The number of foreign companies providing electronic services in Nepal has reached 18.
Eighteen companies were registered according to the Nepal government's regulations of registering foreign companies doing electronic businesses in Nepal two years ago.
According to the Large Taxpayers Office, only nine were registered in the fiscal year (FY) 2079/80 BS, but this number soared to 18 in the last fiscal year.
Foreign companies did not pay taxes despite providing electronic services in Nepal for a long time. The Inland Revenue Department has tasked the Large Taxpayers Office to investigate the financial transactions of digital service provider companies.
"The number of electronic service provider companies has reached 18 in Nepal", Ramesh Aryal, Chief Tax Administrator of the Large Taxpayers Office, told Nepalkhabar, "A company pays 2 percent digital service tax and 13 percent value added tax (VAT) following registration in Nepal."
Now, the Ministry of Finance has implemented the Electronic Service Tax Procedure 2081 BS. It is mandatory for a company to obtain a permanent account number (PAN) before carrying out its businesses, but even if he is not registered, it will not be exempted from the obligation to pay tax according to the procedure.
Businesses with annual turnover exceeding Rs 2 million were subject to a 13% VAT rate during the fiscal years 2079/080 and 2080/081. However, starting from the current fiscal year, the VAT threshold has increased, requiring businesses with an annual turnover exceeding Rs 3 million to pay the 13% VAT.
Businesses with an annual turnover below Rs 3 million are exempt from VAT. However, foreign individuals or entities conducting electronic service transactions within Nepal are subject to a 2% tax.
In the last FY, those who carried out business with an annual turnover more than Rs 2 million had paid 13 percent VAT. International electronic service provider companies have started paying tax regularly.
Rs 365 million revenue collected, including Rs 171 mln from Meta
As of mid-July in the fiscal year 2080/81, the government had collected Rs 358 million 544 thousand from VAT and Rs 6 million 793 thousand from the electronic service tax.
"Rs 365 million, 337 thousand has been collected through VAT and DST," Tax Officer of Large Tax Payers Office, Ram Bahadur KC, told Nepalkhabar, " Facebook, Instagram, WhatsApp, and Threads, all Meta apps, have been the top revenue earners."
Rs 171 million in revenue has been generated from Meta platform alone. Google among those registered in the Large Taxpayers Office has paid Rs 50 million.
"TikTok has become the highest tax paying social media platform in Nepal. The government revenue also went down after it imposed a ban on it," Chief Tax Officer KC said, " The platform generated Rs 9 million in revenue in the fiscal year 2079/080 and saw a rise to Rs 13.3 million in the following fiscal year, 2080/081.
The government had imposed a TikTok ban in Nepal on November 13, 2023 and lifted it on August 22, 2024.
Electronic companies providing services like advertising, media content (films, songs, series), data storage, cloud computing, gaming, software development, e-commerce, software updates, data monetization, education, consulting, training, e-libraries, and mobile applications must pay taxes in Nepal.
Eighteen foreign tech giants registered in Nepal
Eighteen companies have been registered in Nepal till mid-July. According to the Large Taxpayers Office, Google Asia, NCS Person, LinkedIn, Meta Platform, Microsoft, Amazon Web Series, Amazon Service, Google Ireland, TikTok, Adobe System and Netflix are the electronic companies registered in Nepal.
Similarly, Zoho Corporation, Google Digital Inc, Prometric Japan Company, Ipsco International Inc, Apple Distribution International Limited, Pearson Education Limited, and Association of Chartered Certified Accountants are the other digital companies registered in Nepal.
