business tax in Nepal

Starting and running a business in Nepal is exciting — but managing taxes can often feel complicated. Whether you’re a small business owner or an emerging startup, understanding the basic tax laws in Nepal can save you both time and money. While complex tax issues should always be handled by professional accountants or tax consultants, having a clear idea of key tax obligations helps you make better business decisions and stay compliant with the Inland Revenue Department (IRD). Here are the five most important tax facts every entrepreneur in Nepal should know in 2025 1. Advance Tax in Nepal If your estimated annual tax liability (after adjusting for withholding tax) is Rs. 5,000 or more, you’re required to pay advance tax. Installment Schedule (as per IRD Nepal): The total estimated tax should be at least 90% of the actual tax payable for the year.Missing the deadline can result in 15% per annum interest under Section 118 of the Income Tax Act, 2058. 2. Withholding Tax (TDS) in Nepal Withholding Tax (TDS) means tax deducted at the source — the payer deducts tax from payments and remits it to the IRD. Under Sections 87–89 of the Income Tax Act, 2058, resident payers must withhold tax on certain payments made within Nepal. Type of Payment Tax Rate Salary As per slab rate Services (VAT invoice) 1.5% Services (without VAT invoice) 15% Interest (Bank to Individual) 5% Rent 10% Contract Payments (> Rs. 50,000 within 10 days) 1.5% Dividend 5% Insurance Investment Gain 5% Unapproved Retirement Fund Gain 5% Proper TDS deduction ensures compliance and prevents penalties during audits. 3. Filing Income Tax Return in Nepal As per Section 99 of the Income Tax Act, businesses must file their income tax return within 3 months from the end of the income year. 🔹 Extension: You can request up to 3 more months by submitting a written application to the IRD before the deadline. 🔹 Penalty for Late Filing (Section 117): Filing returns on time improves your business credibility and is essential for future loan approvals or government registrations. 4. Income Tax Rates in Nepal (2025) Tax rates are specified under Schedule 1 of the Income Tax Act, 2058. For Individuals (Natural Persons): Progressive rates apply based on income brackets.(Example: lower rates for lower income, higher rates for higher income.) For Businesses (Entities): A flat 25% tax rate generally applies unless your business qualifies for special rates (e.g., banking, insurance, or export-oriented businesses). 5. Value Added Tax (VAT) in Nepal VAT is charged at 13% on the sale of taxable goods and services.Registered businesses can claim input tax credit — meaning VAT paid on purchases can be adjusted against VAT collected on sales. VAT Return & Payment Deadline:Submit VAT returns and pay VAT within 25 days after the end of each month or trimester, depending on your filing type. Failure to file or pay VAT on time can result in fines and interest charges from the IRD. Final Thoughts Understanding Nepal’s tax system helps entrepreneurs make better financial decisions and stay compliant. Paying advance tax on time, deducting TDS correctly, and filing returns regularly ensures your business runs smoothly without legal hassles. At Shark Vision Consulting, we help entrepreneurs and businesses in Nepal with: 📞 Contact Shark Vision Consulting today for reliable tax advice and compliance solutions tailored to your business.