20 Foreign Firms Registered Under Digital Service Tax: Large Taxpayers Office

The number of foreign firms providing digital services in Nepal and registered under the digital service tax (DST) has reached 20, according to the Large Taxpayers Office. 

While eight firms were registered under the DST by the end of the fiscal year 2022/23, the number had increased to 18 by the end of the last fiscal year, 2023/24.

According to the Digital Service Tax Procedure, 2022 which came into effect from the fiscal year 2022/23, a non-resident person providing digital services to Nepali consumers is charged 2 percent DST if their annual transaction exceeds Rs 2 million.

The Inland Revenue Department (IRD) had also issued a procedure for VAT applicable to digital service for non-resident persons.

The Income Tax Act, 2002, uses the 183-day rule as one of the criteria to determine non-residents for tax purposes.

Dhruba Prasad Pandey, Information Officer at the office, told RSS, the state-owned news agency, that 20 foreign IT companies have begun paying two percent DST on their digital transactions in Nepal.

The firms registered so far are Goggle Asia Pacific, Google Ireland, Google Digital, NCS Pearson, Linkedin, Meta, Microsoft Regional Sales, Amazon Web, Amazon.com, Adobe, Netflix, Zoho Corporation, Google Digital, Prometric Japan, Association of Chartered Certified Accountants (ACCA), Pearson Education and Apple Distribution, Apple Sales, and EBSCO International, reported RSS. 

The TikTok which got its nine-months' ban lifted recently has also registered under the DST. 

In fiscal year 2023/24, the Government of Nepal collected around Rs 358 million in Value Added Tax (VAT) from foreign firms for services provided to Nepali consumers over the internet. In 2022/23, the government had collected around Rs 100 million in VAT and Rs 16 million in DST. 

Read: TikTok, Viber, We Talk Registered in Nepal

Registered firms need to present their financial declaration and pay the DST for the last fiscal year by the end of the first quarter of the current fiscal year. The DST is only levied for services provided to the consumers, not to the businesses.

According to the procedure, services such as advertisements, data storage, gaming, those related to mobile applications, supply and update of software, and downloads of data and images; movies, television, music, over the top and similar subscription based services; and online marketplace and goods and services to be provided through it, among others, fall under the ‘digital service’.

(With inputs from RSS)