Year 2082/83 at the Inland Revenue Office and submits an application for waiver by end of Poush month of Sambat 2083, the entire income tax, interest, and fees applicable on the Rs. 30 lakh in donations and gifts received during F.Y. 2082/83 and all prior years shall be fully waived.

Example 2 (In the case of only donation income - return also need not be filed):

"Bal Kalyan Kosh", a non-profit institution, also has a provision in its constitution that the assets shall belong to the government upon dissolution. This institution had no other commercial income (such as interest, rent, or service fees) in Financial Year 2082/83 and all prior years, other than membership fees, donations, and contributions collected from its members. According to this provision, since the source of income of this institution is "only donations, gifts, and contributions", as per the last phrase of this section, the institution shall not be required to file any income return (Tax Return) for Financial Year 2082/83 and all prior years, and tax on this type of income shall be automatically nil and waived.

9) Special Provision Relating to Waiver of Interest, Additional Charges, and Fine for Insurance Agents (Section 39)

Legal Provision

If any person engaged in the business of an insurance agent has, in Financial Year 2082/83 or before, not collected Value Added Tax as required by law, the applicable tax and the interest, additional charges, and fine levied thereon shall be waived, and such person shall also not be required to file a tax return.

Compliance Steps Required by the Taxpayer

• The taxpayer must mandatorily be a person engaged in insurance agent business or work.

• This facility shall apply only to transactions in all financial years up to and including Financial Year 2082/83.

• Despite having the obligation to collect Value Added Tax (VAT) as required by law, the agent must not have collected (not charged) the said tax from the clients.

• For this concession, the taxpayer shall not be required to file any tax return (Tax Return) either; it shall be automatically waived.

Relevant Illustrative Example

Example 1 (In the case where VAT was not collected when receiving commission in the past):

A life insurance company's agent "Hariprasad Sharma (fictitious name)" had received a total commission of Rs. 15,00,000.00 for selling various insurance policies in F.Y. 2080/81 and 2081/82. Although 13% VAT was required to be collected on the said commission as per the law, he had not collected VAT from the insurance company or any customer. According to this provision, since Hariprasad had not collected VAT in F.Y. 2082/83 or before, he shall not be required to pay the principal VAT amount on the commission. Furthermore, the entire interest, additional charges, and fine applicable thereon shall be fully waived, and he shall not be required to go to the office and file any return.

10) Special Provision Relating to Waiver of Income Tax Interest and Fees (Section 40)

Legal Provision

(1) If any person who has, in the past, earned taxable income without obtaining a Permanent Account Number and has not filed income tax returns, such person, upon obtaining a Permanent Account Number and filing income returns for Financial Years 2079/080 to 2082/083 and depositing the applicable tax by end of Poush month of Sambat 2083, the fee and interest amount applicable thereon shall be waived, and it shall also not be necessary to file income returns for prior income years and deposit the tax, fee, and interest applicable thereon.

(2) If taxpayers who have obtained a Permanent Account Number and have come within the tax scope have not filed income returns for Financial Year 2081/082 or prior because they have not earned any income or carried out any transaction, such persons, if they wish to have their registration cancelled or to resume operations after carrying out transactions, shall file the income return for Financial Year 2082/083 and deposit the applicable tax, and shall submit an application to the concerned office by end of Poush month of Sambat 2083 for cancellation of registration or to resume transactions. If no application is submitted within the said period, such Permanent Account Numbers shall be automatically cancelled by the system, and if they subsequently wish to become active or resume operations, such persons shall be required to file income returns for that period and deposit the applicable tax, fee, and interest.

(3) If persons who have obtained a Permanent Account Number under the Income Tax Act, 2058, have earned income, and have outstanding income returns and tax remaining to be filed and paid, deposit such tax and one percent of such amount as an additional amount and file the income return by end of Poush month of Sambat 2083, the fee and interest applicable thereon shall be waived.

Compliance Steps Required by the Taxpayer

In order to obtain a waiver of income tax interest and fees under this provision, the taxpayer must fulfil the following compliance steps:

• For Sub-section (1): By end of Poush month of Sambat 2083, PAN must mandatorily be obtained and income returns for the past 4 years (F.Y. 2079/80 to 2082/83) and tax must be filed and deposited.

• For the facility under Sub-section (2): The person must have been registered but carried out no transaction, not filed returns, or even if a return was filed for any year, must have carried out no transaction. For this, the income return and tax for F.Y. 2082/83 must be deposited, and an application for "registration cancellation" or "resumption of transactions" must be submitted by end of Poush month of Sambat 2083. If no application is submitted by that deadline, the said PAN shall be automatically cancelled; and if they subsequently wish to become active or resume operations, such persons shall be required to deposit all outstanding income returns, principal tax (principal) and an additional 1% (one percent) of such amount for that period.

• The process for availing the concession under all sub-sections must be completed by end of Poush month of Sambat 2083.

Relevant Illustrative Examples

Example 1 (In the case of a new PAN holder - Sub-section (1)):

Mr. Krishna Thapa had been earning income by running a consulting firm from Bikram Sambat 2075 onwards without a Permanent Account Number. According to this provision, if he obtains a new PAN by end of Poush month of Sambat 2083 and files income returns and deposits tax for the 4 years from F.Y. 2079/80 to 2082/83, no fee or interest shall be charged on him. Furthermore, he shall not be required to file returns and deposit tax on income for the period from Bikram Sambat 2075 to 2079.

