N OVERVIEW OF INANCIAL BUDGET 2016-17 [2073-74]

AN OVERVIEW OF FINANCIAL BUDGET 2016-17 [2073-74]

Contents 1. FOREWORD 2. KEY POLICY ANNOUNCEMENTS 3. FISCAL & ECONOMIC REVIEW 4. SNAPSHOT ON TAX PROPOSALS 5. DIRECT TAXES HIGHLIGHTS PERSONAL TAX CORPORATE TAX TAX CONCSESION & REBATE WITHHOLDING TAX PRESUMPTIVE TAX ADVANCE TAX OTHERS 6. INDIRECT TAX HIGHLIGHTS VALUE ADDED TAX CUSTOM DUTY EXCISE DUTY EXPORT DUTY 7. REBATES, RELIEFS & OTHERS 8. CONTACT US

NEPAL BUDGET 2016

Foreword: Foreword

Honorable Finance Minister Mr. Bishnu Prasad Poudel presented the full Annual Budget of Rs. 1.049

Key Policy Announcements

Trillion (PY Rs 819.46 Billion) on Saturday, Jestha 15, 2073 (May 28, 2016) for the F/Y 2073-74 (2016-17)

Fiscal & Economic Review Snapshot on Tax Proposals

through Finance Act 2073. This is the first Budget after the promulgation of Constitution of Federal Democratic Nepal. Budget has given utmost importance to Hydropower, Infrastructure and Agriculture sector. Budget has

Direct Taxes Highlights

aimed for the growth rate of 6.5% and limiting

Indirect Taxes Highlights

The budget has launched various new programs and

Rebates, Reliefs & Others

inflation rate to 7.5%.

also giving the continuity to the programs included in the previous year’s budget.

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1

ASR & Associates Chartered Accountants

NEPAL BUDGET 2016

Budget

Foreword Key Policy Announcements Fiscal & Economic Review

[Rs. 1.049 Trillion (PY 819.46 Billion)] Sources of Budget

Budget Expenditure

Snapshot on Tax Proposals Direct Taxes Highlights

Revenue 565.90 Billion

Foreign Grants 106.90 Billion

Principle Refund 10.00 Billion

Recurrent Expenditure 617.16 Billion

Capital Expenditure 311.95 Billion

Indirect Taxes Highlights Rebates, Reliefs & Others Contact Us

Loan Repayment & Share Investment 119.81 Billion

Budget Deficit Rs. 366.12 Billion Source of Deficit Financing Foreign Loan Rs. 195.71 Billion (PY 94.96 Billion) Domestic Borrowing Rs. 111.00 Billion Reserve Fund Rs. 59.41 Billion

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NEPAL BUDGET 2016

Key Policy Announcements: Foreword Key Policy Announcements Fiscal & Economic Review

Energy Sector: 

Hydropower projects will be developed with public participation under Program “Ghar ghar ma bijuli, Jan Jan ma share”.  Purvadhar kar of Rs. 5 Per Ltr on Diesel, petrol & aviation fuel and fund to be used for Budhigandaki Jalvidyut Ayojana.  Energy Audit for Big power consumers and promotion of LED lights in place of CFL lights. Manufacturing Sector:

Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others Contact Us

3



15% Tax rebate for manufacturing, hydropower, IT & tourism industries listed in stock exchange.  Agriculture, forestry and mines industry will be classified as special industry.  Rebate on demand fee of electricity to industries running below 50% of their installed capacity in the first six months of F/Y 2072-73 because of disruption in the supply.  New Industrial corridor will be developed based on the specific product type industries. Readymade cloths industrial corridor will be developed in Simra in next 2 years. Agro Sector: 

75% subsidy on insurance premium for agriculture and cattle.  Subsidy in capital investment for agriculture of spices, tea, coffee, cardamom, fruits, flowers, vegetables, milk etc through co-operatives.  VAT exemption on insurance of cattle, bees, fish, flowers etc.  Rebate on Import Duty on agriculture equipment and machineries. ASR & Associates Chartered Accountants

NEPAL BUDGET 2016 Tourism Industries:

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals



Gautam Buddha International Airport will be brought into operation in Magh 2074.  Year 2073 – Domestic Tourism Year and Year 2018 – International Tourism Year.  Income tax rebate to industries providing employment to more than 100 Nepalese. Financial, Insurance & Capital Market:  Implementation of National Health Insurance Policy in 3 years for health insurance of every individual.  Purvadhar Bikash bank to be established under partnership of government and private sector.  Various banking acts rules and regulations will be amended.  Insurance companies will be required to do 5% of their total insurance for micro insurance.

Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others Contact Us

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NEPAL BUDGET 2016

Foreword

Real Estate Sector: 

25% rebate on land registration for land purchased from remittance through banking channel by a person on foreign employment.

Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals



Rate of Land registration fees are specified separately for Metropolitan, Sub Metropolitan, Municipality & VDC.



Land registration fee under Common Residential units (Flat) is increased for Metropolitan city.

Others:  Classification of taxpayer in good, general and risk category based on their past performance.  Compulsory disclosure of rates inclusive of VAT at Showrooms, shops, hotel, restaurant etc. 

SEZ in all the Pradesh.


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NEPAL BUDGET 2016

Fiscal & Economic Review: Foreword Key Policy Announcements

GDP & Key Fiscal Indicator  GDP expected to be 0.8 % in the running fiscal year.  Inflation rate expected to be at 10% in the running fiscal year.  Balance of Payment for the first 9 months of 2015/16 stood at surplus of Rs. 163.81 Billion.

