Nepal IT Sector Tax Guide

Preferential CIT Rate — 10% for IT Companies

• Eligible activities: The 10% rate applies to companies engaged in: software development (application, system, and embedded), IT services (consulting, implementation, maintenance), digital content creation, data processing and analytics, cloud computing services, cybersecurity services, and technology research and development.
• Qualification criteria: To claim the 10% rate, the company must: (a) be registered with the Ministry of Science and Technology as an IT company, (b) derive at least 80% of gross income from eligible IT activities, (c) maintain proper accounting records, and (d) file annual audited financial statements with the IRD.
• Period of benefit: The reduced rate is available for the life of the company as long as it continues to meet the eligibility criteria. There is no time limit on the concession.
• Other levies: Even at the 10% rate, the 7% rural municipality tax and 3% SSF on net profit still apply, bringing the total effective tax cost to approximately 20% of net profit.

Digital Economy Incentives

• Digital service imports: Imported digital services (SaaS, cloud platforms, software licenses) may qualify for reduced withholding tax rates, making it more cost-effective for Nepali IT companies to use global technology platforms.
• Export incentives: IT services exported by Nepali companies are zero-rated for VAT (0%), and the input VAT incurred on local expenses (office rent, utilities, equipment) can be refunded under the VAT credit mechanism.
• IT park benefits: Companies operating in designated IT parks (such as Banepa IT Park) may qualify for additional incentives including subsidised rent, power subsidies, and streamlined regulatory procedures.
• Startup incentives: Technology startups may qualify for additional tax holidays or exemptions under the Industrial Enterprise Act 2076, particularly in the first few years of operation.

SSF and Employment for Tech Companies

• SSF contributions apply: IT companies must register with the Social Security Fund (SSF) and make contributions for all regular employees. The standard rates apply: employee 11% and employer 20% of basic pay.
• Contractors vs. employees: Many IT companies use contract developers. The IRD and SSF may reclassify contractors as employees if the working relationship meets the criteria for employment (control, integration, exclusivity). Companies should carefully structure contractor engagements to avoid reclassification risks.
• Software developer salaries: Developer salaries are subject to SSF contributions up to the monthly cap (~NPR 240,000 of basic pay). Above the cap, no SSF contribution is required on the excess.
• Tax deduction for training: IT companies may deduct the cost of employee training, certification, and professional development as business expenses, reducing the corporate tax base.

Registration and Compliance

• Company registration: IT companies must register with the Company Registrar's Office (private or public limited) and obtain a PAN from the IRD. Additionally, registration with the Ministry of Science and Technology is required for the tax concession.
• Annual compliance: IT companies must file annual audited accounts with the IRD, file monthly VAT returns (if registered), remit WHT on payments, and file SSF contribution reports monthly.
• NRN IT professionals: Non-Resident Nepali (NRN) IT professionals returning to Nepal may qualify for additional tax incentives on foreign income for a limited period under the Returned NRN provisions.

For corporate tax rate comparisons and general provisions, see our Corporate Tax Guide →. For cross-border taxation of digital services, see our Cross-Border Guide →.