Finance Bill 2083: Key Tax Changes and Legal Implications for Businesses in Nepal (2026)

On 29 May 2026 (Jestha 15, 2083 B.S.), Finance Minister Dr. Swarnim Wagle presented the annual federal budget for Fiscal Year 2083/84 along with the Finance Bill, 2083 (referred to in this update as the "Finance Bill"). The Finance Bill revises several tax headings, introduces new tax relief schemes, and brings settlement and amnesty provisions. It also amends four major tax laws of Nepal: the Income Tax Act, 2058, the Value Added Tax Act, 2052, the Excise Act, 2058, and the Customs Act, 2082.

What sets this Finance Bill apart from previous years is the sheer range of new fiscal levies it creates. Many of these are labelled as fees, charges, or royalties rather than "taxes" in the traditional sense, but they function as real financial obligations on businesses, institutions, and individuals across a wide range of sectors. Digital services, luxury hospitality, private education, private healthcare, gold and silver trade, electric vehicles, telecommunications, petroleum, and casinos all fall within scope.

When do these changes take effect? The Finance Bill becomes fully operative once it is passed by both houses of the Federal Parliament, certified by the President, and published in the Nepal Gazette. That said, certain provisions listed under Section 1(2) of the Finance Bill are already in force from 29 May 2026, while most remaining provisions take effect from 17 July 2026 (Shrawan 1, 2083).

Note: This update is based on the Finance Bill as available on the Ministry of Finance website on 03 June 2026. Changes to the Customs Act and Excise Act will be covered in a separate update.

Understanding the Finance Bill, 2083: What It Does and What It Covers

Every year, the Government of Nepal tables a Finance Bill alongside the federal budget. The Finance Bill does two distinct things. It introduces new standalone provisions, which in this case means a set of new taxes, fees, and charges that have no precedent in earlier Finance Acts. And it amends existing tax legislation, which this year means substantive changes to the Income Tax Act, the VAT Act, the Excise Act, and the Customs Act.

This update covers the following areas:

1. New and Revised Tax Headings and Sector-Specific Levies
2. Legal Remedies Clarified for Special Tax Assessments
3. Tax Amnesty, Waiver, and Settlement Schemes
4. Major Amendments to the Income Tax Act, 2058
5. Major Amendments to the VAT Act, 2052

1. New and Revised Tax Headings and Sector-Specific Levies

The Finance Bill introduces a number of new taxes, fees, and charges that were simply not present in previous Finance Acts. These apply on top of regular income tax, VAT, excise duty, and customs duty. Businesses need to assess which of these apply to their sector and build the necessary collection and deposit mechanisms into their operations before the relevant effective dates.

Green Tax

Section 9, read with Schedule 1 of the Finance Bill, imposes green tax on specified imported goods at the customs point. The goods covered include coal and coal-based solid fuels, petroleum oils and residues, asbestos and friction materials, electric accumulators and batteries, vacuum cleaners, and vehicle ignition and lighting equipment.

A specific petroleum provision sets the green tax on petrol and diesel imports at NPR 10 per litre.

Effective date: 29 May 2026 (immediate). Collected at the customs point by the customs authority.

Internal Production Protection and Promotion Fee

Section 10, read with Schedule 2, imposes this fee on a list of specified imported goods at the customs point. The rationale is to protect and promote domestic production in those categories. Goods covered include dairy products, coffee, tea, spices, vegetable and natural products, wood and wood products, footwear, and stone and construction materials.

One notable gap in the Finance Bill is that it does not specify how the funds collected under this fee will be utilised.

Effective date: 29 May 2026 (immediate). Collected at the customs point by the customs authority.

Clean Infrastructure Investment Fee

Section 11, read with Schedule 3, imposes a clean infrastructure investment fee on electric vehicles and electric transport vehicles, whether they are imported or produced in Nepal. The list of covered vehicles is extensive: electric passenger vehicles, motor cars, buses, vans, goods vehicles, three-wheelers, motorcycles, scooters, lorries, trucks, tippers, dumpers, container trucks, garbage collection vehicles, tankers, and other electric two-wheelers.

