January 14, 2021 | Mukunda Tripathee
For the purpose of paying tax, as per Income Tax Act 2058, taxpayers are classified into resident or non-residents status depending upon their economic interest to the reporting economy. A resident individual is a person who is mainly an inhabitant in a particular place or jurisdiction but has an interest in a different place. Individual who is classified by government authorities as a non-resident can be a resident (for tax purposes).
Generally, an individual who is residing in the country permanently is considered a resident. On the basis of domicile, if it is difficult to define the status of a person, then an individual is deemed to be a resident of a nation in which he has been abode.
A person who is a citizen of Nepal can be a non-resident of Nepal for income tax purposes, whereas a Chinese is a citizen of China can be a resident of Nepal for income tax purposes. Moreover, an individual can be resident in more than one nation at a time for income tax purposes.
On the basis of duration- an individual residing in Nepal for more than 182 days in any period of 365 consecutive days is also considered as a resident.
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Basis To Determine The Residential Status Of Taxpayer In Case Of Individuals
Define whether the taxpayer’s normal place of abode is in Nepal or not
As per the income tax act, the normal place of abode is defined as a place where major economic activities are carried out. So, having a citizen of Nepal s/he does not mean that person’s normal place of abode should be in Nepal. Suppose Mr. L.K Gurung’s permanent address is in the Kaski district of Nepal has been working in Hong Kong for the last 2 years. He has been remitting his earning to his family member who is residing in Nepal. In this case, Mr. Gurung is considered as a non-resident person for income tax purposes even though being a permanent resident of Nepal because his economic activity is out of Nepal.
Define whether the taxpayer’s resided in Nepal for 183 days or more during 365 consecutive days or not
If a person has been residing in Nepal more than 182 days and carried out economic activities is considered resident status for income tax purpose even though being a foreigner. Suppose Mr. Harry an American citizen arrived in Nepal on the 5th of Ashad, 2076, and stayed in Nepal till 12th Poush, 2077. Here Mr. Harry stayed 25 days in F/Y 2075/76, his status is a non-resident. Similarly, he stayed 162 in FY 2076/77, now his status is resident because he resided more than 182 days in total.
Define the taxpayer whether s/he is deputed by the Government of Nepal or not
If any government officials, who is posted abroad at any time during the income year by the government is considered a resident person whenever he stayed there. In the first case, suppose if Mr. L.K Gurung is a government officer and posted in Hong Kong by the government is considered as a residential.
The act has not precisely defined the non-resident. It is defined as a person who is not a resident person. The non-resident natural person does not get any exemption limit and the tax rate is 25% flat.
(Mr. Mukunda Tripathee is currently working in the banking sector.)
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