Income Tax Act, 2002

Added by the Finance Act, 2075.Provided that a payment made from a non-contributory fund shall not be deemed to be a benefit derived from an interest held in an unapproved retirement fund. Repealed by the Finance Act, 2075.66. Chapter-13

International Tax

67. Source of income, loss, gain, and payment: (1) If, in respect of income of a person from any employment, business, or investment, the amount referred to in clause (a) exceeds the amount referred to in clause (b), the source of such income shall be deemed to be in Nepal to the extent of such excess amount.

(a) amounts sourced in Nepal included in calculating such income,

(b) amounts sourced in Nepal deducted in calculating such income.

(2) If, in respect of a loss incurred by a person from any business or investment, the amount referred to in clause (a) exceeds the amount referred to in clause (b), the source of such loss shall be deemed to be in Nepal to the extent of such excess amount.

(a) amounts sourced in Nepal deducted in calculating the income from such business or investment,

(b) amounts sourced in Nepal included in calculating such income.

(3) An amount included in calculating income shall be deemed to have a source in Nepal in the following circumstances:

(a) net gains under clause (c) of sub-section (2) of Section 7 or clause (b) of sub-section (2) of Section 9, arrived at after deducting losses incurred from the disposal of assets or liabilities sourced in Nepal from gains derived from the disposal of assets or liabilities sourced in Nepal,

(b) gains and amounts included in calculating income as referred to in clause (d) of sub-section (2) of Section 7 or clause (c) of sub-section (2) of Section 9, involving assets situated in Nepal or liabilities to be borne in Nepal,

(c) subject to clauses (a) and (b), payments received sourced in Nepal.

(4) If assets situated in Nepal or liabilities to be borne in Nepal are involved, the source of the gain or loss arising from the disposal of such assets or liabilities shall be deemed to be in Nepal.

(5) If amounts deducted while determining income include the following amounts, the source of such amounts shall be deemed to be in Nepal:

(a) the amount allowable as deduction for cost under sub-section (1) of Section 15 in relation to assets situated in Nepal,

(b) expenses under sub-section (1) of Section 16 and expenses allowable as deduction up to the limit under Section 19 in relation to assets situated in Nepal, and

(c) subject to clauses (a) and (b), payments sourced in Nepal.

(6) The source of the following payments shall be deemed to be in Nepal:

(a) dividends paid by a resident entity,

(b) interest paid by a resident person,

(c) payments in respect of natural resources made in relation to, or calculated with reference to, natural resources derived from land situated in Nepal,

(d) rent paid for the use of any property situated in Nepal,

(e) royalties received by a person for giving someone the use of any property situated in Nepal, or for the right to use such property, or for refraining from using such property,

(f) amount paid in respect of general insurance relating to a risk situated in Nepal, and premium paid to that person in respect of general insurance,

(g) payments received by a person operating a land, sea, or air transport or charter service business in Nepal, except as a result of transshipment, for:

(1) the carriage of departing passengers, or

(2) the despatch of mail, animals, or other direct movable property.

(h) payments received by a person operating a business of transmitting news or information through means of communication such as wire, radio, optical fiber, or satellite, from the transmission of news or information from mechanisms established in Nepal, whether or not such news or information originates in Nepal,

(i) payments for the following types of service fees, including fees for engaging employment or providing services or for refraining from such activities, not covered by clause (g) or (h):

(1) if such activities occur in Nepal, wherever the place of payment, or

(2) amended by the Finance Act, 2075. if the payment is made by the Government of Nepal, wherever the employment.

(j) annuity amounts, amounts in respect of life insurance, and retirement benefit amounts not falling under clause (i), paid by a resident person, and any premium or other payment given to a resident person to secure such amounts,

(k) gifts received in relation to a business or investment operated from assets situated in Nepal, and

(l) payments other than those referred to in clauses (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), and (k) above:

(1) payments made in respect of the disposal of assets situated in Nepal or in respect of assuming a liability to be borne in Nepal, or

(2) payments made in respect of activities conducted in Nepal.

(7) Any income, loss, amount, gain, or payment not deemed to have a source in Nepal under the above sub-sections shall be deemed to have a foreign source, and for the purpose of determining in which foreign country the source of such income, loss, amount, gain, or payment lies, the references to Nepal in this Act shall apply mutatis mutandis as references to that specific foreign country.