Example 2 (In the case of an inactive taxpayer - Sub-section (2)):

"Everest Trading" had obtained a Permanent Account Number in F.Y. 2075/76. However, it had not carried out any transaction and had also not filed income returns till date. According to this facility, if the company files the income return for F.Y. 2082/83 and deposits the applicable tax, and submits an application for "registration cancellation" or for resuming business by end of Poush month of Sambat 2083, it shall not be required to file the 7 past years of income returns and deposit the fee and interest thereon. If no application is submitted, the PAN shall be automatically cancelled.

11) Special Provision Relating to Waiver of VAT Fine and Interest (Section 41)

Legal Provision

(1) If a person registered for Value Added Tax has, in the past, carried out taxable transactions and has not collected and deposited Value Added Tax, such establishment shall, by filing the tax return it is required to file up to Chaitra month of Sambat 2082 and depositing the tax to be collected and one percent of such amount as an additional amount by end of Poush month of Sambat 2083, be entitled to have the interest, additional charges, and fine amount waived.

(2) If a person registered for Value Added Tax has, in the past, carried out taxable transactions and collected the tax but has not filed the tax return, such person shall, by filing the tax return up to Chaitra month of Sambat 2082 by end of Poush month of Sambat 2083 and depositing the tax as per the return and one percent of such amount as an additional amount, be entitled to have the interest, additional charges, and fine amount waived.

Compliance Steps Required by the Taxpayer

In order to avail this special concession, the taxpayer must have fulfilled the following compliance steps:

• The taxpayer must be a person registered for Value Added Tax (VAT).

• The taxpayer must have carried out taxable transactions in the past but either not collected and deposited tax, or collected tax but not filed tax returns.

• The taxpayer must have mandatorily filed the Value Added Tax return up to Chaitra month of Sambat 2082.

• The principal tax amount as per the said return and an additional one percent (1%) of that amount must have been mandatorily deposited by end of Poush month of Sambat 2083.

• The taxpayer must mandatorily submit an application to the concerned Inland Revenue Office to avail this facility.

Relevant Illustrative Examples

Example 1 (In the case of a taxpayer who has not collected or deposited tax):

"Nepal Electricals", registered for VAT, had sold goods to certain customers in F.Y. 2081/82 without issuing VAT bills, due to which Rs. 50,000.00 VAT had been omitted from the government account. If the said company deposits the return for that period, the principal tax of Rs. 50,000.00, and the 1% additional amount of Rs. 500.00, totalling Rs. 50,500.00, in the revenue account by end of Poush month of Sambat 2083, the entire interest, additional charges, and fine amount applicable on the company shall be fully waived.

Example 2 (In the case of a taxpayer who collected tax but did not file return):

"Global Trading Company" had, when selling goods in Magh month of Sambat 2081, collected Rs. 1,00,000.00 tax from customers. However, the company had not filed the tax return (VAT Return) for the same. Under this scheme, if the company enters (Submits) the tax return for that period in the system and deposits the principal tax of Rs. 1,00,000.00 and the 1% additional amount (Rs. 1,000.00), totalling Rs. 1,01,000.00, and submits an application by end of Poush month of Sambat 2083, the interest, additional charges, and fine amount for late filing of the return shall be fully waived and the company's accounts shall be regularised.

12) Regarding Waiver of Value Added Tax on Cheese (Section 42)

Legal Provision

Value Added Tax remaining to be paid on past sales of cheese made from milk that has not been collected from consumers shall be waived.

Compliance Steps Required by the Taxpayer

In order to avail this special concession (scheme), the taxpayer must have fulfilled the following compliance steps:

• The transaction must be that of an industry or commercial establishment registered for or within the taxable scope of Value Added Tax (VAT).

• The goods for which waiver is claimed must mandatorily be cheese (Cheese) made from milk.

• The true and actual situation must be that Value Added Tax has not been collected from customers or consumers on past sales of the said cheese.

Relevant Illustrative Examples

Example 1 (In the case of waiver of tax outstanding of a dairy industry):

"Kanchanjangha Dairy Industry" had, when selling cheese produced from milk in the local market in F.Y. 2081/82, not collected Value Added Tax from customers. The Inland Revenue Office had, upon tax assessment in Chaitra month of Sambat 2082, determined an outstanding VAT amount of Rs. 2,00,000 on the said cheese sales. Since the Rs. 2 lakh VAT had not been collected from customers and remained to be paid, it shall be fully waived under this facility, and the industry shall not be required to deposit the said tax.

Example 2 (In the case where tax has already been collected - this provision shall not apply):

"Kathmandu Food Mart" had, when selling cheese in Baishakh month of Sambat 2082, issued VAT bills to customers and formally collected Rs. 50,000.00 VAT from them. However, the said tax remained to be deposited to the government account. Since this provision applies only for tax that has "not been collected" from customers, the said mart shall not be entitled to a waiver on the Rs. 50,000.00 tax that has already been collected from customers. That amount must be deposited.

