Taxation & Compliance 2025: What Every Nepal Business Needs to Know

The Fiscal Year 2081/82 (2025) Update

The Government of Nepal’s latest budget and Fiscal Act have introduced subtle but impactful changes to the tax regime. For businesses operating in Kathmandu, “Compliance” is the keyword of the year. The Inland Revenue Department (IRD) is digitizing faster than ever, meaning non-compliance is easily flagged.

1. Digital Service Tax (DST)

The 2% Digital Service Tax is now fully operational.

• Who Pays? Foreign digital service providers (Facebook, Google, Netflix) providing services to Nepali consumers.
• Why It Matters to You: If your business spends heavily on Facebook Ads or Google Cloud, ensure your invoices reflect these tax realities. You might not be liable to pay directly, but your “expense claim” for these ads needs to be audit-proof.

2. VAT Thresholds & Mandatory Billing

• Service Sector: If your annual turnover exceeds NPR 30 Lakhs (increased from 20 Lakhs), VAT registration is mandatory.
• Goods: The threshold remains NPR 50 Lakhs.
• Electronic Billing (CBMS): The IRD is expanding the mandatory Central Billing Monitoring System (CBMS) to more sectors, including restaurants and large retailers. If you are still using manual bills, consult a tax lawyer immediately to avoid penalties.

3. Section 57: Change in Control

This remains the biggest trap for startups and private companies.

• The Rule: If the ownership of a company changes by 50% or more over a rolling 3-year period, it is treated as a “Deemed Disposal” of assets.
• The Tax Hit: The company must re-value all assets and pay tax on the capital gain as if the company was sold.
• Advisory: Before transferring shares to new investors or partners, calculate your “Change in Control” percentage carefully.

4. Social Security Fund (SSF) is Non-Negotiable

While technically a labor law issue, it is now a tax issue.

• Tax Deduction: Contributions to SSF are deductible expenses.
• The Stick: The government is linking tax clearance certificates with SSF compliance. No SSF enrollment = No Tax Clearance = No Bank Loan.

Conclusion

Tax evasion in Nepal is becoming impossible due to integrated software systems (IRD + Company Registrar + Banks). Smart tax planning, however, is legal and necessary.

Disclaimer: Tax laws change with every budget speech. This article refers to the FY 2081/82 Fiscal Act.