Fiscal & Economic Review

 Foreign Exchange Reserve at the end of ninth month stood at Rs. 1.008 Tillion and foreign remittance has increased by 13% reaching upto 481.69 billion.


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NEPAL BUDGET 2016

Snapshots on Tax Proposals: Foreword Key Policy Announcements

Direct Tax Proposals: 

Income Tax slab increased by Rs. 1 Lacs.



Facilities of Mergers to Banking and insurance business continued.



Tax rebate @ 15% on applicable tax rates for manufacturing, tourism, hydropower Industries Listed on stock exchange.

Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others Contact Us

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

Changes in rates of Turnover based tax facility.



Compulsory Income Tax Return Filing for Individuals having annual income more than 40 lacs.

Indirect Tax Proposals: 

Excise rates on alcohol, beer, cigarettes and tobacco products increased by 12 to 15%.



Only 1% import duty on vehicle used for transportation of fish, meat and milk. 2/3rd import duty rebate on bullet used for transportation of LPG.



Only 1% import duty on import of electric vehicle used for public transportation and 10% import duty on import of electric vehicle for other than public transportation. Excise duty fully waived off.



Only 1% duty on import of machineries by industry doing processing of old batteries.



100% VAT rebate on import of equipment by Licensed Health institutions for treatment of patient of cancer, heart & Kidney and import duty only 1% levied.



Only 1% import duty on import of paper used for publication of newspaper.



Custom clearance of vehicle will be made based on the triplet agreement between manufacturers, manufacturer’s authorized distributor and authorized buyer.



System of electronic billing will be implemented for taxpayers of departmental store and commercial complex.


NEPAL BUDGET 2016

Foreword



VAT removed on insurance premium of agricultural products and animal insurance



Changes in the Refund facility on VAT to Oil and Mobile Industries.

Rebates & reliefs:

Key Policy Announcements Fiscal & Economic Review



Relief to persons not filed tax return for F/Y 2071-72, VAT return, excise return, HSF return, ESF return from Shrawan 2072 to Falgun 2072, estimated income tax return for F/Y 2072-73.



Income tax rebate for saving & credit co-operative or F/Y 2071-72



Demurrage & Detention charges allowed for Income tax calculation. Note: Changes are highlighted in black and new additions are shown separately in box.


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NEPAL BUDGET 2016

Direct Taxes Foreword Key Policy Announcements

Personal Tax Basic rate of taxes for individual as well as slabs has been increased as follows: Ate S.No

Individual

Rate

Remarks

1%

Nil (incase of Proprietorship firm)

1.

Resident

A

Up to Rs. 400,000 [PY 300,000] in case of Couple (includes widow & widower) & Rs. 350,000 [PY 250,000] in case of unmarried

B

Next Rs. 100,000

15%

C

Next Up to Rs 25 Lacs

25%

20% in case of special industry


D

Balance in excess of Rs. 25 Lacs

35%

20% in case of special industry


2.

Non Resident

A

Any Amount

Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights

25%

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NEPAL BUDGET 2016 Note:

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others



1 % tax should be deducted and deposited under Social Security Fund separately.



In case of physically disabled resident individual, an additional 50% of exemption limit (i.e. Rs. 300,000 or Rs. 250,000 as the case may be) shall be allowed to be deducted.



Husband and Wife having separate income from source are given choice to adopt either to get assessed separately or jointly as couple.



Deduction equal to life insurance premium paid or Rs. 20,000/- whichever is lower is allowed from taxable salary.



Deduction equal to Health Insurance Premium paid or Rs. 20,000/- whichever is lower is allowed from taxable salary.



Remote Area Allowance up to Rs. 50,000 P.A is exempted from Tax.



Employees working in Nepalese mission abroad are allowed 75% of their foreign allowances as tax exempted.



Natural person having income from retired employment (Pension Income only) are allowed 25% of their income as tax exempted.



In case of women having income from salary only shall be allowed a rebate of 10% in tax payable calculated as per above.



Export income for manufacturing Industry shall be taxed at rate of 15% only.



Export income for other sectors shall be taxed at rate of 20% only.

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NEPAL BUDGET 2016 Corporate Tax Rates [No change]

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others Contact Us

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Basic rate of taxes for entities are as follows:

Corporate Entities

Rate

Bank & Finance Company, General Insurance Company, Petroleum, Alcohol, Beer, Tobacco, Cigarette entities

30%

Special industries & IT Industries Entities constructing & operating road, bridges, tunnel Road construction, Airports, trolley bus and tram Entity wholly engaged to build public infrastructure, own, operate and transfer it to the NG & in power generation, transmission, or distribution Non-resident person Providing Shipping, Air Transport or Telecommunications Services in Nepal Airline Services having office and business in Nepal but not operating flights to and within Nepal

20% 12% 20% 5% 2%

Private Ltd., Limited, Partnership Firm not specifically mentioned above

25%.