13) Special Provision Relating to Waiver of Excise Duty Fine and Late Fee (Section 43)

Legal Provision

(1) If any person who has obtained or not obtained a licence under the Excise Duty Act, 2058, has in the past carried out transactions in excisable goods and has not collected and deposited excise duty, such establishments, by filing the return they are required to file themselves under Section 10(ka) of the said Act and depositing the excise duty amount as per the said return and one percent of such amount by end of Poush month of Sambat 2083, shall be entitled to have the late fee and fine applicable thereon waived.

(2) A licence-holder who has obtained a licence under the Excise Duty Act, 2058, but has not renewed the licence within the prescribed period and wishes to give continuity to their transaction, if they deposit the fee payable for renewal for Financial Year 2082/83 and renew by end of Ashoj month of Sambat 2083, the renewal fee and fine applicable for the remaining financial years shall be waived. The licence of a licence-holder who does not renew within the said period shall be automatically cancelled.

Compliance Steps Required by the Taxpayer

In order to obtain a waiver of excise duty fines, late fees, and old renewal fees under this provision, the licence-holder or business person must have fulfilled the following compliance steps:

In the case of those who have not filed excise duty returns - Sub-section (1):

• Both types of business persons - whether or not they have obtained a licence under the Excise Duty Act - shall be entitled to participate.

• The outstanding excise duty return (under Section 10ka) must be filed and the principal excise duty amount and an additional 1% (one percent) thereof must be deposited to the revenue account.

• The entire amount must be deposited and an application submitted by end of Poush month of Sambat 2083.

In the case of licence renewal - Sub-section (2):

• The excise duty licence (License) must not have been renewed within the prescribed period in past years.

• If they wish to give continuity to their transaction, they must deposit the fee payable for the Financial Year 2082/83 renewal.

• The renewal fee and fine for Financial Year 2082/83 must be deposited and an application submitted by end of Ashoj month of Sambat 2083 (if the deadline passes without renewal, the licence shall be automatically cancelled). If they come to renew the licence after the exemption period, the renewal fee and fine for all remaining periods up to the current date shall be applicable.

Relevant Illustrative Examples

Example 1

"AB Industries" had obtained an excise duty licence on Shrawan 2 of Sambat 2082 and had been carrying on business. From the said date till date, the said industry had not collected or deposited excise duty and had also not filed excise duty returns. The taxpayer has a calculated liability of the total excise duty return-based amount for all 8 monthly returns from Bhadau month of Sambat 2082 to Chaitra month of Sambat 2082 of Rs. 1,26,431.00, late fee (LP) of Rs. 4,156.00, and fine (LF) of Rs. 8,000.00, totalling Rs. 1,38,587.00, remaining to be deposited. In such a situation, the taxpayer must file the excise duty return for all 8 months from Bhadau month of Sambat 2082 to Chaitra month of Sambat 2082 and submit an application to the office in the prescribed format after depositing the excise duty amount as per the return of Rs. 1,26,431.00 and one percent of such amount of Rs. 1,246.31 together. The office must examine and decide on the said application and grant the exemption facility as per the Act. In the case of taxpayers who have not obtained a licence, they must also submit an application for licence registration according to the rules.

Example 2

"Prem Timilsina" had, on Bhadau 13 of Sambat 2069, registered "Navin Hotel" at Sanoshi Municipality, Lalitpur, Ward No. 6, and had obtained an excise duty licence for a hotel, restaurant, lodge, and bar (outside the Valley) for liquor sale and distribution. Till date, they had not renewed the excise duty licence. In such a situation, in accordance with the Excise Duty Act, 2058, the excise duty renewal fee and fine payable on the excise duty renewal is as follows:

To participate in availing the exemption facility under Section 43(2) of the Finance Act, 2083, if the participant deposits the licence fee as shown below for renewal for Financial Year 2082/083, the renewal fee and fine for the remaining financial years shall be waived.

14) Special Provision Relating to Waiver of Interest and Fees for Persons Who Filed Returns but Have Outstanding Tax and Excise Duty (Section 44)

Legal Provision

If persons who have filed Value Added Tax returns, income returns, and excise duty returns under the Value Added Tax Act, 2052; Income Tax Act, 2058; and Excise Duty Act, 2058, and who still have outstanding Value Added Tax, income tax, and excise duty remaining to be deposited till Jestha 15 of Sambat 2083, deposit the outstanding tax and excise duty amount as per such returns and one percent of such amount as an additional amount by end of Poush month of Sambat 2083, the fee, additional charges, fine, interest, and late fee applicable thereon shall be waived.

Compliance Steps Required by the Taxpayer

In order to obtain a waiver of fines and interest on outstanding VAT (Value Added Tax), income tax (Income Tax), and excise duty (Excise) under this provision, the taxpayer must have mandatorily fulfilled the following compliance steps:

• The taxpayer must have mandatorily filed (Filed) their respective Value Added Tax return, income return, or excise duty return in the integrated tax system of the Inland Revenue Office.

• The tax or excise duty amount as per such filed returns must have been outstanding (Outstanding Payable) remaining to be deposited till Sambat 2083 Jestha 15.

• The actual principal tax or excise duty (principal) amount remaining to be deposited per the return and one percent (1%) additional of such principal amount must be deposited to the revenue account.

