
KATHMANDU: The government has introduced a series of changes to existing tax and customs duty provisions.
Deputy Prime Minister and Minister for Finance Bishnu Prasad Paudel announced amendments to revenue rates across several sectors through the budget for the fiscal year 2025/26 presented in the joint session of the federal parliament on Thursday.
Under the revised provisions, IT-based industries, hotels and resorts will now enjoy income tax and electricity tariff exemptions similar to those offered to special industries. Exporters of IT services will receive a 75% income tax exemption.
Furthermore, individuals providing IT services to foreign clients from Nepal will be taxed at a flat rate of 5% on their earnings, which will be treated as final.
Startups with an annual turnover of up to Rs 100 million will be fully exempt from income tax for five years.
Industries involved in wood seasoning, which enhances the quality and usage of timber and related products, will benefit from a 1% customs duty on the import of essential mill machinery, with all other related taxes and duties waived.
Customs duties and other taxes have also been waived on the import of machinery and equipment for producing organic and natural fertilisers.
For the construction of football, cricket and multi-purpose stadiums, a 1% customs duty will apply to the import of necessary machinery, equipment and sports materials. All other taxes and duties will be waived.
Machinery and equipment imported for green hydrogen production will also be exempt from all taxes and duties. Green hydrogen industries will also benefit from a five-year income tax holiday.
To support the storage of solar and wind-generated electricity, the government has introduced a 1% customs duty on the import of batteries and related equipment, waiving all other applicable taxes and duties.
Industries producing and assembling EV charging machines will also have to pay only 1% customs duty on equipment imports. They will enjoy income tax exemption for five years.
To promote digital payments, VAT on clearing house services has been abolished. Advance income tax previously levied at customs points on food grains, pulses, fruits and other plant or animal-based and dairy products has also been removed. Additionally, VAT has been eliminated on hearing aids for the hearing-impaired.
Foreign tourists entering Nepal by air or land routes are now allowed to bring foreign currency or traveler’s cheques up to $5,000 without declaring them. Amounts exceeding this limit must be declared at customs points.
Similarly, the previous Rs 1.6 million price cap on ambulances eligible for tax exemption has been lifted.
To promote the use of electric vehicles (EVs), reduce pollution and boost domestic electricity consumption, the government has kept existing taxes and duties on EVs unchanged. A new provision allows the scrapping of private or public vehicles older than 20 years or those deemed non-operational, with the waiver of remaining income tax liabilities provided that taxes for the last two years have been paid.
To encourage the use of tunnel technology in road, irrigation and hydropower projects, the government has lowered customs duty on the import of tunnel boring machines by the private sector to 1%.
Transport service providers who deduct advance tax on vehicle rental payments to individuals can now claim these rental expenses when calculating taxable income.
Taxpayers who have not submitted VAT and excise duty returns or payments on time will get interest or penalties waived off if they regularise their filings and payments.
Similarly, international airline companies and agents will get interest and penalty waivers if they pay their outstanding dues. Taxpayers who have not filed income statements will be allowed to settle dues resulting from revised assessments made by tax authorities.
Customs and excise duties on liquor, beer, tobacco, and cigarettes have been increased. The scope of the health risk tax has also been expanded to discourage the consumption of harmful substances.