For specified electric motor cars under HS codes 8703.80.91 and 8703.80.99, the fee applies on a value-based sliding scale:

Where a customs duty transaction value has already been determined, the Clean Infrastructure Investment Fee is calculated by including that customs duty amount in the transaction value.

Effective date: 29 May 2026 (immediate). Administered by the customs office for imported vehicles and by the vehicle registration office for domestically produced or previously imported but unregistered vehicles. As with the Production and Promotion Fee, the Finance Bill does not specify how funds collected will be utilised.

Luxury Fee

The Finance Bill imposes a luxury fee at 2% on two categories: (a) services provided by five-star and above hotels and luxury resorts, calculated on the sale value of services; and (b) imports of ready-made liquor, calculated on the value inclusive of customs duty and excise duty.

Worth noting: the previous application of luxury fee to gold and gold ornament sales has been removed under this Finance Bill.

Collections must be deposited by the 25th of the following month (Bikram Sambat calendar). Late deposit carries 15% annual interest. Failure to file the required return attracts a charge of 0.05% per day or NPR 1,000 per return, whichever is higher. Failure to collect the fee in the first place carries a 25% fee.

Effective date: 17 July 2026 (Shrawan 1, 2083). Administered by the Inland Revenue Department.

Skill Promotion Fee

Under Section 14, read with Schedule 6, sellers of gold, silver, and ornaments or goods made from them must collect a skill promotion fee at 0.5% from final consumers. Non-deposit carries 15% annual interest; non-filing carries 0.05% per day or NPR 1,000 per return, whichever is higher; failure to collect carries a 25% fee. How the collected funds will be used is not specified in the Finance Bill.

Effective date: 17 July 2026 (Shrawan 1, 2083). Administered by the Inland Revenue Department.

Education Equality Fee

Private educational institutions are now required to collect an education equality fee at 3% on all fees collected from students. This covers private universities, colleges, schools, technical educational institutions, and other private education providers. The exemptions are narrow: institutions providing training and refresher training are excluded, and public educational trusts are exempt.

The fee must be collected through invoice and deposited on a four-monthly basis, within 25 days of the end of each four-month period. Late deposit attracts 15% annual interest. Failure to file the return carries NPR 1,000 per return. Tax evasion may attract a penalty of 25% of the determined fee amount.

The Finance Bill specifically states that funds collected will be used for access to quality education and the development of educational infrastructure.

Effective date: 17 July 2026 (Shrawan 1, 2083). Administered by the Inland Revenue Department.

Health Equality Fee

Private health service providers are required to collect a health equality fee at 3% on all service charges collected from patients. The collection, deposit, and penalty framework mirrors the Education Equality Fee exactly: four-monthly deposit within 25 days; 15% annual interest for late deposit; NPR 1,000 per return for non-filing; 25% penalty for evasion.

Funds collected will be directed to access to quality health services and development of health infrastructure.

Effective date: 17 July 2026 (Shrawan 1, 2083). Administered by the Inland Revenue Department.

Casino Royalty

Casino operators face a significant increase in their annual royalty obligations:

• Casino operation: NPR 55 million per year (up from NPR 30 million per year)
• Games operated only through modern machines or equipment: NPR 30 million per year (up from NPR 15 million per year)

Royalty payments are made in instalments: 40% by Poush end, 70% by Chaitra end, and the balance by Ashad end. Late payment attracts 15% additional fee for up to three months, and 30% annual additional fee beyond that.

Effective date: 17 July 2026 (Shrawan 1, 2083). Administered by the Department of Tourism.