• The entire principal amount and the additional 1% amount must mandatorily be deposited by end of Poush month of Sambat 2083.

Relevant Illustrative Examples

Example 1 (In the case of outstanding VAT):

A construction materials supplier company had regularly filed VAT returns (VAT Return) for various months of F.Y. 2081/82. However, because the money had not been collected from the market, a VAT amount of Rs. 10,00,000.00 remained to be deposited to the government. Till Sambat 2083 Jestha 15, the said amount had not been deposited, and with accumulated interest and fine, the total liability had reached Rs. 13,50,000.00. According to this provision, if the said company deposits the VAT principal of Rs. 10,00,000.00 as per the return and 1% additional of Rs. 10,000.00, totalling Rs. 10,10,000.00, by end of Poush month of Sambat 2083, the entire fine and interest of the remaining Rs. 3,40,000.00 shall be automatically waived.

Example 2 (In the case of outstanding income tax):

A technical services provider company had, when filing its annual income return (Self-Assessment Return) for F.Y. 2080/81, shown business income tax of Rs. 5,00,000.00. However, it had not deposited the said tax due to a financial crisis. According to the new provision: if the company deposits the determined income tax principal of Rs. 5,00,000.00 and the 1% additional amount (Rs. 5,000.00), totalling Rs. 5,05,000.00, by end of Poush month of Sambat 2083, the entire fee and interest applicable for late payment under the Income Tax Act shall be fully waived.

15) Special Provision Relating to Waiver of Fees, Additional Charges, and Fine Upon Filing Outstanding Amounts Created Through Tax Assessment (Section 45)

Legal Provision

1) If persons for whom VAT, income tax, or excise duty assessment, amended tax assessment, or excise duty assessment has been made by the Inland Revenue Department or offices thereunder by Jestha 15 of Sambat 2083 under the Value Added Tax Act, 2052; Income Tax Act, 2058; and Excise Duty Act, 2058, and who have outstanding amounts remaining to be filed, deposit the outstanding VAT, income tax, and excise duty amount and one percent of such amount as an additional amount by end of Poush month of Sambat 2083, the fee, additional charges, fine, and remaining interest or late fee applicable thereon shall be waived.

2) Notwithstanding anything contained in Sub-section (1), the provision under that sub-section shall not apply to persons engaged in telecommunications service business.

Compliance Steps Required by the Taxpayer

In order to avail this special concession (scheme), the taxpayer must have fulfilled the following compliance steps:

• The tax assessment, amended tax assessment, or excise duty assessment must have been completed from the Inland Revenue Department or its subordinate offices by Sambat 2083 Jestha 15.

• The taxpayer must be a person from a sector other than telecommunications service business (Telecom Operators).

• The principal tax (principal) amount remaining to be filed from the assessed tax must be fully filed by end of Poush month of Sambat 2083.

• One percent (1%) additional of the said principal tax amount remaining to be filed must also be mandatorily deposited to the revenue account by end of Poush month of Sambat 2083.

• To avail this facility, the taxpayer must submit an application to the concerned Inland Revenue Office after depositing the amount.

Relevant Illustrative Examples

Example 1 (In the case of tax assessment outstanding of a commercial company):

"Everest Trading Pvt. Ltd." had, when auditing its F.Y. 2080/81 tax accounts, received an amended tax assessment order from the Large Taxpayer Office in Baishakh of Sambat 2083 (before Jestha 15) with a total of Rs. 14,50,000.00 consisting of principal tax of Rs. 10,00,000.00 and additional interest and fee of Rs. 4,50,000.00, which the company had kept remaining to be deposited. Since this company is a non-telecom business, if it deposits a total of Rs. 10,10,000.00 consisting of the principal tax of Rs. 10,00,000.00 and 1% additional amount (Rs. 10,000.00) by end of Poush month of Sambat 2083, the Rs. 4,50,000.00 equivalent of interest and fee applicable thereon shall be automatically waived.

Example 2 (In the case of a telecommunications company - facility not applicable):

A telecommunications service provider (Telecom) company had VAT assessed from the tax office in Baishakh of Sambat 2083 with a principal tax of Rs. 50,00,000.00 and fine/interest of Rs. 20,00,000.00, totalling Rs. 70,00,000.00. Since it has been stated that "this provision shall not apply in the case of persons engaged in telecommunications service business", this company shall not be able to avail the facility of depositing 1% additional and getting the fine and interest waived, and it shall be required to make the full determined payment according to the rules.

16) Special Provision Relating to Waiver of Fees, Additional Charges, and Fine Upon Filing Tax After Withdrawing a Pending Case (Section 46)

Legal Provision

(1) If persons for whom tax assessment, amended tax assessment, or excise duty assessment has been made under the Value Added Tax Act, 2052; Income Tax Act, 2058; and Excise Duty Act, 2058, by the Inland Revenue Department or offices thereunder by Jestha 15 of Sambat 2083, and who, not accepting such assessment, have pending cases in administrative review before the Inland Revenue Department or any judicial body, withdraw such cases and deposit the Value Added Tax, income tax, and excise duty amount determined from such assessment and one percent of such amount as an additional amount by end of Poush month of Sambat 2083, the fee, additional charges, fine, interest, and late fee applicable thereon shall be waived.