Co-operative Societies (Other than those dealing in exempted business)

20%

All Export Oriented manufacturing Industries

15%

Repatriated income of a foreign permanent establishment of a nonresident person situated in Nepal

5% NIL

Agriculture Income other than income derived by Firm, Company or Partnership Firm Co-operative Societies registered under Co-operative Act 2048 for conducting business based on agriculture and forestry and Gramin Saving & credit Co-operative Societies

NIL


NEPAL BUDGET 2016 Tax Concession & Rebate [No change]

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights

Special Industry & IT Industry

Rebate / Concession

Tax rate after rebate

Providing Direct employment to 300 or more Nepali citizens throughout the year

10% of applicable tax rate

18%

Providing Direct employment to 1200 or more Nepali citizens throughout the year


16%

Providing Direct employment to 100 or more Nepali citizens with 33% employment to women, Dalit & handicapped throughout the year


16%

Industry operated in Least developed areas (For first 10 years from the year of coming into operation)


2%

Industry operated in Undeveloped areas (For first 10 years from the year of coming into operation)


4%

Industry operated in Underdeveloped areas (For first 10 years from the year of coming into operation)


6%


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NEPAL BUDGET 2016 Special Economic Zone

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others

Rebate / Concession


Industries established in Special economic zone (SEZ) of Himali Districts and Government designated Hilly Districts from date of commercial production. Upto 10 Years After 10 years

100% Tax Holiday 50% of applicable tax rate

Nil 10%

Industries established in Special economic zone (SEZ) of Other Regions from date of commercial production. Upto 5 Years After 5 years


Nil 10%

Dividend Distributed by Industries established in Special economic zone (SEZ), dividend tax shall Upto 5 Years

100% Tax Holiday

Nil

After 5 years upto 8th year (for 3 years)


2.5%

Royalty, Technology Transfer, and Management Fee paid to foreign investor establishing industries in SEZ


7.5%

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NEPAL BUDGET 2016

Foreword

Special Industries


Special Industries Investing more than Npr 1 billion and providing direct employment to more than 500 persons throughout the year will get following tax exemption from the date of commencement of operation 100% Tax Holiday

Upto 5 Years


Indirect Taxes Highlights Rebates, Reliefs & Others

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Nil

50% of applicable 10% tax rate But for the existing special industries above tax exemption will be applicable only if they expand their existing capacity by 25%, increase their capital investment to more than Npr 1 Billion and provide direct employment to more than 500 persons throughout the year. Exemption will be applicable only on the income generated from such expansion. Tourism Industries

Rebate / Concession


Tourism Industries Investing more than Npr 2 billion and Airlines industry operating in International sector will get tax following tax exemption from the date of commencement of operation Upto 5 Years After 5 years upto 8th year (for 3 years) -

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After 5 years upto 8th year (for 3 years) -


Rebate / Concession


Nil 12.5%

But for the existing special industries above tax exemption will be applicable only if they expand their existing capacity by 25% and increase their capital investment to more than Npr 2 Billion. Exemption will be applicable only on the income generated from such expansion.


NEPAL BUDGET 2016 Power Sector

Foreword Key Policy Announcements

Snapshot on Tax Proposals

100% Tax Holiday

After 7 years upto 10th year (for 3 years) IT Related Industries

and digital mapping business established in Government notified


Petroleum & Natural Gas Industries

Technology Park, Information Technology Park, Bio tech Park

Rebate / Concession

10% Tax rate after rebate


Rebate / Concession

10%


Industries involved in Exploration and Petroleum & Natural Gas if starts operation till Chaitra 2075 

First 7 years of operation



Next 3 years

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Nil

Industries involved in Software Development, Statistics, Cyber cafes




Entity having license for generation, transmission, distribution of electricity, generate, generate & transmit, generate & distribute commercially within end of Chaitra 2080 - Hydropower, Solar, Wind & Bio-techniques Upto 7 Years


Rebate / Concession

100 % of applicable tax rate 50% of applicable tax rate

NIL 10%


NEPAL BUDGET 2016 Tax Rebate

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights

Manufacturing, Tourism, Hydropower generation, distribution and transmission and IT related Industries listed in Stock Exhange Industries as mentioned above

Rebate / Concession 15% of applicable tax rate (earlier 10%)

Rebate in Dividend Tax on Capitalization of Accumulated Profit Special Industries, Agriculture product based Industries & Tourism Industries will be allowed 100% rebate in dividend tax on capitalization of their accumulated profit for capacity expansion of that industry.

Deductions Deduction in respect of Capitalized Assets 50 % of the Capitalized amount can be claimed as deduction in the same fiscal year in respect of capitalized assets for the purpose of generating energy for their business by any entity.

Rebates, Reliefs & Others Contact Us

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NEPAL BUDGET 2016 Other Deductions

Foreword



Any amount contributed to PM Disaster relief fund and Reconstruction fund created by the Nepal Government is allowable as expenses.

Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others Contact Us

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

Limit of 7% for repair will not be applicable at the discretion of taxpayer upto 2073/74 in the earthquake affected district as prescribed by Nepal Government and whole amount can be claimed as deduction.

