Guide for Foreign Income Tax in Nepal

As a foreigner earning income in Nepal, you are subject to income tax on the income earned in the country. Here is a guide to help you understand the foreign income tax system in Nepal.

1. Tax Residency: To determine your tax liability, the first step is to determine your tax residency status. If you stay in Nepal for more than 183 days in a fiscal year (Mid-July to Mid-July), you are considered a tax resident of Nepal for that year. If you are a tax resident, you are taxed on your worldwide income in Nepal. If you are not a tax resident, you are only taxed on the income earned within Nepal.
2. Tax rates: Income tax rates in Nepal vary according to the income level. The tax rates for fiscal year 2079/80 (Mid-July 2022 to Mid-July 2023) are as follows:

• Income up to NPR 400,000 is taxed at 1%
• Income between NPR 400,000 and NPR 1,000,000 is taxed at 10%
• Income between NPR 1,000,000 and NPR 2,000,000 is taxed at 20%
• Income above NPR 2,000,000 is taxed at 30%

3. Taxable Income: To calculate your taxable income in Nepal, you must first calculate your total income. This includes your salary, wages, bonuses, tips, commissions, and other types of income. You can then deduct certain expenses such as rent, utilities, and transportation costs from your total income to arrive at your taxable income.
4. Tax Filing: All tax residents of Nepal must file an annual tax return. The deadline for filing the tax return is 30th Ashad (Mid-July). If you fail to file your tax return by the deadline, you may be subject to penalties and fines.
5. Tax Exemptions: Nepal offers various tax exemptions to foreign workers. For example, if you are a foreign national working for an international organization, you may be exempt from paying income tax in Nepal. Similarly, if you are working on a project funded by the government of Nepal, you may also be eligible for tax exemptions.

In conclusion, as a foreign worker in Nepal, it is important to understand the tax laws and regulations in the country. You should consult with a tax professional to ensure that you are meeting all of your tax obligations and taking advantage of any available exemptions.