KATHMANDU, Aug 7: The implementation of the Digital Service Tax (DST) in Nepal has yielded positive results, with six foreign companies engaged in electronic business stepping up to pay taxes. The Large Taxpayers Office reported that approximately Rs 100 million in revenue has been collected from these companies since the implementation of the DST during the last fiscal year, 2022/23.
Out of the nine electronic service companies registered in Nepal, six have already fulfilled their tax obligations. Notably, Google Asia Pacific Private Limited and LinkedIn Singapore Private Limited, both based in Singapore, as well as Google Ireland Limited with an address in Dublin, Ireland, have begun paying taxes.
Moreover, NCS Pearson Incorporation Limited, Amazon.com Services LLC, and Amazon Wave Services Incorporation Limited, headquartered in Wilmington, USA, have also registered and complied with the tax requirements in Nepal.
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However, three companies are yet to meet their tax obligations despite being registered with the Large Taxpayers Office. Ibsco International Incorporated, based in Wilmington, County of Newcastle, Meta Platforms Ireland Ltd with an address in Dublin, Ireland, and Microsoft Regional Sales Pvt Ltd with an address in Singapore are among those who still need to pay the DST.
The introduction of DST in the Financial Act last year compelled digital service providers in Nepal to register with the tax system. While the tax has been effective in encouraging compliance among certain companies, it appears that many information technology firms still operate outside the tax system.
The current tax law stipulates a two percent levy on the transaction value of electronic services provided by non-resident companies to consumers in Nepal. However, transactions up to Rs two million per annum are exempt from this tax.
Although the law lays out penalties for non-compliance, there remains some uncertainty about how to handle companies that have not registered with the Large Taxpayer Office or paid taxes. Nonetheless, the government has acknowledged the potential for substantial revenue losses due to the absence of digital business companies, including social networks, within the scope of taxation.
