On 12 October 2026 (26 Ashwin 2083), the Inland Revenue Department (IRD) of Nepal published a revised informational manual detailing tax exemptions, concessions, and other provisions under the Economic Act 2083. The Economic Act 2083, enacted as part of the annual Finance Bill, introduces significant amendments to the Income Tax Act, Value Added Tax Act, and Excise Duty Act, aiming to stimulate economic growth, attract foreign investment, and simplify compliance. This revised manual serves as an authoritative guide for taxpayers, tax practitioners, and revenue officials, consolidating all exemptions, concessions, and procedural clarifications issued through various amendment orders and notifications since the Act’s commencement on 16 July 2026 (1 Shrawan 2083). The manual is structured to provide chapter-wise analysis of tax incentives available to specific industries such as hydropower, tourism, information technology, agriculture, and special economic zones. It also addresses anti-avoidance provisions, transfer pricing documentation requirements, and the newly introduced digital services tax framework. The IRD emphasized that this publication supersedes all previous guidance on the subject and should be referenced for all tax assessments and filings for the fiscal year 2083/84 (2026/27).
Key Takeaways
- Consolidated Incentive Regime: The manual integrates over 45 distinct tax exemption and concession provisions, including accelerated depreciation for renewable energy projects, VAT exemptions on imported machinery for export-oriented industries, and income tax holidays for startups registered after 1 Shrawan 2083. Taxpayers must align their claims with the updated eligibility criteria and documentation checklists provided.
- Enhanced Compliance Obligations: New reporting requirements mandate that entities claiming exemptions under Section 11 of the Economic Act submit quarterly compliance certificates certified by a registered auditor. Failure to furnish certificates within 30 days of quarter-end may result in automatic withdrawal of the exemption and imposition of penalty interest at 15% per annum.
- Digital Services Tax Clarification: The manual provides the first official interpretation of the 2% digital services tax on non-resident tech companies with annual turnover exceeding NPR 20 million. It defines “digital services” broadly to include online advertising, cloud computing, and streaming services, and establishes a simplified registration and payment portal effective 1 Kartik 2083 (18 October 2026).
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement