The government has decided to levy a two percent digital service tax in Nepal on electronic service transactions by non-residents to Nepali consumers. The ruling will be implemented as stated in the new Financial Bill 2080 which was recently released by the Ministry of Finance in the budget speech FY 2080/81 by the Finance Minister Dr. Prakash Sharan Mahat.
The bill mentions that no tax is to be imposed on the transaction of electronic services of up to Rs 20 lakh annually. The digital service tax was first introduced by the government through FY 2079/80 budget speech.
The bill holds that a person who provides electronic services in Nepal has to submit the details of the business and the tax as per the fiscal year. If failed to do so, the government will charge the individual or business 0.1% per annum of the annual transaction amount. If the tax is not filed within the specified period, the person will be charged a 15% interest rate per annum.
Digital service tax in Nepal includes ramifications for irregularities too
Likewise, if one posts less than the stated tax or conceals the details, a 50% fine will be slapped on the person against the concealed amount. The bill has already issued the Digital Service Tax Procedure, 2079 to implement the new policy.
The digital service tax includes businesses such as advertising, movies, television, music, over-the-top (OTT), cloud services, gaming, mobile apps, online markets, supply and updating of software, data, consultancy, skill development, and training. Services such as e-books, e-library, e-magazine, and other services are also covered by the procedure.
Previously, the government had shocked the public with its new provision on “online media”. Particularly, the government’s unclear definition of “online media” and the charges to start services drew wide criticism. It held a YouTube channel would require the owner to pay Rs.5 lakh for a license to the federal government. It has not been implemented to full effect yet.
With this bill, buying ads from social media, buying software, and subscribing to OTTs like Netflix will come within the purview of the federal tax.
What do you think of the government’s imposing a 2% digital service tax in Nepal and its effects on business? Do share your inputs in the comments below.