(2) In the case of cases where the Government of Nepal has obtained permission to appeal to the Supreme Court or has applied for the case to be reheard and such application is pending before the Supreme Court, if the concerned taxpayer deposits the disputed tax amount and one percent of such amount by end of Poush month of Sambat 2083 and submits an application for withdrawal to the Department or concerned office, the Government of Nepal may withdraw such case.

(3) Even in the case of cases where permission to appeal to the Supreme Court has not been obtained but where re-assessment by the concerned office has not yet been completed, such persons may also, by depositing the disputed tax amount and one percent of such amount and submitting an application by end of Poush month of Sambat 2083, obtain the facility under Sub-section (1).

(4) Notwithstanding anything else written in this section, the exemption facility provisions under Sub-sections (1), (2), and (3) shall not apply to persons engaged in telecommunications service business.

Compliance Steps Required by the Taxpayer

In order to avail this special facility, the taxpayer must have mandatorily fulfilled the following compliance steps:

• The Value Added Tax, income tax, or excise duty tax assessment, amended tax assessment, or excise duty assessment must have been completed by Sambat 2083 Jestha 15.

• The taxpayer must have filed a case against the said tax assessment order in administrative review, Revenue Tribunal, or High Court or Supreme Court and the said case must currently be pending (Pending).

• The taxpayer must have submitted an application to the concerned judicial or quasi-judicial body (court/tribunal/department) to withdraw the case and must have obtained an official copy of the said application.

• The principal tax (principal) amount determined and one percent (1%) additional of that amount must have been mandatorily deposited to the revenue account by end of Poush month of Sambat 2083.

• An official application (application) must have been submitted with a copy of the case withdrawal application and bank deposit voucher to the concerned Inland Revenue Office by end of Poush month of Sambat 2083.

Relevant Illustrative Examples

Example 1

"KC and Associates's" construction business had, upon tax audit, had a VAT assessment made by the office in Mangsir of Sambat 2072 with a principal tax of Rs. 10,00,000.00 and Rs. 8,00,000.00 in interest/fine. The company had filed a case in the Revenue Tribunal not accepting the tax assessment, and the said case is pending. If the taxpayer, by end of Poush month of Sambat 2083, withdraws the case from the Tribunal and deposits the principal tax of Rs. 10,00,000.00 and 1% additional of Rs. 10,000.00, totalling Rs. 10,10,000.00, the Rs. 8,00,000.00 in fine and interest applicable on him shall be fully waived.

Example 2 (In the case of excise duty dispute and case withdrawal - Sub-section (2)):

"Mechi Distillery Pvt. Ltd." had, on the matter of excise duty calculation, had Rs. 15,00,000.00 in excise duty principal and Rs. 12,00,000.00 in other fees, charges, fines, and interest assessed by the Inland Revenue Office Bhadrapur in Sambat 2082, against which the concerned industry had filed a case in the Supreme Court and the said case currently remains pending. If the industry, with proof of having withdrawn the case from the Supreme Court (copy of application), deposits by end of Poush month of Sambat 2083 the principal excise duty of Rs. 15,00,000.00 and 1% additional amount (Rs. 15,000.00), totalling Rs. 15,15,000.00, the Rs. 12,00,000.00 in fine and interest applicable on it shall be fully waived.

17) Special Provision Relating to Income Tax, Interest, and Fee Exemption for Nepalis or Resident Persons Employed in the United Nations, International Organisations, or Diplomatic Missions (Section 47)

Legal Provision

Resident persons who are employed in the office of the United Nations in Nepal or organisations under such organisation, or any other international body with recognised diplomatic status, or a foreign diplomatic mission, without being entitled to an exemption facility under the Vienna Convention, who have received payment as remuneration or service fees from such bodies but have not filed income returns or deposited income tax as required by the Income Tax Act, 2058, upon obtaining a Permanent Account Number and filing income returns and depositing the income tax applicable on income from Financial Year 2079/80 to 2082/83 and one percent of such amount as an additional amount by end of Mangsir month of Sambat 2083 and submitting an application, the interest and fees shall be waived. Such persons shall also not be required to file income returns for prior years and deposit the applicable tax, fee, and interest.

Compliance Steps Required by the Taxpayer

In order to avail this special facility, the taxpayer must have mandatorily fulfilled the following compliance steps:

• The taxpayer must be a Nepali citizen or resident person as per Nepal's law employed in offices of the United Nations (UN), its specialised missions, other international organisations, or foreign diplomatic missions (embassies).

• The taxpayer's appointment or service terms must not be those of a diplomatic representative entitled to an exemption under the Vienna Convention.

• There must be a situation where, in the past, income tax and tax returns on remuneration or service fees have remained to be deposited for some reason.

• The taxpayer must mandatorily prepare and file income returns for Financial Years 2079/80 to 2082/83 (a total of 4 financial years).

• The principal income tax on the 4-year returns and one percent (1%) additional of such tax must be mandatorily deposited to the revenue account by end of Mangsir month of Sambat 2083. Persons without a Permanent Account Number shall be entitled to obtain a new Permanent Account Number (PAN) from the nearest Inland Revenue Office.

