A Complete Guide on Capital Gains Tax in Nepal

Capital gains tax is a tax levied on the profits that an individual or business makes from the sale of an asset such as property, stocks, and other investments. In Nepal, the capital gains tax is regulated by the Income Tax Act of Nepal, which sets out the rules and regulations for the calculation and payment of capital gains tax.

Capital Gains Tax Rates in Nepal

As of 2021, the capital gains tax rate in Nepal is 5%. This rate applies to both residents and non-residents of Nepal on the gains made on the sale of assets such as property, stocks, and other investments.

However, there are different tax rates for different types of assets. For instance, the capital gains tax rate on the sale of shares listed in the Nepal Stock Exchange is 0.15%, while the tax rate on the sale of non-listed shares is 5%.

Calculation of Capital Gains Tax

The capital gains tax in Nepal is calculated by subtracting the cost of acquisition from the sale price of the asset. The cost of acquisition includes the original purchase price, any expenses incurred during the acquisition process, and any improvements made to the asset.

For example, if an individual purchased a piece of property for NPR 5 million and later sold it for NPR 7 million, the capital gains tax would be calculated as follows:

Sale price of the property – Cost of acquisition = Capital gain

NPR 7 million – NPR 5 million = NPR 2 million

Capital gain x Capital gains tax rate = Capital gains tax

NPR 2 million x 5% = NPR 100,000

In this case, the capital gains tax would be NPR 100,000.

Exemptions from Capital Gains Tax

There are some exemptions from capital gains tax in Nepal. For instance, gains made on the sale of a primary residence are exempt from capital gains tax, provided the property has been owned and used as a primary residence for at least five years.

In addition, gains made on the sale of shares listed on the Nepal Stock Exchange are exempt from capital gains tax if the shares are held for at least one year before being sold.

Filing and Payment of Capital Gains Tax

Capital gains tax in Nepal is self-assessed, which means that individuals and businesses are responsible for calculating and paying their own capital gains tax. The tax must be paid within seven days of the sale of the asset.

In addition, individuals and businesses are required to file an annual tax return with the Inland Revenue Department of Nepal, which includes details of any capital gains made during the year.

Conclusion

Capital gains tax is an important part of the Nepalese tax system. As an individual or business owner, it is important to understand the rules and regulations regarding capital gains tax in order to comply with the law and avoid penalties. Consult with a qualified tax professional or refer to the most recent tax laws and regulations to get the most up-to-date information.