Nepal Collects Rs 100 Million in Digital Service Tax from Platforms like Google and LinkedIn

Meta, Microsoft, and Ibsco yet to pay the Digital Service Tax

TLDR: Five-points

1. Nepal collected Rs 100 million DST from six foreign e-businesses last year
2. Google, LinkedIn, Amazon, and NCS Pearson paid taxes in Nepal
3. Meta Platforms, Microsoft, and Ibsco registered but are yet to pay taxes
4. DST is 2% of e-service value from non-resident companies to Nepali consumers, except for transactions below Rs 2 million per year
5. Nepal struggles to enforce tax law and get revenue from digital businesses outside the tax system

Nepal has started to see some positive results from implementing Digital Service Tax (DST) in the country.

The Large Taxpayer Office has reported that it has collected about Rs 100 million in taxes from six foreign e-businesses registered in Nepal since the DST came into effect during the last fiscal year 2022/23.

If you don’t know yet, the DST is a tax imposed on non-resident e-businesses that provide services to Nepali consumers, such as online advertising, streaming, e-learning, and cloud computing. The DST aims to ensure that these e-businesses pay their fair share of taxes in Nepal and contribute to the country’s development. You can read Procedure relating to Digital Service Tax, 2079 (2022) on the IRD website here.

A total of nine electronic service companies had registered in Nepal after the Digital Service Tax came into effect. Out of these nine companies, six have started paying taxes.

The following six companies have paid Digital Service Tax to Nepal government: 

1. Google Asia Pacific Private Limited (Singapore)
2. Google Ireland Limited (Dublin, Ireland)
3. LinkedIn Singapore Private Limited (Singapore)
4. Amazon.com Services LLC
5. Amazon Web Services Incorporation Limited
6. NCS Pearson Inc Limited

However, the following three companies are registered in Nepal but have not paid taxes to Nepal government:

1. Meta Platforms Ireland Ltd (Dublin, Ireland)
2. Microsoft Regional Sales Pte Ltd (Singapore)
3. Ibsco International Incorporated (Wilmington, County of Newcastle)

We have prepared this table to make it easier for you to grasp the information.

Digital Service Tax was introduced in the Financial Act last year to make e-businesses pay their fair share of taxes in Nepal. As a result, digital service providers in Nepal had to register with the tax system.

According to the  tax law, e-businesses that provide services to Nepali consumers have to pay 2% of the value of their transactions as DST. However, transactions below Rs 2 million per year are exempt from this tax. The law also has penalties for those who don’t pay the DST.

While the tax has worked well for some companies, but many others are still dodging the tax system. In fact, many non-resident companies are yet to be registered with the Large Taxpayer Office.

This is a problem because various government studies have shown that the government is losing a lot of revenue because of e-businesses that are not in the tax system, including social networks that are very popular in Nepal.

(With inputs from RSS)