Google, Facebook, Microsoft, LinkedIn, Instagram, WhatsApp are registered in Nepal
Six international companies including Google, Facebook and Microsoft working in the field of information technology and digital services are registered in Nepal’s tax system.
In order to bring the foreign companies dealing in electronic services in Nepal under the scope of taxation, the government made provision regarding electronic service tax (digital service tax) through the financial act of the current financial year.
Sadhuram Pudasaini, the tax officer of the Big Tax Payers Office, informed that six foreign companies have been registered according to the same arrangement.
Companies paying electronic service tax are being registered in the big tax payers office. Although the government has made a law to bring such companies under the tax regime, most of the companies are still outside the tax system.
According to the Big Tax Office, three companies with offices in Singapore, Google Asia Pacific Private Limited, Microsoft Regional Sales Private Limited and LinkedIn Singapore Private Limited have been registered.
Similarly, NCS Pearson Incorporation with Bloomington address in the United States and Ibsco International Incorporation with Wilmington County of New Castle address are also registered in the big tax office. Meta Platforms Ireland Limited with Dublin Ireland address is also registered in Nepal.
Among the companies registered in Nepal so far, Google Asia Pacific Private Limited is the Mau company of Google, one of the world’s largest search engines. Similarly, social networks Facebook (including Instagram and WhatsApp) and LinkedIn have also been registered.
Among the other registered companies, NCS Pearson Corporation makes various types of mobile applications, while Ibsco Corporation is a company related to research platforms and database management. Microsoft is also one of the world’s largest companies in the field of software development and information technology.
The Financial Act of the current financial year provided that ‘electronic service tax will be levied at the rate of two percent on the transaction value of electronic services provided by non-residents to consumers in Nepal’. In the financial law, there is no such tax in transactions up to Rs. 20 lakhs per year.
According to the provisions of the Act, a person who provides electronic services in Nepal must file their business details and taxes according to the income year, but it is not clear how to affiliate and pay taxes to companies that are not registered with the big tax payer office.
Even though action has been taken in case of non-payment of taxes by foreign companies registered with the Taxpayer’s Office, it is not clear what action will be taken against unregistered companies. Since such a tax system cannot be binding for all information technology sectors serving in Nepal, it seems that most of the companies are outside the tax system.
According to the Financial Act of the current financial year, if the statement is not filed within the specified time, the amount will be charged at the rate of 0.1 percent of the annual transaction amount and if a person does not file the tax within the specified date, interest will be charged at the rate of 15 percent per annum.
It is stipulated that if the amount of tax to be filed is under-filed or if it is hidden, a penalty of 50% of the tax amount will be charged, but there is no provision in the Economic Act that companies providing services abroad must be registered in Nepal to pay taxes.
A government study has also shown that a large amount of revenue is being lost due to the failure to bring digital business companies including social networks serving within Nepal under the scope of taxation.
The Nepal Revenue Consultative Committee’s ‘Report, 2079’, which was canceled by the decision of the Council of Ministers on October 11, has mentioned that a large amount of money has been generated only through social media advertising in recent years.
‘In Nepal, the trend of advertising on social networks that are not legally registered has increased rapidly. Such social networks are taking billions of rupees annually from Nepal to foreign countries’, the report said.
The report of the Revenue Consultative Committee, quoting data from Data Portal.com, has mentioned that by the year 2022, there are 13.3 million users of Facebook in Nepal.
According to Statista, a market research company, Facebook’s advertising revenue for advertisers has reached 40.96 US dollars in 2021. That income was equal to 32.03 US dollars in 2020′, it is said in the report of the Revenue Consulting Committee, ‘Looking at it this way, Facebook is earning more than 60 billion per year for viewing advertisements by Nepali users.’ Rasas
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