Relevant Illustrative Examples

Example 1 (In the case of an employee who wishes to come within the tax scope regularly):

Hari Kumar Sharma has been working as a local employee at a European embassy in Kathmandu for the past 10 years. According to the Vienna Convention, he is not entitled to a tax exemption facility, and the embassy has also not withheld tax (TDS) when paying his remuneration. Hari Kumar had not obtained a PAN till date and had also not paid tax. If Hari Kumar obtains a PAN number and files income returns for F.Y. 2079/80, 2080/81, 2081/82, and 2082/83 and deposits the principal income tax and 1% additional amount for the 4 years by end of Mangsir month of Sambat 2083, all old income tax and interest applicable on him shall be waived, and he shall be fully legally freed from the obligation to file returns and deposit tax for the 6 years prior to F.Y. 2079/80.

Example 2 (In the case of a consultant or diplomatic mission project staff):

Sita Kumari Bamal had, in F.Y. 2080/81 and 2081/82, worked as a Consultant under a project of a specialised mission (UN Agency) of the United Nations and received service fees, but since she had no diplomatic exemption, her income was taxable. However, she had not declared that income and had also not paid tax. If Sita files the income return for the specified period (F.Y. 2079/80 to 2082/83) and deposits the principal tax and 1% additional amount by end of Mangsir month of Sambat 2083, the entire interest and fee applicable for late filing of returns shall be waived.

18) Special Provision Relating to Waiver of Fine, Additional Charges, and Interest on Fees, Charges, or Taxes Payable Under Annual Finance Acts (Section 49)

Legal Provision

(1) If a person who has an obligation to deposit any fee, charge, or tax under an annual Finance Act has not deposited such fee, charge, or tax, or has deposited less, or has not filed any return required to be filed under the Act, and deposits the outstanding tax or fee or charge amount, one percent of such amount as an additional amount, and the return by end of Mangsir month of Sambat 2083, the fine, interest, additional charges, and fee applicable thereon shall be waived.

(2) In relation to Sub-section (1), if the concerned office has assessed and established an outstanding amount of such fee, charge, or tax, or a case has been filed and is pending in any court or judicial body, if the concerned person withdraws the case and deposits the determined fee or charge or tax amount and one percent of such amount as an additional amount by end of Mangsir month of Sambat 2083, the fine, interest, additional charges, and fee applicable thereon shall be waived.

Compliance Steps Required by the Taxpayer

In order to avail this special concession, the taxpayer must have fulfilled the following compliance steps:

• There must be a situation of not having deposited any fee, charge, or tax payable under any annual Finance Act in the past, of having deposited less, or of not having filed required returns.

• The concerned tax office must have assessed (Assessment) such fee, charge, or tax and established an outstanding amount, or a case must have been filed and currently be pending (Pending) in any court or judicial body.

• The taxpayer must mandatorily have withdrawn (Withdraw) the pending case in any court or judicial body relating to tax.

• The principal tax, fee, or charge (principal amount) remaining to be deposited, or determined by the tax office, and one percent (1%) additional of such principal amount must have been mandatorily deposited by end of Mangsir month of Sambat 2083.

• The returns remaining to be filed under Sub-section (1) must also have been submitted by end of Mangsir month of Sambat 2083.

Relevant Illustrative Examples

Example 1 (In the case of Telecommunications Service Charge - TSC):

A telecommunications service provider company "Nepal Telelink (fictitious name)" had, in past years, omitted to deposit the Telecommunications Service Charge (Telecommunication Service Charge - TSC) to be collected from customers as per the rules; or the concerned Inland Revenue Office had, upon tax audit, determined an additional charge of Rs. 50,00,000.00 stating that less had been deposited. The company, not accepting the determination, is pending in the Revenue Tribunal, and with accumulated fine and interest, the total amount has reached Rs. 85,00,000.00. According to this provision (under Sub-section 2), if the said company withdraws its case from the court or judicial body and deposits by end of Mangsir month of Sambat 2083 the principal charge (principal) of Rs. 50,00,000.00 and one percent additional of such amount of Rs. 50,000.00, totalling Rs. 50,50,000.00, the remaining Rs. 34,50,000.00 equivalent of all fine, interest, additional charges, and fees shall be fully waived.

(Note: Although Sections 45 and 46 have imposed restrictions on telecommunications service providers, this facility may be availed under the special annual Finance Act provision of Section 49.)

Example 2 (In the case of Electronic Service Tax - DST payable by a non-resident person):

A foreign (non-resident) technology company "Texas Pvt. Ltd. (fictitious name)" providing online advertising or cloud services in Nepal had not filed the Electronic Service Tax (Digital Service Tax - DST) return as required by the provision of the Finance Act (annual act), or had deposited less than its actual tax liability. According to this provision (under Sub-section 1), if the said non-resident technology company deposits by end of Mangsir month of Sambat 2083 the actual principal Electronic Service Tax (DST) remaining to be deposited by it, the tax return (Tax Return) for the digital transaction for that period, and one percent additional of such tax principal into Nepal's revenue account, all fines, interest, and additional fees for not filing returns or for depositing less tax under the Act shall be automatically and fully waived.