Turnover based Income Tax Following Resident Natural person are now required to pay income tax based on the turnover of their business:  Having only business income in Nepal  Has not taken Medical tax credit u/s 51  Has not claimed tax deducted u/s 93  Business annual turnover is in the range of 20 lacs to 50 lacs  Is not registered in Value added tax.  Has not earned income from the professional or consultancy services provided by a doctor, engineer, auditor, lawyer, sportsperson, artist, and consultant. Turnover based tax rate is as follows: a. 0.25% [PY 0.5%] of turnover amount in case of business of Gas, cigarettes where commission or value addition is upto 3% b. 0.75% [PY 1.5%] of turnover amount in case of business other than as mentioned in (a) above. c. 2% in case of service oriented business. Minimum turnover tax will be 5,000/- in case turnover tax calculated as above is less than 5,000/Installment of turnover tax should be paid as below:  1st installment at Poush end – based on the actual turnover upto Poush 20, calculated with the rate as above.  2nd and final installment at Ashad end – based on the actual turnover upto Ashad 20 and estimated turnover upto Ashad end calculated at the rate as above. ASR & Associates Chartered Accountants

NEPAL BUDGET 2016 Withholding Taxes

Foreword

Particulars

Rate

Remuneration (Sec.87)


Normal Rate of Individual

Investment Returns & Service Fees (Sec.88) Natural Resource Payment

Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others

Rent - Individuals

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10% (Final Tax)

Rent – Others

10%

Royalty

15%

Service Fees

15%

Service Fees

- VAT Registered

1.5%

Service Fees

- Paid to resident entities involved in VAT free business

1.5%

VAT Registered entities involved in business of renting vehicles

1.5%

Sales Bonus & Commission

15%

Dividend & Gain from Investment Insurance

5% (Final Tax)

Service fee paid f0r Satellite, bandwidth, optical fiber, telecom equipment or transmission line use [NEW] Meeting Allowances Aircraft Lease

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15%

Commission paid by resident foreign Employment companies to non-resident

10% 15% (Final Tax) 10% 5%


NEPAL BUDGET 2016

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights

Particulars

Rate

Interest from Resident Bank & Finance Companies, entity issuing debentures and listed companies to Individuals not related to business

5% (Final Tax)

Lump Sum Retirement Payment from Approved Fund & Nepal Government under Sec 65(1b)

5% (Final Tax)

Retirement Payment

15%

Teaching -not on regular basis

15% (Final Tax)

Windfall Gain (Sec.88Ka)

25% (Final Tax)

Contract Payments (Sec.89) Payment under contract exceeding Rs. 50,000/- by resident

1.5%

Insurance Premium to non-resident Insurance companies

1.5%

Aircraft Repair Contract - Payment to non-resident person

5%

Advance tax to be collected under Sec.95 ka Organization operating the Commodity Future Market should collect the advance tax on the taxable income of the person doing the business in the market

10%

On gain made by any person other than the company licensed to do the business of securities at the rate given below:



In the case of gain made by a natural person on the sale of security of a company listed on the Nepal Stock Exchange

5%




In case of gain made by any other person on the sale of security of a company listed on the Nepal Stock Exchange

10%



In the case of gain made by a natural person on the sale of security of a company not listed on the Nepal Stock Exchange to be deducted by the company whose securities are sold)

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

In the case of gain made by any other person on the sale of security of a company not listed on the Nepal Stock Exchange to be deducted by the company whose securities are sold)

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10%

15%


NEPAL BUDGET 2016 Particulars


Rate

Capital Gain from Sale of Land & Building to be deducted by Malpot Office (Sec.95 ka) If sold by Natural Person - Owned for less than 5 years - Owned for the period 5 years or more

5% 2.5%

If sold by Other than natural person [NEW]

10%

Compulsory Filing of Income Tax Return by Natural Person:


Natural Person having annual income in excess of Rs. 40 Lacs has to Compulsory file Income Tax return.

Direct Taxes Highlights Indirect Taxes Highlights

Registration of Transfer of Shares at OCR [NEW] 


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Transfer of shares at Office of Company Registrar will be registered only after presenting the proof of payment of TDS to be deducted on capital gain on sale of shares.

Limit of Compulsory Audit of Books of Accounts increased to Rs. 1 Crore 

Limit of compulsory audit of books of accounts is increased from 50 Lacs to 1 Crore.


NEPAL BUDGET 2016 Notes:




No Taxes on windfall gain in the field of Literature, Art, Culture, Sports, Science, technology, Public administration upto the amount of Rs. 500,000/-.



Rs. 50,000/- referred to sec 89 shall be determined by aggregating a payment under a contract with any other payment made by the person or an associate of the person during the previous ten days under the same contract to the same payee or an associate of the payee.



Contract means supply of goods or labor or construction, installation or erection of assets under a contract or services as specified by department.



No TDS is required to be deducted on the following:  Payment of remuneration to the writer of the articles published in Newspaper & magazines.  Payment of remuneration for preparation of question paper or checking of answer sheet.  Payment by individuals other than payment in business and payment for house rent.


 Interest paid to Resident Bank & Financial Institutions.  Inter-regional Interchange Fee paid to Bank issuing credit cards.


 Interest & Fee paid by Nepal Government to Foreign Government or International Organization under any agreement.  Payments that are exempted from tax.


 Interest earned upto Rs.25,000 PA (earlier 10,000) from the deposits with Micro Finance based on Village community, Gramin Bikash Bank, Hulak Bachat Bank and Co-operative u/s 11(2) 

If any person who has collected advance tax under section 95(ka) does not submit the advance tax return within 25 days from the end of the month of collection, then he will be charged fee @ 1.5% for every month and part of the month.



Withholding tax need to be deposited along with TDS Return with IRD within 25 days from end of month.



Withholding Tax Certificate should be issued to the person from whom tax has been deducted based on the TDS Return filed with IRD to get the credit for such withholding tax.


