Digital Service Tax for Non-Residents policy requires all entities providing taxable digital services to Nepali consumers to complete a formal registration process. This registration is critical for ensuring compliance with the Digital Service Tax framework and is administered by the Large Taxpayer Office.
Requirement for Digital Service Tax for Non-Residents
Under the policy, non-resident service providers must register for the Digital Service Tax if their annual transaction value with Nepali consumers exceeds two million Nepali rupees. The policy emphasizes that registration is mandatory and does not exempt entities that fail to register within the stipulated timeline from paying taxes. Additionally, non-resident entities may opt for voluntary registration even if their transaction values are below the threshold.
Timeline for Registration
Non-resident entities must apply for registration within 30 days of exceeding the transaction threshold. This ensures that entities are included in the tax system promptly and can promptly fulfill their compliance obligations.
Documents Required for Registration
Nonresident service providers must submit an online application and several supporting documents to complete the registration process. These include:
- A notarized copy of the business registration certificate from the entity’s country of residence.
- A notarized copy of the tax registration identification number issued in the entity’s country of residence.
- A letter designating an authorized person for tax purposes and a notarized copy of the person’s passport.
- A photograph and a specimen signature of the authorized person.
- A copy of their citizenship or passport must be submitted if a Nepali citizen is designated as a representative for tax purposes.
These documents must be scanned and uploaded as digital copies during the online registration.
Permanent Account Number
Upon successful registration, non-resident entities are issued a Permanent Account Number. The Permanent Account Number is a unique identifier for tax purposes and is essential for filing tax returns and making payments. Non-resident entities registered under Nepal’s VAT system are not required to obtain a separate Permanent Account Number for Digital Service Tax.
Process of Registration
The registration process for the Digital Service Tax in Nepal is designed to be straightforward and efficient. Non-resident entities must submit their applications through an online portal managed by the Large Taxpayer Office (Large Taxpayer Office). The steps include:
Fill out the application form provided in Schedule 1 of the policy. This form captures key details about the non-resident entity, including:
- Legal name and business registration number.
- Taxpayer identification number in the country of residence.
- Estimated annual transaction value in Nepali rupees.
- Details of the authorized person and, if applicable, the Nepali representative.
Uploading all required documents, such as notarized certificates, passport copies, and photographs, as specified in the policy. Submit the completed application and supporting documents for the Large Taxpayer Office review.
The Large Taxpayer Office reviews the application and supporting documents within seven days of submission. If the application meets all requirements, the Large Taxpayer Office issues a registration certificate and assigns the entity a Permanent Account Number.
Notification of Registration Status
Once the application is processed, the Large Taxpayer Office notifies the non-resident entity of the outcome:
- If the registration is successful, the entity receives its Permanent Account Number certificate in the format outlined in Schedule 2 of the policy.
- If the application is incomplete or does not meet the requirements, the Large Taxpayer Office informs the entity within 15 days of receipt, stating the reasons for rejection.
This transparent process ensures service providers are promptly informed of their registration status, allowing them to address any necessary issues.
Consequences of Non-Registration
The Digital Service Tax policy explicitly states that failing to register does not exempt an entity from its tax obligations. Non-resident entities not registering within the required timeline are still liable to pay the Digital Service Tax, and penalties may be imposed for non-compliance. This provision ensures accountability and encourages timely registration among service providers.
Voluntary Registration
The policy allows non-resident entities to register voluntarily even if their annual transaction value exceeds the two-million-rupee threshold. This flexibility benefits entities wishing to proactively ensure compliance and establish a formal presence in Nepal’s tax system.
Source: Digital Service Tax 2079 (2022)