Other New Levies at a Glance

The following additional levies have been introduced under the Finance Bill. Detailed treatment of these will be covered in separate updates:

2. Legal Remedies Clarified for Certain Tax and Fee Assessments

The Finance Bill takes a step forward in clarifying the appeal pathways for a specific set of special tax and fee headings. Assessment decisions relating to Luxury Fee, Skill Promotion Fee, Education Equality Fee, Health Equality Fee, and Health Risk Tax can now be challenged as follows:

• Administrative review before the Director General of the Inland Revenue Department, within 30 days of receiving the assessment order.
• If the administrative review is not decided within the prescribed period, or the taxpayer is dissatisfied with the outcome, an appeal can be filed before the Revenue Tribunal within 35 days.
• During administrative review, the taxpayer must deposit the undisputed amount and generally 25% of the disputed amount.
• For Movie Development Fee, a decision made under the relevant schedule may be appealed before the Revenue Tribunal within 35 days.

This is a welcome development, because these special tax and fee headings are created under the annual Finance Bill itself and legal recourse was not always expressly provided in the charging provisions.

What the Finance Bill still leaves open: No uniform appeal mechanism has been provided for all special taxes and charges. The Finance Bill does not expressly provide administrative review or Revenue Tribunal appeal mechanisms for the Digital Service Tax, Foreign Employment Service Fee, Pollution Control Fee, Telephone Ownership Fee, Telecommunication Service Charge, Green Tax, Internal Production Protection and Promotion Fee, Clean Infrastructure Investment Fee, Road Construction Fee, Education Service Fee, and Casino Royalty. For disputes involving those levies, taxpayers may need to rely on the relevant parent legislation, general administrative law principles, or constitutional and writ remedies.

3. Tax Amnesty, Waiver, and Settlement Schemes

The amnesty and settlement provisions in the Finance Bill, 2083 go considerably further than most earlier Finance Acts. Previous schemes typically required payment of the principal tax amount, sometimes with a portion of interest or late fees attached. The current Finance Bill allows a broad range of taxpayers to settle outstanding liabilities by paying the principal tax amount plus only an additional 1%, with full waiver of applicable interest, fees, additional fees, penalties, and late fees.

The scope is wide. The schemes cover assessed tax dues, pending administrative review and court cases, customs post-clearance audit matters, annual Finance Act-based dues, dormant company compliance, and even pending income tax and VAT cases under the Revenue Leakage (Investigation and Control) Act, 2052. The inclusion of revenue leakage cases is particularly significant and appears to reflect the Government's broader policy direction to repeal the existing revenue leakage framework.

For businesses and taxpayers with any outstanding tax exposure, the amnesty window deserves immediate attention. Most deadlines fall at Poush end 2083 (14 January 2027), with some closing earlier.

4. Major Amendments to the Income Tax Act, 2058

The Finance Bill makes a substantial set of amendments to the Income Tax Act, 2058. The changes span corporate taxpayers, individual taxpayers, IT-sector employees, related-party transactions, capital gains, insurance agents, ride-sharing platforms, tax assessment timelines, and electronic invoicing compliance.

Revised Personal Income Tax Slabs

The Finance Bill revises Schedule 1 of the Income Tax Act for resident natural persons. The updated tax slabs are:

International Transactions and Transfer Pricing Rules Expanded

The Finance Bill introduces the definition of "international transaction" for the first time. This covers transactions in goods, services, finance, or intangible assets where at least one party is a non-resident, as well as any other transaction that affects the income, expenses, assets, or liabilities of a party.

The associated-person concept for transfer pricing purposes under Sections 33, 33A, and 33B has also been expanded. The following relationships now qualify:

• Control or benefit of 30% or more in income, capital, or voting power
• A loan exposure where the lender's outstanding loan equals at least 50% of the borrower's total assets
• Substantial or complete dependence on another person's intellectual property, technical knowledge, or commercial rights
• Supply of 90% or more of raw materials or consumables required by another person

Safe Harbour Rule Introduced (Section 33A)

A new safe harbour rule is available to taxpayers with annual controlled transactions up to NPR 1 billion, provided the taxpayer satisfies the prescribed conditions. If the taxpayer opts in and files accordingly, the Inland Revenue Department will accept the declared transfer price as the arm's length price. The applicable conditions are:

• Export of IT services: At least 15% operating profit margin on operating cost
• Foreign-currency intra-group loan: Interest rate at the prescribed reference rate plus 200 to 400 basis points
• Low value-added services prescribed by the Department: Profit mark-up up to 5% of total cost

Once selected, the safe harbour applies for five income years, unless there is a material change in the nature or circumstances of the transaction.