Public Notice Issued by the Inland Revenue Department on 2083.05.22 to Clarify Ambiguous Matters Encountered in Implementation of Tax Exemptions, Concessions, and Facilities Under Finance Act, 2083

Public Notice Issued to Clarify Ambiguous Matters Encountered in Implementation of Tax Exemptions, Concessions, and Facilities Under Finance Act, 2083.

Regarding the ambiguities encountered in the implementation of various tax exemptions and concessions provided by the Finance Act, 2083, the following clarifications have been made on the matters set out below, based on the decision of the Ministry of Finance, Government of Nepal, dated 2083.05.12. All concerned stakeholders are hereby requested to take note.

1. Regarding whether Section 44 of the Finance Act, 2083, is attracted in relation to TDS Payable amounts:

Section 44 of the Finance Act, 2083, provides that persons who have filed Value Added Tax returns, income returns, and excise duty returns under the Value Added Tax Act, 2052; Income Tax Act, 2058; and Excise Duty Act, 2058, and who have outstanding Value Added Tax, income tax, and excise duty remaining to be deposited till Jestha 15 of Sambat 2083, shall have the fee, additional charges, fine, interest, and late fee applicable thereon waived if they deposit the outstanding tax and excise duty amount as per such returns and one percent of such amount as an additional amount by end of Poush month of Sambat 2083. In this regard, a question has arisen as to whether the said section is attracted in relation to the TDS Payable amount - i.e., advance tax withheld at the source of payment as per the income return filed by a person but remaining to be deposited:

The provision under Section 44 of the Finance Act, 2083, relates to amounts remaining to be deposited as per filed VAT returns, income returns, and excise duty returns. Since any amount of advance tax withheld at the source of payment remaining to be deposited would be clearly specified as a payable liability in the financial statements and income return; and since the amount so withheld also constitutes income tax itself and remains as an amount to be deposited as per the filed income return; taxpayers may, availing the facility prescribed under Section 44 of the Finance Act, 2083, set off (shiropar) the advance tax withheld amount as shown as payable in the income return against that outstanding liability.

2. Regarding the doubt as to whether the facility under Section 44 of the Finance Act, 2083, is available in relation to advance tax amounts remaining to be deposited under Section 95(ka) of the Income Tax Act, 2058:

Since the advance tax amount remaining to be deposited under Section 95(ka) of the Income Tax Act, 2058, as per the financial statements that form an integral part of the income return, also constitutes income tax itself and remains as an amount to be deposited as per the return, the facility under Section 44 of the Finance Act, 2083, shall be attracted in relation to amounts remaining to be deposited for persons who have fulfilled the conditions under Section 44 of the Finance Act, 2083, and filed returns but have amounts remaining to be deposited.

3. Regarding whether the facility under Section 46 of the Finance Act, 2083, is available where a taxpayer has withheld advance tax from payments as per their income return but has not deposited it, and an office has demanded such amount under Section 90 of the Income Tax Act, 2058, and the taxpayer has appealed to a judicial body and the matter is pending:

Amounts to be deposited under Sections 90 and 95(ka) of the Income Tax Act, 2058, also constitute income tax itself. In cases where advance tax was collected under Section 90 but not deposited, or advance tax was collected under Section 95(ka) but not deposited, and as a result the tax administration has issued a tax assessment order/notice demanding such amount under Section 90(8) and Section 95(ka)(15) of the same Act - if such amount remains to be deposited, the facility under Section 45 of the Finance Act, 2083, shall be attracted; and even if the taxpayer has gone to administrative review or judicial appeal against such order, the facility under Section 46 of the Finance Act, 2083, may also be availed.

4. Regarding the doubt as to whether, where an office has demanded under Section 90 of the Income Tax Act, 2058, the advance tax withheld from payments, or has demanded advance tax under Sub-section (15) of Section 95(ka), and the taxpayer, not accepting such demand, is in administrative review or judicial proceedings before the Inland Revenue Department, whether such taxpayer may withdraw the case and avail the facility under Section 46 of the Finance Act, 2083:

Section 46 of the Finance Act, 2083, contains a special provision relating to waiver of fees, additional charges, and fines where tax is filed after withdrawing a pending case, providing that persons who, not accepting an amended tax assessment, have pending cases in administrative review before the Inland Revenue Department or any judicial body, upon withdrawing such cases and depositing the income tax determined from such assessment and one percent of such amount by end of Poush month of Sambat 2083, the fee and interest applicable thereon shall be waived. In this regard, a doubt has arisen as to whether, where an office has demanded under Section 90 of the Income Tax Act, 2058, the advance tax withheld from payments, or has demanded advance tax under Sub-section (15) of Section 95(ka), and the taxpayer, not accepting such demand, is in administrative review or judicial proceedings before the Inland Revenue Department or any judicial body - whether such taxpayer may withdraw the case and avail the facility under Section 46 of the Finance Act, 2083:

In cases where a tax officer has, under Section 90 of the Income Tax Act, 2058, assessed withholding tax that was collected but not deposited, or that was not withheld at all, and has issued a tax assessment order/notice demanding such amount under Sub-section (8) of the same section from the tax administration - if such amount remains to be deposited, the facility under Section 45 of the Finance Act, 2083, shall be attracted; and even if the taxpayer has gone to administrative review or judicial appeal against such order/notice, the facility under Section 46 may also be availed.

