Nepal’s Digital Service Tax policy provides a structured process for the cancellation of registration by non-resident service providers. This provision ensures that entities that cease their taxable activities in Nepal or no longer meet the requirements for registration can formally deregister while fulfilling their tax obligations.
Grounds to Cancel Digital Service Tax in Nepal
A non-resident service provider can request the cancellation of their Digital Service Tax registration for the following reasons:
- The entity has ceased its operations in Nepal.
- The taxable transaction value no longer meets the threshold defined in the policy.
- Any other legitimate reason that justifies deregistration, as outlined in the policy.
Registration cancellation is not automatic. Non-resident entities must follow a defined process and fulfill their outstanding obligations before the registration can be terminated.
Application Process to Cancel Digital Service Tax in Nepal
To initiate the cancellation process, the non-resident service provider must submit a formal application to the Large Taxpayer Office. The application must be submitted in the format specified in Schedule 4 of the policy and include the following details:
- The taxpayer’s Permanent Account Number.
- The name and address of the taxpayer.
- Details of tax returns and payments made for the current income year.
- The reason for requesting cancellation of registration.
This structured application process ensures that all necessary information is provided for the Large Taxpayer Office to evaluate the request efficiently.
Verification by the Large Taxpayer Office
Upon receiving the application, the Large Taxpayer Office verifies the following:
- Whether the taxpayer has submitted all required tax returns.
- Whether all outstanding tax liabilities have been paid in full.
- Whether the taxpayer has complied with all other Digital Service Tax policy regulatory requirements.
This verification step ensures that deregistration is only granted to entities that have fulfilled their tax obligations.
Notification of Cancellation Decision
After completing the verification process, the Large Taxpayer Office notifies the non-resident service provider of its decision regarding the cancellation of registration. The policy specifies a timeline of three months for the Large Taxpayer Office to either:
- Approve the application and issue a cancellation certificate.
- Reject the application, providing clear reasons for the decision.
If the application is approved, the Large Taxpayer Office confirms the deregistration and ensures that the taxpayer is no longer liable for Digital Service Tax obligations in Nepal. However, if the application is denied, the service provider is informed about the outstanding requirements that need to be fulfilled for reconsideration.
Taxpayer Obligations Before Cancellation
The Digital Service Tax policy ensures that no taxpayer can evade their obligations during the cancellation process. Before a registration can be canceled, the non-resident service provider must:
- Submit all outstanding tax returns for the current income year.
- If applicable, pay any remaining tax liabilities, including late submission fees or interest.
- Ensure that all previously reported transactions have been audited and cleared by the Large Taxpayer Office.
These provisions maintain the integrity of the Digital Service Tax system, ensuring that deregistration does not result in unpaid taxes or unresolved compliance issues.
Importance of the Cancellation Process
The cancellation process is vital in maintaining a fair and transparent tax framework. By enforcing stringent requirements for deregistration, the policy:
- Ensures that non-resident service providers cannot avoid their tax obligations.
- Helps maintain accurate records of active taxpayers under the Digital Service Tax framework.
- Promotes trust and accountability in Nepal’s tax administration system.
Re-registration and Future Compliance
If a previously deregistered service provider resumes operations in Nepal or exceeds the transaction threshold again, they must re-register for the Digital Service Tax. The policy allows entities to re-enter the tax system, ensuring that all active service providers remain compliant.
Source: Digital Service Tax 2079 (2022)