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NEPAL BUDGET 2016 No change made by Finance Act 2073 in the following sections:

Foreword

Presumptive Taxation Advance Income Tax Installment

Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights

Loss Carry forward & Setoff Penalty for Non- Filing of Income Tax Return within due date

Income Tax on Vehicle Income Persons running vehicles on rent shall be taxed as follows as per vehicle per annum. If the person is individual, tax will be final tax.

Particulars

Tax Per Vehicle

Minibus, Mini truck, Truck, Bus

3,000/-

Car, Jeep, VAN, Micro Bus

2,400/-

Three wheeler, Auto, Tampo

1,550/-

Tractor, Power Triller

1,000/-


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NEPAL BUDGET 2016

Indirect Tax Foreword

Value Added Tax 


23

Single Rate of 13% remains unchanged.

Exclusion from Exemption List  Lifts or elevators used by an industry for other than commercial purpose.  VAT is applicable on Professional Training services provided other than by government organization.  Cultural Program, Entry Fee for Botanical Garden and National Forest

Inclusion of certain Goods/ Services Exempted from VAT [NEW]       

Licensed Health institutions importing equipment relating to treatment of heart, kidney and cancer. [detailed name in customs section] Electronic Rickshaw manufacturing industries importing materials and spares under chapter 87.14 Electric Tempo and Rickshaw under HC 8703.90.11 & 8711.90.10 Lithium Ion Battery used in solar panel capacity below, 12 volt and 10 ampere on recommendation of AEPC. Agricultural product Insurance and Animals insurance, insurance of fish & bees, Electric or battery operated Tempo and Rickshaw Only 1% duty on import of machineries by industry doing processing of old batteries. Industries producing plastic bags importing machineries for replacing production of plastic bags with environment friendly material like cloth, jute or paper. Collection of VAT Under Section 8(2) & 8(3)

Payment of VAT U/S 8(2) on Import of Service and U/S 8(3) on construction of building valuing more than Rs. 50 Lacs remains same as previous year. ASR & Associates Chartered Accountants

NEPAL BUDGET 2016

VAT Refund Facility




Tea Industry – Local tea manufacturing and processing industries or auction house will be refunded 50% of VAT collected by them on sales of their manufactured products to the VAT registered parties.



Utensils Industry - 25% VAT Refund collected on sales allowed to Sheet, Circle and Utensils Manufacturing Industry from Brass Copper Scrap (Patru), if sold to VAT registered parties.



Textile Industry - Local textile manufacturing industries or government institutions will be refunded 70% of VAT collected by them on sales of their manufactured products to the VAT registered parties. 100% cotton Textile industry will be refunded VAT payable by them after adjusting VAT credit on purchases from that of VAT collected on sales.





Dairy Industry – Local Dairy Industry doing business of milk products will be refunded 50% of VAT collected by them on sales of its manufactured milk products.



Sugar Industry – VAT refund facility of 90% to Local manufacturer at the time of sale to VAT registered parties.



Maida Industry – VAT refund facility of 25% continues.



Cellular Mobile – VAT refund facility of 40% (earlier 50%) to Local manufacturer and importer on presenting the proof of sale to VAT registered person.




Ghee & Oil Industry - VAT refund of 40% (earlier 50%) of vat collected on sale to VAT registered parties by Local Manufacturer of Mustard oil, Vanaspati Ghee and other refined eatable oil. Refund facility will not be available to the persons importing Refined oil in bulk and selling after packing and refilling the same.

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

Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights

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

Wooden Match, tyre / tube, dhoop Industries shall be refunded VAT payable by them after adjusting VAT credit on purchase from that of VAT collected on Sales. ASR & Associates Chartered Accountants

NEPAL BUDGET 2016

New Provision regarding VAT refund on Export or reexport of Goods [NEW]

Foreword 


Refund of VAT on purchases will not be allowed if goods exported falls under the category as mentioned under Anusuchi 1 of Value Added Tax Act on which VAT refund is already taken. (like refund to tea industry, maida industry, ghee & oil industry, cellular mobile, sugar industry etc). Others



Any two or more persons can form a Joint Venture and register temporarily in VAT for a fixed term work contract. Registration should be cancelled once the term of the project completes. Both the joint venture party will be individually or jointly liable for the taxes relating to the joint venture.



If tax officer during the physical stock inspection of any taxpayer finds stock in excess of what is mentioned in the stock register, then tax officer can give the order to book income of such excess stock on the basis of current market value and impose 50% penalty of such market value.




Penalty of Rs. 500,000 will be levied on persons whether approved or not to do computer billing and using software having the facility of erasing or editing data.




Company having rental income from renting its “Apartments” is required to be registered under VAT.

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

Threshold Limit for Service Organization is increased to Rs. 20 Lakh [PY 10 Lakh] & other than service organization is Rs. 50 Lacs.


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NEPAL BUDGET 2016 Custom Duty

Foreword



Rebate of 5% allowed on all goods falling under duty rate upto 30% and 3% allowed on all goods falling under duty rate above 30% of Indian Origin imported from India.




through Letter of Credit. 


Rebate of 3% on goods of Chinese origin imported via Tibet is continued subject to import is made In case the importer not declaring the detailed description of goods clearly then penalty of 2% on the value fixed by Customs Officer or 1% in case custom duty exempted items shall be imposed. Fully Exempted Goods List

 Pet Chips (HC 3907.60) imported by Industries (within limit prescribed by Industry Department)  POY & Staple Fibres under heading 54 & 55 imported by VAT registered Yarn Industries.  Fertilizers HC 31.


