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Companies indexed in the Securities Exchange Center Ltd. (SEC) and Government owned Corporations are subject to 40 percent corporate tax. Public limited industrial companies are eligible for a concessionof five percent on their corporate income tax. Dividends declared by companies are exempt from income tax.


A resident is taxed on income derived from Nepal as well as on income derived outside Nepal and remitted to Nepal. A non-resident is taxed only on his income derived from Nepalese sources. The Income Tax Act of 1974 defines a non-resident as a person staying in the country less than 183 days during an income tax year or a person staying outside Nepal but deriving income from Nepalese sources or a firm in Nepal under the management of a foreign company or firm. The Act, however, does not distinguish between resident and non-resident companies for tax purposes.

Rates of Income Tax

10 percent of the first Rs. 10,000

20 percent on next      Rs. 20,000

30 percent on next      Rs. 20,000

40 percent on next      Rs. 20,000

50 percent on balance


The single or married status of an individual determines the relief to which he is entitled. Taxable income include profits from a business, income from salaries along with other benefit provided by the employer, income from house rent, interest, dividends and other sources. The first Rs. 35.000 of income of a married couple or family are exempt from income tax. In the case of an individual the exemption limit is Rs. 25,000. The rates of income tax as same as above. However, the maximum rate of income tax in the case of salary income only has been fixed at 40 percent. Non-resident taxpayers are subject to an additional tax of 12 percent on the total income tax amount calculated at above rates.


The Income Tax Act of 1974 has provision for deduction of expenses from taxable corporate and personal income. Expenses wholly and exclusively incurred in the generation of income are deductible from taxable income. Furthermore five percent of the total gross income of industrial units will be allowed for deductions for advertisement, entertainment and other contingencies.


Custom duty, sales tax and excise duty are, wherever application, levied on goods manufactured in or imported into Nepal. The rate of tax varies depending on the type of goods manufactured or imported.


Enterprises are entitled to depreciate the fixed assets on either a straight line method or an accelerated basis. All plant, machinery and equipment qualify for depreciation at the rate of five to twenty five percent per annum. The rate of depreciation on industrial and commercial buildings ranges from two to six percent per annum. Transport vehicles, ships and aeroplanes will be depreciable at the rate of seven to twenty five percent and furniture at eight to fifteen percent per annum.

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Ministry of Industry
Foreign Investment Promotion Division
Singha Durbar
Kathmandu, Nepal
Tel: 216692
Fax: 220319
Tlx: 2610MOI NP

Copyright 1996 by Foreign Investment Promotion Division, Ministry of Industry, HMG

Webmaster: Anita Shrestha, AMAA, INC