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Nepal Budget Highlight & Tax Perscpective

2074/75

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Budget Highlights 2017/18

Fig :- Pictorial Interpretation of the budget 2074-75

Total Budget Allocation 1278.99 1048.92 819.47 618.1 517.24

Re- Current Expenditure

803.53 617.16 484.27 398.95 353.42

Capital Expenditure 335.17 311.95 208.88 116.75 85.1

Financing Provisions 140.29 119.81 126.32 102.39 78.72

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Revenue 730.05 565.9 475.01 422.9 354.5

Principal Debt- Repayment

15 10 2 1 5.5

From Foreign Grants 72.17 106.9 110.93 73.38 69.54

From Foreign Loan 214.04 195.71 94.96 49.52 43.7

From Domestic Borrowings

145 111 88 52.75 44

FY 2016/17 Cash Balance Carryover

102.73 59.41 48.56 - -

62.28%

26.20%

11.52%

Re- Current Expenditure

Capital Expenditure

Financing Provisions

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i) Post-earthquake reconstruction, rehabilitation and new construction

ii) Education, health, drinking water, sanitation

iii) Agriculture, industry, tourism, forest

iv) Hydro power generation, transmission line expansion and distribution

v) Road, airport, irrigation

vi) Urban and local infrastructure

vii) Social security

viii) Service delivery, corruption control and governance reform

A) 17.6% of the total budget i.e. Rs. 225.05 Billion has been allocated for Local Areas. Out of which, Rs. 148.63 Billion has been distributed as equalization grant and Rs. 76.41 Billion for conditional grant.

A) Rs. 146.18 billion for the post-earthquake reconstruction and rehabilitation programs to be spent through National Reconstruction Authority

A) During the upcoming fiscal year, Upper Tamakoshi Hydro Power Project will be completed providing additional 456 MW electricity for which Rs.500 million has been allocated. The

0 100 200 300 400 500 600 700 800

Revenue

Principal Debt- Repayment

From Foreign Grants

From Foreign Loan

From Domestic Borrowings

FY 2016/17 Cash Balance Carryover

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process of constructing Budhi Gandaki Hydro Power Project will be commenced for which Rs. 10.17 billion has been provided.

B) Rs. 13.72 billion has been allocated for Nijgadh Second International Airport, Gautam Buddha Regional International Airport and Pokhara Regional International Airport.

C) For the re-construction of Kathmandu Terai-Madhesh Fast Track (to be completed by Nepal Army), Rs.10.14 Billion has been separated.

D) Rs. 4.27 Billion has been allocated for Postal Highway(Hulaki Rajmarga)

E) Rs.300 million for connecting Humla District Headquarter with Khulalu-Laifu-Kalikot-Simikot Road and Rs. 4.03 Billion for Black topping and bridge construction.

F) Rs. 4.02 Billion for Bardibas-Simara Railway Track.

G) For formulation of second phase Master Plan of Pashupati area and wider Lumbini area, Rs 1.16 Billion has been allocated.

H) Rs.6.57 Billion for construction work of most–awaited Melamchi drinking water project will be completed by Mid-October.

I) Rs. 1.92 billion in order to implement activities related to comprehensive Master Plan of President Chure Protection Program.

J) Initiation will be taken to develop Karnali Chisapani Multipurpose Project with the capacity of more than 10,000MW as a tripartite friendship project of the friendly nations India, China and Nepal.

Rs. 30.40 billion for the agriculture and livestock sector programs has been allocated.

Rs. 27.41 billion for the irrigation programme has been allocated.

A) Rs. 15.34 billion for the forest sector and Rs 6.80 billion for the land reform and management.

A) Rs.10.96 billion for all programs implemented in industry, commerce and supply sector.

A) Rs. 66.12 billion for education related programs excluding programs to be implemented by the local level in the coming fiscal year.

A) Rs. 31.78 billion for the implementation of health related services excluding primary health services to be provided from local level as per the Constitution.

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B) Health Insurance to all people within 3 years.

C) Both Life and General Insurance Company shall now re-Insure a portion of their risk with Nepal Reinsurance Company Ltd

A) Rs. 1.14 billion to carry out programs in the labor sector.

B) Individuals outgoing Nepalese Labors are mandatorily requiring opening bank accounts in order to receive remittance via formal channel.

C) The ten year Master Plan for the abolition of child labor will be implemented in the next fiscal year

A) Rs. 2.23 billion for women, children and social welfare programs.

A) Rs. 22.70 billion for this purpose have been allocated.

A) Rs. 2.24 billion for youth and sports sector programs. B) Construction of Eight Cricket Stadiums will be taken place and international standard

cricket stadium at Mulpani, Kathmandu will be on full-swing.

A) To increase private and foreign investment in the infrastructure sector, Infrastructure Development Bank was established which will be completed in the coming fiscal year.