 Raw Jutes HC 53 imported by Jute Industries.  Chesis Engine, Motor, Battery Charger imported by Industry for manufacturing of electric / solar / battery operated 3 or 4 wheeler vehicles and carriage vehicles.


 Spare parts imported by Jute industry for operation of industry under recommendation of Department of Industry.


 Machinery, tools, & spare parts (not manufactured in Nepal) and raw materials required to manufacture such equipment imported by Hydropower Industry on recommendation of Electricity Development Department.

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 Prescribed goods imported by Nepal Army, Nepal Police, Armed Police under recommendation of Ministry of Home.

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NEPAL BUDGET 2016  Custom Duty Tariff of Few Products :

Products

New Rate

PY Rate

30%

30%

5%

5%

Bus Other than electric bus (Chapter 8702)

30%

30%

Mini Bus, Micro bus

30%

30%

Car / Jeep / Van

80%

80%

Crude Soyabean Oil, Crude Palmoline Oil, Crude Palm Oil imported by Vanaspati Ghee & Mustard Oil Manufacturing Industries

2.5%

2.5%

1.25%

1.25%

15%

15%

Clinker (Chapter 25.23)

Rs. 2400/MT

Rs. 2400/MT

Portland Cement – Others (Chapter 25.23)

Rs. 4050/MT

Rs. 4050/MT

10%

10%

Rs. 15200 / KL

Rs. 15200 / KL

Kerosene Oil & HSD (High Speed Diesel)

Rs. 2000 / KL

Rs. 2000 / KL

Aviation Sprits

Rs. 2100 / KL

Rs. 2100 / KL

5%

5%

30%

15%

Foreword

Motorcycle Other than electric


Power Tractor (Chapter 8701) other than power tiller and mini tiller of HC 8701.10.10

Tallow oil under 15.03, Sodium Silicate under 28.39 Palm Acid Oil, Palm Fatty Acid and acid oil under chapter 38.23 imported by Soap Industries Sugar

Marble & Granite Petrol

Furnace Oil Transformer Oil

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NEPAL BUDGET 2016


Products

New Rate

PY Rate

Agriculture Equipment under HC 8201.10, 8201.50.00, 8209.90.10 (Kodalo, Khurpa, Bancharo, Poultry Scissors etc)

1%

5%

Dairy Machinery under chapter 83.34

1%

5%

15% 1%

15%

Electric Generating Sets and Rotary Convertors under Chapter 85.02 - Upto 75 KVA - More than 75 KVA Electric Vehicle having capacity of more than 10 persons (Chapter 87.02) Electric Operated Three wheelers (8703.90.11) Fire fighting Vehicle Electric Motorcycle (HC 8711.90.10)

Indirect Taxes Highlights Rebates, Reliefs & Others

Power tiller and mini tiller 8701.10.10 Base Oil (Used for Mobil) (HC 2710.19.60)

1% 10%

30%

1%

5%

10%

30%

1%

5%

15%

Instruments and appliances used in medical, surgical, dental or veterinary sciences (HC 9018.90.00)

1%

5%

Unassembled Television and parts like LCD, LED, Picture tube

20%

20%

Contact Us

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NEPAL BUDGET 2016

Concessional Rate of duty [NEW]

Foreword 

Only 1% Duty on Machinery & Equipment (HC 8747.80.00) imported by industries registered for processing of used batteries and electricity storage devices.



Only 1% Duty on Machinery & Equipment (Chapter 87.47) imported by industries registered for processing of used plastic items.



Only 1% import duty on Balances (Taraju) imported by Pharmaceutical industry under HC 9016.00.00



Only 1% import duty on import of machineries and equipment for replacing the existing plastic bags with jute/paper/fabric bags by existing plastic bag manufacturer industries.




Only 1% duty on import of Copper rod under HC 7404.21.00 by Industries registered for manufacturing of Valve of Gas cylinder.



Only 15% import duty on Cross connection cabinet box (HC 9403.20.00) used in PSTN Landline.




Rebate of 50% duty on import of spare parts under chapter 87.14 by Electric rickshaw manufacturers.




Only 1% import duty on import of hemodialysis machine, dialysis re processor, dialyzer, dialysis bed & chair used in treatment of kidney patient, echocardiography, cathlab, Heart long machine, defibrillator used in treatment of heart patient, PET machine, Scan machine, CT scan machine, mammography, brachytherapy, linear accelerator etc used in the treatment of cancer patient by Licensed Health Institutions.



Harmonic codes for items falling under concessional rate of duty for Star hotel & resorts are clearly specified.

Contact Us



Only 1% duty on import of cab (HC 8431.39.00) or steel sheets (HC 7210.90.00) for construction of cab by cable car industries.



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NEPAL BUDGET 2016 Excise Duty

Foreword

Excise Duty Tariff Excise tariff on alcohol, cigarettes and tobacco products have been increased by 12-15%.


