Tax Changes In The Budget For Fiscal Year 2080/81
May 30, 2023 | Investopaper
The government has proposed changes to income tax rates and introduced new taxes in the latest budget statement for the financial year 2080/81. Individuals earning over 50 lakh rupees annually will now be subject to a higher income tax rate of 39 percent, while the lower income tax threshold remains unchanged. The current tax structure includes tax exemptions up to Rs. 5 lakhs for singles and Rs. 6 lakhs for couples, with progressive tax rates ranging from 10% to 36% for different income brackets. However, those earning more than 50 lakh rupees will now face an additional 3 percent tax, bringing their total tax rate to 39 percent.
A new “luxury tax” has been introduced, which entails a 2 percent tax on services provided by five-star hotels and luxury resorts, as well as imported alcohol, diamonds, pearls, and high-value jewelry.
Manpower companies sending workers abroad for employment will also be subject to a 1 percent tax.
Furthermore, individuals traveling abroad from Nepal will be required to pay an additional 5 percent tax, and students going for abroad study will need to pay a 3 percent tax. Companies sending employees on foreign tours will also be responsible for deducting taxes in advance. Previously, there was no additional tax on foreign visits, and students studying abroad paid a 2 percent tax.
The government has also made some exemptions and adjustments. Individuals who have contributed to the social security fund and returned from working abroad for at least 12 consecutive months will receive a customs duty exemption on any size television.
To support micro, domestic, and small-scale industries, a 1 percent customs duty has been set on imported mills and machinery used for production purposes.
Import duties on certain goods, such as cement, iron rods, iron pipes, plastic pipes, zinc sheets, and electric cables, have been increased to protect domestic production.
The government aims to incentivize foreign currency earnings from export-oriented services such as business process outsourcing, software programming, and cloud computing by offering a 50 percent discount on income tax. To bring non-residents selling electronic services in Nepal under the tax umbrella, the government has waived fees, interest, and additional charges if value-added tax filings are submitted by Ashad 25, 2080 BS.
Changes have also been made to the value-added tax (VAT) system. The list of VAT exemptions has been revised, and excise duty on one-third of excisable items has been abolished under the self-exemption system. Taxpayers with annual transactions up to one crore rupees, who are registered for VAT, will now only be required to submit tax returns every four months.
The government states that these revisions aim to create a favorable environment for domestic and foreign investment through an investment-friendly tax policy while ensuring effective revenue mobilization. Industries producing and exporting VAT and excise duty-exempt products will be eligible for refunds on the VAT and excise duty paid for the purchase of raw materials. Additionally, measures will be taken to promote the export of high-quality Nepali liquor to the international market by facilitating the re-distillation of extra neutral alcohol spirit.