B) Production based companies will be encouraged to be listed in the Stock Exchanges. 15 percent tax rebate on the income of industries and businesses established under public companies and Companies listed in the stock market is made available.

C) Minimum 5 percent of the provision of insurance services of micro business, which has been made compulsory for all the insurance companies.

D) Branchless banks and Mobile banking will be promoted.

A) The provision of building database by receiving income tax return from those having

income above Rs. 4 million will be implemented with high priority.

B) Further three hundred thousand tax payers will be brought under the tax umbrella by

allotting them Permanent Account Number.

C) New business code number to be brought into effect from this Fiscal Year revising the

existing business code used for the tax purpose so as to match with goods classification

code based on the harmonized customs system

D) An arrangement to be made in a way that the importer and exporter will be allowed to

import and export for business purpose, only after getting import export code effective

from 16 July 2017.

E) The financial statement and tax amount will be used as a reference for credit mobilization

through bank and financial institutions for fair business.

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F) Tax base will be broadened by giving priority to the expansion of tax net instead of

increasing the tax rate.

A) Economic growth rate is forecasted to be 7.2 percent in FY 2074/75.

B) Inflation rate forecasted to be lower than 6 percent in this fiscal year.

C) Balance of payment surplus was Rs 50.64 billion as of Chaitra 2073.

D) Revised total revenue collection of the current Fiscal Year 2073/74 is estimated to be 103

percent or Rs 580.98 billion against the targeted total revenue collection of Rs 564 billion.

A) Trade distortion to be controlled by the use of electronic system in internal movement of

goods making efficient internal monitoring and surveillance. Patrolling to be mobilized in

order to control illegal import.

B) An arrangement of payment only through banking system to be made in case of trade

transaction over certain amount with India and Tibet of China.

C) For the purpose of protecting national tax base, risk indicators to be revised through

identifying revenue risk zones and controlling high tax planning and evasion.

D) Customs valuation system to be made realistic and transaction value based by enforcing

realistic customs declaration and right classification of goods.

E) Revenue Administration Training Centre will be developed as an academic institution to

offer capacity development and subject matter efficiency. This Centre will be developed

as Document Archiving Centre and preserving important revenue related records.

For Individuals

Income Up to 350,000.00

1% 350,000.00 1% 250,000.00 1%

Next 100,000.00

15% 100,000.00 15% 100,000.00 15%

Balance Exceeding

450,000.00

25% 450,000.00 25% 350,000.00 25%

For Couples

Income Upto 400,000.00

1% 400,000.00 1% 300,000.00 1%

Next 100,000.00

15% 100,000.00 15% 100,000.00 15%

Balance Exceeding

500,000.00

25% 500,000.00 25% 400,000.00 25%

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In case the Taxable Salary of an Individual is more than Rs. 25 Lakhs, additional tax at the rate of 40 percent shall be levied on the tax applicable on the income above Rs. 25,00,000 (i.e. Above Rs. 25,00,000, Tax Rate of 35% is applicable).

1. Natural person working at remote areas are entitled to get deduction from taxable income to a

maximum of Rs. 50000.

2. Natural person with pension income included in the taxable income shall be entitled to deduct

from taxable income an additional 25% of amount prescribed under first tax slab.

3. Incapacitated natural person shall be entitled to get deduction from taxable income an additional

50% of amount prescribed under first tax slab.

4. A Resident natural person who has procured life insurance and paid premium amount thereon

shall be entitled to a deduction of actual annual insurance premium or Rs. 20000 whichever is less

from gross taxable income.

5. A Resident natural person who has procured Health Insurance and paid premium amount thereon

shall be entitled to a deduction of actual annual insurance premium or Rs. 20,000 whichever is less

from gross taxable income.

6. In case of the employee employed at the foreign diplomatic of Nepal only 25% of the foreign

allowances are to be included in the income from salary.

7. In case of the employee posted outside Nepal is getting foreign allowance will get 75% rebate of

such allowance.

8. In case of the female employee whose taxable income is only from employment than 10% rebate

is allowed on tax liability.

9. In case of individual having income from export, tax rate of 15% is applicable in place of 25%.

10. The limit of 7% of Depreciable Base is not applicable on the repair and improvement expenses

incurred for assets located at earthquake affected areas prescribed by GON, in case the person

desires to apply this provision. This facility is allowed until FY 2073/74.

11. Productive industries, except tobacco and alcohol industries are eligible to get 50% discount on

land registration fee.

12. Special Industries related with manufacturing, tourist services, electricity production and

distribution listed on NEPSE and industries mentioned on section 11(3ga) shall be provided with

concession of 15% on applicable tax rate. This budget has included Agricultural, Forestry and

Mineral Industries also in to the category of Special Industries.