Products

New Rate

P/Y

Rs. 50/ quintal

Rs. 50/ quintal

Rs. 180/ ton

Rs. 180/ ton

15%

15%

Rs. 4.5/ Ltr

Rs. 4.5/ Ltr

Rs. 106 / Ltr

Rs. 98 / Ltr

Rs. 22 / Ltr

Rs. 20 / Ltr

Khayar Kattha (1404.90.12)

Rs. 115/ Kgs

Rs. 115/ Kgs

Semi Kattha (Kattha Ras) (1404.90.11)

Rs. 10 / Kgs

Rs. 10 / Kgs

Iron Rod HC 7213 & 7214 (except 7214.99.10)

Rs. 1000/ MT

Rs. 1000/ MT

5%

5%

Cigarette without filter

Rs. 346 / M

Rs. 320 / M

Cigarette 70 MM with filter

Rs. 795 / M

Rs. 723 / M

Cigarette over 70 MM upto 75 MM with filter

Rs. 1024 / M

Rs. 931 / M

Cigarette over 75 MM upto 85 MM with filter

Rs. 1336 / M

Rs. 1193 / M

Cigarette over 85 MM with filter

Rs. 1868 / M

Rs. 1624 / M

Molasses (17.03)


Cement Electrical Switches & Equipment (8536.50.00 & 8536.90.00) Finished Fruit Juice (20.09)


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Beer (22.03) Country Beer (Chyaang)

Color Television & Picture tube (85.40)


NEPAL BUDGET 2016

Products


New Rate

P/Y

Car, Jeep, Van, Double Cab Pick Up

60%

60%

Microbus & Three wheeler

55%

55%

Delivery Van (8704.21.20.20)

30%

30%

Single cab pick-up

50%

50%

Mini bus (8702.10.20)

35%

35%

Granite (25.15)

15%

15%

Rs. 420/Kg

Rs. 375/Kg

40%

40%

Glass Seat and Mirror used in Vehicles

5%

5%

Bus & Truck

5%

5%

Electric Vehicle

NIL

NIL

Marble (except domestic production)

5%

5%

155 P KG

138 P KG

10%

15%

Rs. 22/ Ltr

Rs. 22/ Ltr

5%

5%

Rs. 10/ Ltr

Rs. 10/ Ltr

Rs. 7.50/ Kg

Rs. 7.50/ Kg

(8704.21.20.10)

Pan Masala & Gutkha having Nicotine (HC 2403.99.10)


Motor Cycles

Sugandhit Supari no tobacco (HC 2106.90.70) Television Receivers (8529.90.10) Thinner & Solvent (3814.00.00) Paints (3210.00.00) Denature Spirit (2207.20.00) Noodles & its broken, Macaroni, Pasta, Junk Foods (19.02)

31


NEPAL BUDGET 2016

Special provision for local Production

Foreword 

100% Excise Duty is exempted on domestic production of Marbles and lid acid battery (Chapter 85.07), 50% exemption on Motor Cycle and 25% exemption on automobiles produced in Nepal.


Excise Duty Refund on Export of Excisable Products

Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights



Exporters of excisable product will be allowed credit of excise duty paid on raw material purchase or import with the excise duty payable at the time of removal of excisable product from the factory.



Any excise duty remaining for set off will be refunded to the manufacturer



In case of alcohol and tobacco products, excess credit remaining to be set off will be refunded only if value addition in export is at least 15%.  Excise duty paid on Auxiliary Raw Material and Packing Material will not be allowed for credit with the excise duty collected on sale of manufactured excisable products.


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Others  Persons doing business of alcohol products in Metropolitan, Sub Metropolitan, Municipality and Highways as prescribed by department will be allowed to do business of only Alcohol and tobacco products.  Department store should make separate space for alcohol products.


NEPAL BUDGET 2016 Export Duty


Export duty rates of some of the items are as follows:

Products

Rate

Remarks

Kattha Ras

Rs. 7/ Kg

No Change

Khayar Kattha

Rs. 5 / Kg

No Change

Sugandhit supari no tobacco

Rs. 25 P Kg

No Change

Stone Aggregates upto 2.5"

Rs. 600 / Cu. Mtr

No Change

Rs. 1200 / Cu. Mtr Rs. 1200 / Cu. Mtr

No Change No Change

Rs. 600 / Cu. Mtr

No Change

Rs. 1 / Kg

No Change

Rs. 0.50 / Kg Rs. 50 / Kg

No Change No Change

Stone Aggregates beyond 2.5" Stone Aggregates & Sand Mixtures Stone Dust Oil Cakes (HC 23.06) Residuals of Starch (HC 23.03) Jarda, Khaini, Nas, Gutkha (HC 24.03.9910)

Custom Service Fee Indirect Taxes Highlights

Custom service fee is payable on import/export of goods as follows:

Rebates, Reliefs & Others 

Contact Us

33

o

Imports - Rs.500 per Pragyapan Patra

o

Exports - Rs 100 per Pragyapan Patra

Export of Software through Internet shall be treated as Export sale only after certification from Nepal Rastra Bank on the basis of Invoice, Agreement and Payment Certificate.


NEPAL BUDGET 2016

Rebates, Reliefs & Others: Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights

Rebates in Interest, Additional charge and late fine Rebate in interest, additional charge and late fine for those taxpayers who were not able to submit the tax return of F/Y 2071-72, estimated tax return of 2072-73, payment of first installment of tax, VAT return, Excise return, Education Service Fee return, Health Service Fee return, Film Development Fee return from Shrawan 2072 to Falgun 2072, if submitted within Ashoj 2073. Deduction of Demurrage and Detention Charge Demurrage, detention and other parking charge paid on goods imported within Bhadra 01, 2072 to Falgun end 2072 will not be added in valuation at the custom point and will be allowed as deduction as expenses in Income tax return of F/Y 2072-73. Rebate of Income tax for F/Y 2071-72 to Saving & Credit Co-operative Income Tax rebate to Saving & Credit Co-operative registered in F/Y 2071-72 in Municipality. If any Saving & Credit co-operative has already paid Income tax for F/Y 2071-72, then such paid taxes will be allowed to adjust in tax liability off F/Y 2072-73.


