Nepal Cross-Border Tax Guide

Withholding Tax on Cross-Border Payments

• Dividends — 10%: Dividends paid by a Nepali company to non-resident shareholders are subject to 10% WHT. Reduced rates may apply under DTTs (typically 5-10% for substantial shareholdings).
• Interest — 5% to 15%: Interest paid to non-residents is subject to WHT at 5% on savings account interest and 15% on fixed deposits, debentures, and other debt instruments. DTT rates generally range from 10-15%.
• Royalties — 15%: Royalties paid to non-residents for the use of intellectual property, technology, patents, copyrights, or know-how are subject to 15% WHT. DTTs may reduce this to 10-15%.
• Technical services fees — 15%: Fees for technical, management, or consulting services provided by non-residents are treated as royalties or fees for technical services, subject to 15% WHT (unless reduced under DTTs).

Permanent Establishment (PE) Risk

• PE definition: A foreign company is considered to have a permanent establishment in Nepal if it has a fixed place of business (office, branch, factory, workshop), a construction site lasting more than 6-12 months (depending on DTT), or a dependent agent concluding contracts in Nepal.
• Taxation of PE: A PE is taxed on Nepal-source income at the standard corporate rate (25%) or applicable rate. The PE must register with the IRD, obtain a PAN, and file annual tax returns.
• Force of attraction: Nepal applies the force of attraction principle — if a foreign enterprise has a PE in Nepal, all Nepal-source income of that enterprise is attributed to the PE and taxed accordingly.

Transfer Pricing

• Arm's length principle: Nepal's transfer pricing rules require that related-party transactions be conducted at arm's length prices — the price that would have been agreed between independent parties in comparable circumstances.
• Documentation requirements: Companies with related-party transactions exceeding prescribed thresholds (NPR 10 million in aggregate or NPR 1 million for individual transactions) must maintain transfer pricing documentation and submit a disclosure form with the annual tax return.
• Methods: Nepal accepts OECD-recognised transfer pricing methods: Comparable Uncontrolled Price (CUP), Cost Plus Method, Resale Price Method, Transactional Net Margin Method (TNMM), and Profit Split Method.
• Penalties: Transfer pricing adjustments by the IRD may result in additional tax, interest at 12-15% per annum, and penalties of up to 50% of the additional tax.

Remittance Reporting (NRB)

• Large remittance reporting: The Nepal Rastra Bank (NRB) requires reporting of large cross-border remittances. Outward remittances exceeding NPR 1 million per transaction are subject to enhanced due diligence.
• Repatriation of profits: Foreign companies with a PE or subsidiary in Nepal may repatriate after-tax profits. Prior approval from the NRB is required, and tax clearance from the IRD must be obtained before repatriation.
• Foreign investment: Foreign direct investment (FDI) in Nepal requires NRB approval and must be registered with the Department of Industry. Dividends and capital can be repatriated subject to compliance with foreign exchange regulations.

For DTT benefits and tax residency, see our Tax Residency Guide →. For inbound investment incentives, see our IT Sector Guide →.