Global tech giants like Microsoft, Google, Meta, TikTok, Adobe, Netflix, Amazon, and Apple have collectively conducted transactions worth NPR 2.75 billion (275 crore) in Nepal by providing digital services within a year. In the fiscal year 2080/81 (2023/24), these companies paid NPR 410 million (41 crore) in taxes. Among these, a single US-based company alone accounted for transactions worth nearly NPR 1.31 billion (131 crore).
In the last fiscal year, 18 companies registered with the Inland Revenue Department and obtained PAN numbers, collectively transacting NPR 2.75 billion (275 crore 80 lakh 32 thousand). According to the Large Taxpayers’ Office, they paid NPR 358.5 million (35 crore 85 lakh 44 thousand) as Value Added Tax (VAT) and NPR 58.1 million (5 crore 81 lakh 75 thousand) as Digital Service Tax (DST). Together, the government collected NPR 416.7 million (41 crore 67 lakh 19 thousand) in revenue from these global tech companies.
Fiscal Year | Business Volume (NPR) | VAT (NPR) | Electronic Service Tax (NPR) |
---|---|---|---|
2079/80 | 70 crore 54 lakh (5 months) | 9 crore 17 lakh | 1 crore 77 lakh |
2080/81 | 2 arab 75 crore 80 lakh | 35 crore 85 lakh | 5 crore 81 lakh |
2081/82 | 49 crore 30 lakh (5 months) | 6 crore 40 lakh | – |
Among them, the company with the highest transaction volume paid NPR 171 million (17 crore 10 lakh) in VAT and NPR 2.9 million (29 lakh 36 thousand) as DST. According to Information Officer Dhruva Prasad Pandey, under the Financial Act 2080, non-resident companies conducting annual transactions exceeding NPR 2 million (20 lakh) were required to pay 2% DST and 13% VAT on their annual transaction value in Nepal.
For the ongoing fiscal year 2081/82 (2024/25), the Financial Act has amended the threshold, and now only transactions exceeding NPR 3 million (30 lakh) annually are subject to these taxes. With the addition of one more company this year, 19 foreign tech companies collectively transacted NPR 493 million (49 crore 30 lakh 41 thousand) between Shrawan (mid-July) and Mangsir (mid-December). They paid NPR 64 million (6 crore 40 lakh 95 thousand) in VAT to the Large Taxpayers’ Office.
“All registered international companies are complying with tax laws and submitting the required revenue within the stipulated time,” said Information Officer Pandey. “We’ve also held discussions with the local contact representatives of these companies. They’ve assured us that being large corporate entities, they would adhere to tax obligations.”
As of now, companies like Google Asia Pacific, NCS Pearson, LinkedIn Singapore, Meta Platforms Ireland Limited, Microsoft Regional Sales, Amazon Web Services, Amazon.com Services, Google Ireland Limited, TikTok Private Limited, Adobe Systems Software Ireland Limited, Netflix Private Limited, Zoho Corporation Private Limited, Google Digital Inc., Prometric Japan Company Limited, EBSCO International Inc., Association of Chartered Certified Accountants (ACCA), Pearson Education Limited, Apple Distribution International Limited, and Apple Services Private Limited have been linked to Nepal’s tax system.
The government had initially announced the inclusion of digital social media platforms in the tax system through the budget for the fiscal year 2079/80 (2022/23). The 59th Annual Report of the Auditor General in the same year also highlighted the significant outflow of funds abroad due to payments made for applications like YouTube, TikTok, Google Meet, Zoom, and Microsoft Teams.
Since these applications provide services in Nepal, the report emphasized that, based on the principle of source taxation, such transactions—despite being operated from abroad—should be taxable in Nepal. Following these findings, the Inland Revenue Department issued the “Digital Service Tax Procedure, 2079 (2022)” and “VAT Procedures for Non-Resident Service Providers, 2079 (2022)” on Asar 22, 2079 (July 6, 2022).
Starting Falgun 2079 (mid-February 2023), companies like Google, Meta, and Microsoft registered in Nepal, and within just five months of that fiscal year, they transacted NPR 705.4 million (70 crore 54 lakh 50 thousand). They paid NPR 91.7 million (9 crore 17 lakh 8 thousand) in VAT and NPR 17.7 million (1 crore 77 lakh 20 thousand) in DST during that period. Among them, one US-based company alone conducted transactions worth NPR 710 million (71 crore) and paid NPR 57.2 million (5 crore 72 lakh) in VAT and NPR 3.5 million (35 lakh 92 thousand) in DST. However, the names of these companies have not been disclosed for confidentiality reasons.
Non-resident entities providing digital services in Nepal are required to pay 13% VAT monthly and DST within three months after the fiscal year ends. The VAT Procedures for Non-Resident Service Providers categorize digital services to include advertising, movies, television, music, over-the-top (OTT) platforms, cloud services, data storage, gaming, mobile app-related services, software supply, consulting, and training services.
Information Officer Pandey mentioned that detailed analysis and comparative studies regarding the tax paid by international companies operating in Nepal are yet to be conducted. “There is no data or study on how much tax such companies pay in other South Asian countries, their transaction volumes, and how Nepal’s transactions compare,” he said. “The digital service tax law in Nepal resembles Malaysia’s, but due to significant differences in digital economies, comparisons cannot be made.”
Deputy Director-General Gopi Krishna Koirala of the Inland Revenue Department stated that although there was a discussion to honor non-resident entities paying the highest DST on Tax Day (Mangsir 1, mid-November), it was deferred as these companies have only been under Nepal’s tax purview for three years. “We studied honoring taxpayers from this sector along with other contributors to revenue, but the short timeframe makes it premature,” he said.
He emphasized that strengthening the tax system in this sector requires further study and analysis. “Our population is smaller compared to countries like India or China, so revenue collection from this sector is not as significant. However, as all sectors gradually digitalize, this area could become a vital revenue source for the government in the future.”