The standard corporate income tax rate for companies is 25%. Capital gains are taxed at the same rate as corporate income tax i.e. at 25%.
However, a number of other rates apply as follows:
- A corporate tax rate of 20% applies to:
- special industries, i.e., manufacturing companies (except relating to tobacco and alcoholic beverages); and
- entities wholly engaged in projects conducted to build public infrastructure and in the power generation, transmission, or distribution sector;
- A corporate tax rate of 30% applies to:
- banks and other financial institutions and insurance companies;
- companies engaged in the petroleum business;
- companies engaged in the business of cigarette, tobacco, cigar, chewing tobacco, alcohol, and beer;
- telecom and internet service providers (from the financial year 2018-19); and
- companies engaged in money transfer, capital market or securities and commodities businesses (from the financial year 2018-19);
- Companies eligible for tax incentives are subject to reduced corporate tax rates (see Sec. 10. below);
- A 5% withholding tax is levied on dividends distributed by a resident company to another resident company;
- A 1.5% withholding tax is levied on contract payments made to a resident company; and
- A 1.5% withholding tax is levied on royalty payments by a resident company to another resident company for any literary articles and compositions.
Nepal’s Budget for 2022-23 has proposed a 50% corporate tax exemption for the financial year 2021-22 for sectors impacted by the COVID-19 pandemic, including hotels, travel, trekking, film industry, party palace, media house or transportation, and with turnover exceeding NPR 10 million. The proposal is yet to be enacted into law.
For the financial year 2020-21, a reduced corporate tax rate of 1% applied for the specified sectors that met the turnover threshold.
There is no minimum tax.