Kathmandu. Social media companies that collect and sell various data related to Nepali users will have to pay tax for the sale of data.
The Department of Internal Revenue has implemented tax provisions for foreign companies with annual turnover of more than Rs 3 million through the ‘Working Procedure on Digital Service Tax, 2082’ issued on Tuesday. In this procedure, the digital service provided by a foreign service provider company in Nepal and the sale of Data related to Nepali users have been defined as separate taxable transactions.
As per the procedure, a foreign person or company will be taxed at the rate of two percent on the transaction value of the sale of data collected from users in Nepal. In this tax calculation, only the amount other than indirect tax levied in Nepal should be included.
Similarly, all foreign companies with annual turnover of more than Rs 3 million must be registered in Nepal as per this procedure. Service tax will also have to be paid.
The tax officer may impose a fine of Rs 20,000 each time as per clause (a) of sub-section (1) of Section 29 of the Value Added Tax Act, 2052.
Foreign companies will get tax exemption in case of transaction amount sold to Nepali companies for business purposes.
According to this provision, facebook, Instagram, YouTube, TikTok, Google, etc. will have to pay two percent tax on the income of Nepali users while selling data including choice, behavior, spending habits, methods of choice, choice, personal details, etc. to third parties.
Similarly, the Department has issued the Vat Related Procedure 2079 Third Amendment 2082 bs on electronic services provided by non-resident persons. According to the revised procedure, non-resident persons carrying out electronic transactions in Nepal with a tax of more than Rs 3 million in the last 12 months will have to register in Nepal and collect value added tax (VAT). A non-resident person registered with vat once exceeding the transaction limit will have to compulsorily collect value added tax (VAT) irrespective of the amount of transaction.