S. N.

Nature of transaction FY 2072/73 FY 2073/74 FY 2074/75

1 Income earned from normal transactions. 25% flat

rate 25% flat

rate 25% flat

rate a. Income earned from providing shipping, air

transport or telecommunication services, postage, satellite, optical fiber project.

5% 5% 5%

b. Income earned providing shipping, air transport of Telecommunication services through the territory of Nepal.

2% 2% 2%

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c. Repatriation by Foreign Permanent Establishment.

5% 5% 5%

Existing Provisions Amended Provision Any person, entity, etc. running casino business in Nepal shall be liable to pay an annual royalty of Rs. 30 million in FY 2073/74. However, if the casino business is operated using modern machines, Rs 20 million shall be the royalty amount.

Any person, entity, etc. running casino business in Nepal shall be liable to pay an annual royalty of Rs. 30 million in FY 2073/74. However, if the casino business is operated using modern machines, Rs 7.5 million shall be the royalty amount.

Types of Vehicles Duty Car, Jeep, Van, Microbus, truck, tripper, truck mixture, minibus, mini truck and mini tipper

7% of the value inclusive of all other taxes and duties

Motor cycle per piece: Up-to 125cc 126 cc to 250 cc 251 cc to 400 cc 401cc and above

10,000 12,000 15,000 20,000

Not applicable to ambulances, fire brigade, vehicles carrying dead bodies (hearse), diplomatic

missions and individuals having diplomatic immunity. Above duty would not be applicable for

cooperative societies and companies importing more than 5 buses having 40 or more seat

capacity for use in public transportation business..

Resident Natural Person who fulfills all the following conditions:

1. The person generates income only from business having source in Nepal

2. The person does not claim Medical Tax Credit

3. The person does not claim advance tax arising out of tax withheld by withholding

agent.

4. The transaction of the business exceeds Rs. 20 Lakhs and is less than Rs 50 lakhs.

5. The person not registered for VAT purpose, and

6. The person does not have income related to consultancy and expert professional

services including that provided by doctor, engineer, auditor, lawyer, sportsman,

artist, and consultant.

Then the tax applicable will be as follows:

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1. For person dealing in cigarette, gas, etc. in

which the person makes sales by

adding 3% commission or profit.

0.25% of transaction amount.

2. For persons dealing goods besides that

specified in (1) above.

0.75% of transaction amount.

3. Persons dealing in service business 2 % of transaction amount

However, if amount calculated above is less than Rs. 5000 then Rs. 5000 is imposed

on such case.

Items Units Proposed Rate for 2074

Prevailing rate for 2073

Beer made of barley Per Ltr 115 106

Beer without alcohol Per Ltr 7 0

Wine up to 12% alcohol (Local Ingredients)

Per Ltr 80 74

Cider made up of Local Ingredients Per Ltr 119 108

ENA (Extra Neutral Alcohol) Per Ltr 58 50

Raw material and Cardials (Spirit also) used for wine, brandy, whisky and vodka.

Per Ltr 127 115

Liquor with 48.5% alcohol Per Ltr 1003 912



Pan Masala without tobacco Per Kg 462 420

Flavored supari without tobacco Per Kg 171 155

Cigarette without filter Per M 374 346

Cigarette up to 70 mm with filter Per M 859 795

Cigarette 70-75 mm with filter Per M 1116 1024

Cigarette 75-85 mm with filter Per M 1456 1336

Cigarette above 85 mm with filter Per M 2055 1868

Container truck attached with chassis Per Rs. 5% 0

Specially prepared Bullet for liquidified petroleum transportation

Per Rs. 5% 0

Finance Bill 2074 has additional provision on Point 21 of custom schedule, which has imposed

certain restrictions on import/export through courier service by private entity, which is:

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Restriction on import via courier:

Not weighing more than 70 kg per packet

Animal and their body parts

Plant and their parts.

Any types of Jewellery

Precious and valuable stone/metal

Restriction on export via courier:-

Goods and services attracting custom duty.

Export made by bonded warehouse facility.

As restricted by prevailing laws.

Changes in custom for the import of LCD, Plasma, LED television:

Gross rate of 55% of amount included shall be charged as custom, excise and vat. Previously there

is the provision of charging duty as per the size (Inch) of the television so imported

Disclaimer: -

This information provided through this material is made available by Suvod

Associates is for educational purpose and for general information purposes

only and does not intend to provide any advice. This information has been

compiled through various government sources and Suvod Associates does not

guarantee the accuracy of the technical content or material provided on the

information if any. Suvod Associates holds the exclusive property of this

material.

Contact Us:

Suvod Associates | A Member of TIAG International

Head Office:

357/55 Ganesh Marg, New Baneshwor

Kathmandu, Nepal

Phone: +977-1-4781314

Fax: +977-1-4785219

Email:[email protected]

Website: www.suvodassociates.org

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