According to the data of the Large Taxpayers Office, the electronic service tax collection was Rs. 48.995 crore in the fiscal year 2080/81, which increased to Rs. 63.542 crore in the last fiscal year 2081/82.
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The share of tax payable by foreign technology companies operating in Nepal for their transactions here has increased in the last fiscal year. According to the data of the Large Taxpayers Office, the electronic service tax collection was Rs 48.995 crore in the fiscal year 2080/81, and it has increased to Rs 63.542 crore in the last fiscal year 2081/82.*
The digital service tax or electronic service tax paid by large companies like Google, Meta, TikTok, Netflix, Adobe was Rs 56.9 million in the fiscal year 2079/80. According to the office's data, 19 foreign technology companies paid a total of Rs 56.9 million in digital service tax in the fiscal year 2080/81.
Currently, 22 large foreign technology companies have been registered in Nepal for tax purposes. According to the Economic Act 2082, non-resident individuals or companies providing electronic services (digital services) to users in Nepal must register with the Nepalese tax system and obtain a PAN number and pay DST annually and Value Added Tax (VAT) monthly.
Only foreign technology companies with an annual turnover of more than 3 million rupees fall under the scope of this tax. A 2 percent electronic service tax is levied on the total transaction value received by non-resident individuals for providing electronic services in Nepal. Residents or companies in Nepal are not attracted by this tax. In addition, this tax is also not levied on the transaction value of services provided for commercial purposes to commercial users in Nepal. Although the initial provision had a provision to levy 2 percent digital service tax on transactions exceeding 2 million rupees annually, the government increased the threshold to 3 million rupees annually through the Economic Act 2081.
The amount of VAT that foreign technology companies required to pay digital service tax are paying in Nepal on a monthly basis. In the fiscal year 2079/80, 8 foreign companies collected a total of Rs 91.7 million in VAT. In the fiscal year 2080/81, 18 companies paid a total of Rs 35.85 million in VAT, while in the fiscal year 2081/82, 19 companies collected a total of Rs 42.65 million in VAT. With the recent registration of 3 more companies, the total number of foreign digital companies under the tax net in Nepal has reached 22.
The Economic Act and the Procedure on Electronic Services Tax (Digital Services Tax), 2082, have defined electronic or digital services as services that require information technology to provide services to users and are provided automatically over the internet with minimal human intervention. This includes movies, music, OTT services, data collection, cloud services, gaming services, mobile applications, software supply, online marketplaces and even targeted advertising.
‘Since this tax system is a new subject for Nepal, the details submitted by the companies online from outside are currently being considered as the basis,’ said Kedarnath Sharma, Chief Tax Administrator of the Large Taxpayers Office. ‘Verification is currently underway to see if the details they have submitted are correct or not.’
Sharma informed that work is being done to find local representatives and agencies in Nepal to understand how the companies are filing taxes and what their actual system is. Since the main activities and offices of these companies are abroad, they deposit the amount from there and it took some time to verify it from here.
According to Sita Bartaula, the information officer of the office, the merger between digital companies has also affected tax collection. ‘Some companies have written to us informing us that they have merged,’ she said. ‘Although the process of new registrations is ongoing, they have not paid significant taxes so far.’ Some have also shown a tendency to pay only digital service tax and not pay VAT. Video sharing app TikTok has been refusing to pay VAT lately.
The 59th report of the Auditor General in 2079 pointed out that a large amount of state money was being transferred abroad from payments made for using applications like YouTube, TikTok, Google Meet, Zoom, and Microsoft Teams. Since these applications provide services in Nepal, the report mentioned that even if the transaction is conducted from abroad, based on the tax source principle, the tax should be paid in Nepal. As pointed out by the Auditor General, the Department of Internal Revenue had issued procedures related to electronic service tax and procedures related to value-added tax on electronic services provided by non-residents on 22 Ashad 2079.
Since then, foreign technology companies have started paying digital service tax. US President Donald Trump has been very aggressive against digital service tax. Since most technology companies are American, he had already announced in February 2025 that he would take strong action against countries that impose digital services taxes. He had last described it as ‘exploitation of American technology and innovation’ or ‘ransom’. He has instructed the US Trade Representative (USTR) to prepare a list of countries that impose digital taxes and initiate action against them under ‘Section 301’.
Due to pressure from Trump, countries like Canada have recently decided to withdraw or amend their digital services taxes. If the US also considers Nepal’s digital services tax ‘unfair’, there is a risk of additional customs duties on goods such as carpets, ready-made garments and other goods exported from Nepal to the US.
However, as Nepal’s digital market is small, observers of this sector say that the US is unlikely to target Nepal in the first place. Although Trump's policy is mainly aimed at the European Union, Canada and countries with large economies, there is a possibility that Nepal could fall into their trap.
In the news item titled 'Digital tax paid by Google, Meta, Netflix in Nepal has decreased' published earlier, this error has been corrected due to a technical error in the data received from the Large Taxpayers' Office. Although the details provided by the office earlier showed a decrease in the collection of Digital Services Tax (DST), the office itself later corrected the details and informed that the tax collection has increased.
According to the latest data of the office in the fiscal year 2080/81, 48.995 million rupees were collected in that year, while in the fiscal year 2081/82, the revenue collection increased to 63.542 million rupees, informed Kedarnath Sharma, the head of the Large Taxpayers' Office.
In this way, the graph of digital services tax in Nepal has not declined but has increased compared to the previous year. Sharma pointed out that the file might have been different when the employee looked at the details. Although the office initially attributed the decrease in taxes to ‘merger of companies’ and ‘change in ceiling’, the actual data has confirmed that the collection situation is still strong. This detail has been corrected, apologizing for the confusion caused to the reader due to the incorrect information provided by the office.
