The Government Introduces Digital Service Tax in Nepal

The Digital Service Tax in Nepal will bring media giants like Twitter and Facebook under the purview of tax and regulation.

The government of Nepal has introduced the digital tax formally for the first time in its budget speech for FY 079/80. The economic bill brings social media giants such as Facebook, Twitter, TikTok, and Netflix within the jurisdiction of the government regulation and taxes. So far, large tech companies have run their services in Nepal without registration. That has evaded the government of billions of rupees annually.

Finance Minister Janadardhan Sharma mentioned in the budget speech that with this bill, any company providing electronic service in Nepal must submit details of the business and tax to continue services.

He also said that tax won’t be imposed on transactions of up to an annual Rs.200 million.

The bill also tries to redefine what it means to be an “electronic service”. As per the bill, these are the services based on ads, television, music, OTT movies, and membership for the income year.

 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.  

Besides the above-mentioned services, electronic services also include could, gaming, mobile app, data collection, and eCommerce services would also be taxed. In addition, software procurement, registration, data and image download, etc. are also taxable under this bill.

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.

Also read: Nepal Government to Tax Social Media and Regulate Them from FY 079/80

Digital Service Tax in Nepal for companies with over 2 million transactions annually

Companies with transactions of over 2 million annually, will require to update their details and pay taxes. The companies also need to register for Value Added Tax (VAT) as well.

If a company fails to pay its duties in time, the company will be charged 15% in a fine against its annual income. As for the failure to update their details, the bill stipulates a company will be charged 0.1% interest on its annual income.

The government has made some crucial provisions regarding tax and regulation on social media in the past. But due to clarity and coordination, most have failed to implement effectively. This bill from the budget speech for FY 079/80 does include fresh regulations and tax schemes on social media and media companies. Once they come into effect, the government could formally monitor them and earn revenues from their operations in Nepal.

What do you think of the government’s continued attempts at regulating social media in Nepal? Do share your opinion in the comments below.