34


NEPAL BUDGET 2016

Foreword

Health Service Fee A sum equal to 5% shall be levied on health services provided by any entity other than provided by Government of Nepal or community hospitals.


Invoice for above needs to be issued by the person providing such services. Service Tax amount and Statement for such Service Tax collected by concerned person shall be deposited/submitted to Inland Revenue Office on Four-Monthly basis within 25 days of the end of respective four months. Interest @ 15% p.a. shall be charged in case of non-deposit of Service Tax on time. In case of Nondeposit of due Service Tax for a period of 3 months, the Tax Officer may order the closure of such service. Fine Rs. 1000 per Statement shall be levied upon Non submission of Return. Optional provision for Private Hospital Optional Provision to register in VAT to hospitals other than Government and Community hospitals has been made. In such cases Health Service Tax need not be collected. Provision for Compulsory registration for minimum 5 year is removed.

Agriculture Improvement Fee [No change] On import of agricultural products listed in Clause 16 of Annexure 1, agriculture development fee has been @ 5%. No such fee will be charged if there is custom duty.

Pollution Control Fee [No change] Rs.0.50 / ltr from sale of petrol and diesel.

35


NEPAL BUDGET 2016

Foreword Key Policy Announcements

Purvadhar Kar [NEW]:

Rs. 5 Per Ltr on Diesel, Petrol & Aviation Fuel

Education Service Fee A sum equal to 1% shall be levied on Admission Fee & Monthly Tuition fee collected by private educational institutions. No Education service fee on education institutions under “Sarbajanik Saikshik Guthi”.

Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights Indirect Taxes Highlights Rebates, Reliefs & Others Contact Us

36

Educational Service Tax of 1% from students going abroad for study shall be collected by the bank at the time of providing foreign currency and the same should be deposited within 15th of next month along with return. Invoice for above needs to be issued by the person providing such services. Service Tax amount and Statement for such Service Tax collected by concerned person shall be deposited/submitted to Inland Revenue Office on Four-Monthly basis within 25 days of the end of respective four months. Interest @ 15% p.a. shall be charged in case of non-deposit of Service Tax on time. In case of Nondeposit of due Service Tax for a period of 3 months, the Tax Officer may order the closure of such service. Fine Rs. 1000 per Statement shall be levied upon Non submission of Return.

Telecom Service Fee Telecom Companies needs to collect service fee @ 11% from its customers and have to deposit the same along with Value Added Tax. But no such fee shall be applicable to Pager and Internet Service (except internet telephone VOIP) & on inter connection charges paid by one Telecom Company to other telecom company using their network.


NEPAL BUDGET 2016 Telephone Ownership Fee [No change]


A sum of Rs. 1000/- shall be collected as Telephone Ownership Fee. In case of Prepaid mobile a sum equivalent to 2% of the value of Sim Card and Recharge Card shall be collected as Telephone Ownership Fee.

Casino Royalty Casinos have to pay Rs. 30 Million per annum towards casino royalty. Royalty has to be paid within the 2 months from the starting of financial year. Fine @ 15% p.a. shall be charged in case of nondeposit of Royalty on time. Additional fee @ 15% per annum from the due date till the end of three month will also be charged. In case of Non-deposit of due Royalty for a period of 3 months, the Tax Officer may order the closure of such casino. Casinos using only modern machine and equipment should pay 7.5 Million annual royalty.


Road Construction & Improvement Fee: Increased by Rs. 5000/- for Motorcycles

Vehicle Tax: Car, Jeep, Van, Micro Bus – Increased fromRs. 1,000/- to 3,000/Dozer, Excavator, Loader, Mini tipper – Increased by 5,000/-


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NEPAL BUDGET 2016 Property Registration Fee:

Foreword

Property registration charges are amended as below: Type

Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals Direct Taxes Highlights

Land & Building Flat in Common Housing Project Land & Building in Common Housing Project

Metropolitan Sub Metropolitan Municipality New Old New Old New Old 5% 4% 4.5% 4% 4% 4%

VDC New Old 2% 2%

4%

4%

3%

4%

2%

4%

1%

4%

5%

4%

4.5%

4%

4%

4%

2%

4

Notes:  50% rebate on land registration fee for manufacturing industries other than tobacco & liquor industries. If land not used for the specified purpose, then Malpot office will recover the registration fee including 100% penalty.  25% rebate on registration fee on land registration in the name of woman.  25% rebate on registration fee if land purchased through remittance received from banking channels in foreign employment.


38


NEPAL BUDGET 2016

Foreword Key Policy Announcements Fiscal & Economic Review Snapshot on Tax Proposals

ASR & ASSOCIATES Chartered Accountants Office Location: 1st Floor, Apex Building Shankar Dev Marg, Besides Capital Hospital Building Ward No. 31, Putalisadak, Kathmandu, Nepal Post Box No. 24500 Tel (o) : 01-4168272 Tel (M) : +977 9851127506 Email : [email protected] [email protected]


39

Information in this publication is intended to provide only general outline of the subject covered & is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. ASR & Associates accepts no responsibility for loss arising from any action taken or not taken by anyone using this publication. ASR & Associates Chartered Accountants

N OVERVIEW OF INANCIAL BUDGET 2016-17 [2073-74]

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