Advance Pricing Agreement Introduced (Section 33B)

A new Section 33B allows the Inland Revenue Department to enter into advance pricing agreements (APAs) for determining the arm's length price of international related-party transactions. An APA may be:

• Unilateral (between the taxpayer and the IRD)
• Bilateral (involving a treaty partner tax authority)
• Multilateral (where applicable under a double taxation avoidance agreement and mutual agreement procedure)

An APA may remain valid for up to five income years and may include rollback for up to four immediately preceding income years. This is especially relevant for multinational groups and businesses with recurring cross-border related-party transactions.

Sweat Shares in IT Sector Excluded from Taxable Remuneration

The Finance Bill amends Section 8 of the Income Tax Act to exclude the value of sweat shares received as remuneration by persons employed in the information technology industry from taxable remuneration income. This is a targeted incentive for Nepal's IT sector.

New Exempt Income Categories

The Finance Bill expands exempt income under Section 10 of the Income Tax Act by adding the following:

• Income from free transfer of land or a private building by a natural person to the Government of Nepal, a provincial government, or a local level authority
• Interest income of a non-profit financial institution fully owned by a foreign government, from loan investments in Nepal
• Income earned by drinking water and sanitation consumer institutions registered under the Water Resources Act, 2049, for their stated objectives
• Income earned by universities established and operating in Nepal, for their stated objectives

Donation Deduction Limit Raised

The Finance Bill amends Section 12 of the Income Tax Act to increase the deductible donation limit from NPR 100,000 to NPR 300,000. This is a meaningful change for individual taxpayers who make donations to eligible institutions.

CSR Expenditure Deduction Now Expressly Permitted (New Section 12D)

A new Section 12D has been inserted into the Income Tax Act to expressly allow the deduction of expenses incurred on corporate social responsibility activities, as required under prevailing law. This brings welcome clarity and consistency with Section 54 of the Industrial Enterprises Act, 2076, which already requires applicable industries to set aside at least 1% of annual net profits for CSR and allows that amount to be deducted for income tax purposes.

Cash Payment Deduction Threshold Tightened

The Finance Bill amends Section 21 of the Income Tax Act. Two significant changes apply here:

• The cash payment disallowance rule previously applied only to persons with annual turnover exceeding NPR 2 million. It now applies to any person, regardless of turnover.
• The cash payment threshold, above which cash transactions are disallowed as deductions, is reduced from NPR 50,000 to NPR 25,000 per transaction, except in specified cases.

Section 57 Change-in-Control Rule Relaxed in Specific Cases

The Finance Bill replaces the proviso to Section 57(1) of the Income Tax Act. Section 57 will no longer apply in the following situations:

• Where capital is increased in a start-up, venture capital fund, or private equity fund, while existing shareholders or partners retain the same share count and capital, and new shareholders or partners are added
• Where interest in an entity is involuntarily transferred to legal heirs following the death of the beneficial owner
• Where ownership of a resident entity changes and, as a consequence, ownership of another resident entity in which the first entity holds an interest also changes

Department Given Wider Power to Access Electronic Financial Information (New Section 82A)

A new Section 82A is inserted into the Income Tax Act. The Inland Revenue Department is now explicitly empowered to obtain, through electronic means and subject to prevailing law, information or records relating to the financial transactions of any person located in Nepal. This includes records held by the person concerned, as well as by their customers, employees, service recipients, members, or any other party maintaining financial transaction data.

This is a significant expansion in the Department's information-gathering authority and a notable shift toward digital tax administration. Businesses should review their data management and record-keeping systems in this light.

