21st May 2024, Kathmandu
The Federation of Nepalese Chamber of Commerce and Industry has proposed that there should be provisions for tax exemptions in various sectors in the upcoming budget. The federation has made this demand in the pre-budget interaction program for the next fiscal year 2081/82.
FNCCI Demands Tax Exemptions
Tax proposals include a minimum 40% income tax deduction for manufacturing, tourism, and other service industries, as well as information technology industries that offer more than 100 jobs with the title of employment champions.
Since electricity is the raw material of the Nepali manufacturing sector, there should be a provision to give a 50% discount on electricity tariffs for up to five years to the industries that substitute the manufacturing imports. The income tax exemption currently provided to start-up enterprises for up to five years should be given a 50% exemption for the next five years.
For export-oriented information technology enterprises, a 1% income tax should be allowed for five years.
Hotels, resorts, polytechnic institutes, other educational institutions, and teaching hospitals that are to be established in hill stations near the Indian border should also have access roads and electricity, as well as a 50% income tax exemption for the first five years and the next five years.
Section 88 of the Income Tax Act of 2058, Clause No. 8, states that the provision for a 2.5 percent tax deduction at source should be amended on the payment of freight for transportation services.
According to the Electricity Act 2049, firms that construct and run hydroelectric projects will be exempt from income tax for 10 years and 10 to 15 years, respectively, and only those companies that complete construction by the end of June 2082 will receive 10,000 megawatts of electricity. This time limit should be extended by 5 years, to 2087, to make the sale agreement provisions meaningful.
Emphasis should be made on the usage and import of energy-efficient equipment and there should be a provision for a certain level of customs exemption, and banks and financial institutions should give loans at reasonable interest rates.
To reduce revenue risk and impact on collection, identify potential areas for scope extension, and enhance value addition by 10% within three years.
Arrangements should be set up to provide quarterly statements to taxpayers with an annual turnover of up to two crore rupees.
According to the current system, the VAT registration system should be amended when importing products worth more than 10,000 rupees (while retaining the EXIM code system), and the transaction amount that can be imported even if not registered in VAT should be increased.
When importing parts of unassembled electric vehicles (motorcycles, scooters, rickshaws, automobiles, jeeps, vans) from various assembling companies, a 75% customs duty rebate should be used.
Other vehicles built in Nepal should receive a 50% discount on customs and excise duties.
Individuals’ maximum income tax rate should be maintained at 30% before the fiscal year 2076.
Starting in the following year, the current personal income tax exemption limit should be increased by 25 percent from the current exemption amount and changed according to the inflation ratio.
This year, the taxable income will be subject to a 25 percent tax in banks, financial institutions, general insurance businesses, telecommunications and internet services, currency transfer, money transfer, capital market, securities business, merchant banking business, commodity futures market, securities, and commodity brokerage business need to. If an investor reinvests more than 40% of his profits, he/she should be free from income tax.
Section 27 of the Economic Act, which includes a specific provision on tax and interest on merger acquisition profits, has caused uncertainty in revenue-related provisions by imposing a ghostly law, and it should be removed.
Any agricultural business that deals in agricultural products and produces up to one crore should be exempt from taxes for at least ten years based on invoice issuance and self-declaration.
In the case of profit derived from the nature of the private sector of entities listed in the Nepal Securities Ward, the body operating the securities exchange market shall levy 5% of the profit amount of the interest owned for more than 365 days and 7.5 percent of the profit amount of the interest owned for 365 days or less in the case of a resident natural person. If there is a provision, it should be updated with a legal clause stating that the tax is a final tax deduction rather than an advance tax.
A natural person’s capital gain due to alienation of land or private building at the time of registration by the customs office at the rate of 5 percent if ownership of non-commercial taxable property (land and building) alienated for 5 years or more and at the rate of 7.5% if 5 years or less. The arrangement to collect advance tax at the rate of 5 percent should be made legal so that the tax is not an advance tax but a final tax deduction.
By sub-section 1 of 47 K 940, there should be a clear legal provision stating that capital gains tax will not be applied to the profit on shares sold by a shareholder who remains in the merged entity and disposes of their shares within two years of the merger date.
The luxury tax, which is paid at 2% on five-star and higher hotels, luxury resorts, and gold or precious metal jewelry valued at more than ten lakhs, should be eliminated.
The Revenue Consultative Committee’s recommendations indicate the possibility of taxing in education and health as well.
For more Information: FNCCI Demands Tax Exemptions