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5.5. Source Rules with Respect to Income Derived by Non-Residents

Income earned by non-residents from sources in Nepal is subject to tax in the country. Taxes are collected through withholding tax which includes dividends, interests, royalties, technical and management service fees, etc. Following sources of income are subject to tax in the country:

(a) dividends paid by a resident entity;

(b) interest paid by a resident person;

(c) natural resource payments made in respect of or calculated by reference to natural resources taken from land situated in Nepal;

(d) rent paid for the use of an asset situated in Nepal;

(e) royalties arising from the use of, right to use, or forbearance from using an asset situated in Nepal;

(f) premiums for general insurance paid to and proceeds from general insurance paid by a person in respect of the insurance of any risk in Nepal;

(g) payments received in Nepal, other than as a result of transhipment by a person who conducts a business of land, sea, or air transport operator or charterer from- (1) the carriage of passengers who embark; or (2) mail, livestock, or other moveable tangible assets that are embarked,

(h) payments received by a person who conducts a business of transmitting messages by cable, radio, optical fibre, or satellite communication in respect of the transmission of messages by apparatus established in Nepal, whether or not such messages originate in Nepal;

(i) payments, including service fees from exercising employment or rendering service- (1) in Nepal, regardless of the place of payment; or (2) where the payer is His Majesty's Government, irrespective of the place of employment;

(j) payments in respect of the disposal of a domestic asset or the incurring of a domestic liability or made in respect of activity conducted in Nepal.