Withholding Tax on Insurance Agent Commissions

The Finance Bill amends Section 88 of the Income Tax Act. Service fees or commissions paid to a resident natural person insurance agent are now subject to withholding tax at 20%. This directly affects insurance companies, intermediaries, and individual insurance agents working in Nepal.

Capital Gains Tax Rates Revised Upward

For disposal of securities in a resident entity (Section 95A(2)):

For disposal of land or a private building by a natural person (Section 95A(5)):

Special concessional rate for Government compulsory acquisition: Where land or a building owned by a natural person is compulsorily acquired due to a decision of the Government of Nepal, the applicable advance tax rate is 2.5%. This is a meaningful concession relative to the ordinary revised rates.

No capital gains tax on free transfers to Government: A new Section 95A(5A) provides that where a natural person gives land or a private building free of cost to the Government of Nepal, a provincial government, or a local level authority, capital gains tax is not collected on that disposal.

Advance Tax on Ride-Sharing Platform Payments

A new Section 95A(6F) requires resident ride-sharing platform operators to collect 1% advance tax on payments made to natural persons providing services through their platform. This obligation will need to be built into platform payment systems before the effective date.

Tax Assessment Period Shortened

The ordinary tax assessment period under Section 101(3) is reduced from 4 years to 3 years. This reduction in ordinary audit exposure is generally beneficial for taxpayers, though exceptions under the Income Tax Act continue to apply.

Tax Refund Claim Period Extended

The refund-related claim period under Section 113(4) is extended from 2 years to 5 years. Taxpayers who have overpaid tax or are entitled to tax refunds now have considerably more time to submit their claims.

Stricter Penalty for Non-Compliant E-Invoicing Software

Section 119A of the Income Tax Act is replaced with a revised framework:

• NPR 500,000 applies where electronic invoicing software permits deletion or alteration of transaction data.
• NPR 100,000 applies for non-compliance with other e-invoicing requirements, such as prescribed electronic invoice issuance or use of the Department's billing system.

Final Withholding Treatment Clarified

The Finance Bill amends Section 92(1) of the Income Tax Act to clarify that certain gains and payments are to be treated as final withholding payments. The categories now treated as final withholding are:

• Gains under Section 95A(2) (disposal of securities) and Section 95A(5) (disposal of land or private buildings), for resident natural persons who do not wish to file income returns and for non-resident persons
• Foreign currency payments covered under Sections 95A(6B), 95A(6C), and 95A(6D)
• Service payments covered under Section 95A(6E)
• Service fees or commissions paid to resident natural person insurance agents

One drafting concern worth noting: a resident natural person with annual income exceeding NPR 4 million is required to file an income tax return. In practice, natural persons are also required to file for tax clearance certificates. In those situations, the taxpayer may not realistically fall within the category of a person who "does not wish to file income return." The amendment may therefore require further clarification from the Inland Revenue Department or through a subsequent legislative amendment.

Departmental Public Circulars to Have Final Interpretive Authority

The Finance Bill inserts a provision under Section 75 of the Income Tax Act stating that interpretations issued by the Inland Revenue Department through Public Circulars under that section will be final. Businesses and practitioners should monitor these circulars closely going forward, as they will now carry binding interpretive weight.

5. Major Amendments to the VAT Act, 2052

The Finance Bill makes several important changes to the Value Added Tax Act, 2052. Most amendments under Section 55 take effect immediately from 29 May 2026. The specific provisions for 5% VAT on ride-sharing and electricity services take effect from 17 July 2026 (Shrawan 1, 2083).

A More Flexible VAT Rate Framework

Previously, VAT in Nepal was applied at a standard flat rate of 13%, with zero-rated supplies and specific exemptions. The Finance Bill changes this. The Government of Nepal may now prescribe different VAT rates for specified goods or services through a notice published in the Nepal Gazette, provided the rate does not exceed the standard 13%. This gives the Government considerably more flexibility in applying VAT policy going forward.

