The government of Nepal collected Rs 14.16 billion in revenue from exemptions and schemes introduced under the Finance Act of 2080 BS (FY 2023/24). This contribution is part of the overall tax revenue of Rs 944.55 billion and non-tax revenue of Rs 114.34 billion collected during the fiscal year. Despite these collections, the government fell short of its target of Rs 1.422 trillion, achieving only 76% of its revenue goal.
Key actions that contributed to this revenue included the investigation of 1,986 taxpayers, resulting in an additional Rs 11.04 billion being assessed. The government also made significant changes to VAT exemptions, including the cancellation of 170 and 340 VAT exemption rates in an effort to broaden the tax base.
There were also targeted exemptions for Nepali citizens working abroad. For example, those who worked for at least six consecutive months abroad and returned with a labor approval were allowed to bring one additional mobile phone duty-free starting May 15, 2023. In the current fiscal year, Nepali workers who have contributed to the Social Security Fund and worked abroad for 12 consecutive months are allowed to bring any size of television set duty-free. Furthermore, customs duties on specific imports have been increased to promote domestically produced industrial products, such as cement, iron rods, and electrical cables.
Additional measures include a reduced 1% customs duty for machinery imports by small, domestic, and micro-industries, as well as a general income tax increase for individuals with an income exceeding Rs 5 million. At the same time, those earning foreign currency by exporting IT services enjoy a 50% income tax exemption on such earnings.
The government has also expanded its tax base by bringing non-residents providing electrical services in Nepal under the VAT system, waiving filing fees, interest, and additional charges up to mid-June 2023.
These schemes and changes reflect the government’s ongoing efforts to expand the tax base, enhance revenue collection, and encourage domestic production, while also balancing the needs of Nepali citizens working abroad.