5. Regarding the doubt as to whether Sections 45 and 46 of the Finance Act, 2083, attract assessments made by the Revenue Investigation Department, given that those sections refer to assessments made by the Inland Revenue Department or offices thereunder:

Sections 45 and 46 of the Finance Act, 2083, refer to tax assessment, amended tax assessment, or excise duty assessment made by the Inland Revenue Department or offices thereunder by Jestha 15 of Sambat 2083 under the Value Added Tax Act, 2052; Income Tax Act, 2058; and Excise Duty Act, 2058. A doubt has been found to arise as to whether assessments made by the Revenue Investigation Department would also fall under such sections, since the said sections refer to assessments made by the Inland Revenue Department or offices thereunder:

Since the Revenue Investigation Department exercises delegated authority under the Value Added Tax Act, 2052, and the Excise Duty Act, 2058, and makes tax assessments by exercising that delegated authority, the provisions of Sections 45 and 46 of the Finance Act, 2083, shall also be attracted to decisions of tax assessment made by the said Department.

6. Regarding the doubt arising from the language used in Section 46 of the Finance Act, 2083 - specifically whether "not accepting the assessment" refers to a preliminary or final assessment - and whether a person in administrative or judicial review of even an initial assessment may withdraw the case and avail the Section 46 facility:

Section 46 of the Finance Act, 2083, provides that persons for whom tax assessment, amended tax assessment, or excise duty assessment has been made by the Inland Revenue Department or offices thereunder by Jestha 15 of Sambat 2083 under the Value Added Tax Act, 2052; Income Tax Act, 2058; and Excise Duty Act, 2058, and who, not accepting such assessment, have pending cases in administrative review before the Inland Revenue Department or any judicial body, upon withdrawing such cases and depositing the VAT, income tax, and excise duty amount determined from such assessment and one percent of such amount by end of Poush month of Sambat 2083, the fee, additional charges, fine, interest, and late fee applicable thereon shall be waived. Here, since the language "not accepting the VAT assessment under the Value Added Tax Act, amended tax assessment under the Income Tax Act, and excise duty assessment under the Excise Duty Act" has been used, a doubt has been created as to whether the meaning of that is an assessment made before providing a hearing opportunity under the relevant Act, or an assessment made after providing a hearing opportunity - and thereby, whether a person who is in administrative review or judicial review of even an initial tax assessment may withdraw the case and be included within the facility under Section 46:

Since the provision states "not accepting a tax assessment, amended tax assessment, or excise duty assessment made by the Inland Revenue Department or offices thereunder by Jestha 15 of Sambat 2083 under the Value Added Tax Act, 2052; Income Tax Act, 2058; and Excise Duty Act, 2058...", in the case of any tax assessment - whether preliminary or final - where the taxpayer has not accepted and has gone to administrative review or appeal stage, the taxpayer shall be entitled to avail the facility within the provisions stated in the said section.

7. Regarding the doubt as to whether a person in administrative or judicial review of even an initial fee, charge, or tax assessment may withdraw the case and be included within the facility under Section 49, given the language used in Sub-section (2) of Section 49 of the Finance Act, 2083:

Sub-section (2) of Section 49 of the Finance Act, 2083, in relation to Sub-section (1), provides that: "Where such fee, charge, or tax has been assessed by the relevant office and an outstanding amount has been established, or where a case has been filed and is pending in a court or judicial body, if the concerned person withdraws the case and deposits the determined fee or charge or tax amount and one percent of such amount as an additional amount by end of Mangsir month of Sambat 2083, the fine, interest, additional charges, and fee applicable thereon shall be waived." Here, since the language "not accepting the fee, charge, or tax assessment under the annual Finance Act" has been used, a doubt appears to have arisen as to whether the meaning of that is an assessment made before providing a hearing opportunity under the law, or an assessment after providing a hearing opportunity (a "final tax assessment" in ordinary parlance). As a result, it is found that a doubt has been created as to whether a person who is in administrative review or judicial review of even an initial fee, charge, or tax assessment may withdraw the case and be included within the facility under Section 49:

Sub-section (2) of Section 49 of the Finance Act, 2083, states: "In relation to Sub-section (1), where such fee, charge, or tax has been assessed by the relevant office and an outstanding amount has been established, or a case has been filed and is pending in a court or judicial body, if the concerned person withdraws the case and deposits the determined fee or charge or tax amount and one percent of such amount as an additional amount by end of Mangsir month of Sambat 2083, the fine, interest, additional charges, and fee applicable thereon shall be waived." That is, the phrase "where such fee, charge, or tax assessment has been made by the relevant office and an outstanding amount has been established, or where a case has been filed and is pending in a court or judicial body not accepting such fee, charge, or tax assessment" clearly denotes the situation where either an outstanding amount has been established, or - even without an outstanding amount being established - the concerned person has not accepted the assessment of such fee, charge, or tax and has filed a case in a court or judicial body. That is, where such fee, charge, or tax assessment has been taken to a court or judicial body in the form of a case and the case is withdrawn, the facility within the provisions stated in the said section may be availed.

Finance Act, 2083: Informational Handbook on Tax Exemptions, Concessions, and Other Provisions