Effective date: 29 May 2026 (immediate).

5% VAT on Ride-Sharing Platform Services

A resident ride-sharing platform operator is now required to determine and collect VAT at 5% on the taxable value of vehicle or delivery services provided through service providers on its electronic platform. The platform operator is also responsible for collecting VAT on behalf of those service providers.

Ride-sharing platforms in Nepal should review their technology infrastructure and invoicing systems well before the effective date to ensure compliance.

Effective date: 17 July 2026 (Shrawan 1, 2083).

5% VAT on Electricity Services to Final Consumers

Electricity supplied to final consumers will now attract VAT at 5% on the taxable value. Two categories remain exempt: household electricity consumption up to 50 units per customer per month continues to be exempt, and sales of electricity between electricity trading businesses also remain exempt from VAT.

Effective date: 17 July 2026 (Shrawan 1, 2083).

Clearer Framework for Electronic Invoicing and the CBMS

The Finance Bill replaces the existing Section 14A of the VAT Act and introduces a clearer framework for electronic invoicing. The Inland Revenue Department is now empowered to:

• Prescribe standards and procedures for electronic invoices
• Require specified taxpayers to issue electronic invoices on a mandatory basis
• Require taxpayers to connect with the Central Billing Monitoring System (CBMS)
• Require use of the billing system provided by the Department

Electronic Payment Benefit: From Refund to Discount

Previously, a consumer making electronic payment for specified goods or services could receive 10% of the VAT paid as an immediate refund. Under the amended provision, this benefit is reframed as an immediate discount at the point of payment, rather than a subsequent refund. The economic value to the consumer remains similar, but the mechanics are different and businesses will need to reflect this in their billing systems.

Revised VAT Penalty Framework

The tenfold increase in the general penalty and the new NPR 50,000 penalty for goods movement directive violations signal a clear shift toward stricter VAT enforcement.

What Businesses Should Do Now

The Finance Bill, 2083 carries immediate implications across a wide range of sectors and taxpayer categories. These are the priority action areas:

Sector-specific levies: Private educational institutions, private health service providers, luxury hotels and resorts, gold and silver traders, electric vehicle importers, and casino operators should identify their obligations, assess their collection and deposit systems, and act before 17 July 2026 where relevant.

Tax amnesty deadlines: Most amnesty windows close at Poush end 2083 (14 January 2027). Earlier deadlines apply for Companies Act compliance (Ashoj end 2083) and for UN and diplomatic mission employees (Mangsir end 2083). Taxpayers with pending dues, unfiled returns, or ongoing disputes should evaluate eligibility without delay.

Transfer pricing and cross-border transactions: Multinational enterprises and businesses with international related-party transactions should review their positions in light of the expanded associated-person definition, the new safe harbour rule, and the advance pricing agreement framework now available under the Income Tax Act.

Capital gains planning: The revised capital gains rates on securities and real property, alongside the new concessional rate for Government compulsory acquisition, require updated planning for asset disposal transactions.

Ride-sharing platforms: Both the 5% VAT obligation and the 1% advance tax collection obligation on payments to service providers require platform operators to update their technology and compliance systems before 17 July 2026.

Income tax compliance generally: The shortened assessment period (3 years), extended refund window (5 years), tightened cash payment threshold (NPR 25,000), and the new e-invoicing penalty structure collectively require businesses to revisit their internal tax compliance frameworks.

Closing Note

Nepal's Finance Bill, 2083 is one of the more substantive Finance Bills in recent memory. It widens the tax base, introduces new compliance obligations across multiple sectors, modernises transfer pricing and international tax rules, and offers the most extensive amnesty window seen in several years.

For businesses operating in Nepal, the critical question is not whether these changes are relevant but how quickly they can assess and respond to the specific obligations that apply to them. Several provisions are already in force. Others take effect in July 2026. The amnesty window, while generous, has fixed deadlines that will not be extended.