INVESTOR’S APPROACH

ON NEPALESE INCOME TAX

Presented BY:
Arun Raut, FCA, MBS, DiP IFR, ISA
 Coverage
1 • TDS on Share Transfer & Change of Control

2 • Sale of Land & Building

3 • Other Tax Issues

 Company

Seller Buyer

Shareholders
 U/s
95(Ka)
What is the tax rate??? If I invest in
▪ Listed Company
▪ Non-Listed Company
 Listed in NEPSE

5%

10% Stock Broker

25%
 Non-Listed

10%

15% Related
Company/Entity

25%
Is This Tax Final With holding??

Do we have Capital Gain Tax ??

What is the Final Tax??

 For Final Withholding

Capital Gain Tax is applicable to Natural Person Only. For Entity it is normal tax.
Also known as Non Business Chargeable Assets

But for natural person maximum tax rate is the TDS itself
If A has taxable income of Nrs. 1.1 Million out of which Nrs 0.5
million is salary income and Nrs. 0.6 million is from sale of share.
Natural Person-Single Entity

• 400,000 @ 1%= 4,000 1,100,000 @ 25%=275,000

• Next 600,000 @ 5%=30,000
• Next 100,000 @ 10%=10,000
44,000

Even Natural Person need to submit tax return.

If A has taxable income of Nrs. 0.6 million only from sale of
share.
Natural Person-Single Entity

400,000 @ 0%= Nil 600,000 @ 25%=150,000

Next 200,000 @ 5%= 10,000
Total Deducted = 30,000
Can apply for Refund of 20,000

Natural person can ask for refund only if have

submitted return. However refund is remote.
Why do Investor need this???
Lowest tax rate??

TDS liability falls to Company

whose share is Transferred

Can not transfer at par value if book value is

higher or has land whose market value is
greater
ANY IMPACT OF CHANGE IN SHARE HOLDING % ??

Company

Seller Buyer

Shareholders
Taking scenario of change in Control

Share Holders Old % New % Change of Control

A 33.34 6.00 (27.34)
B 33.33 5.00 (28.33)
C 5.00 8.00 3.00
D 6.00 9.00 3.00
E 7.00 28.00 21.00
F 15.33 44.00 28.67
Total 100.00 100.00 -
 ➢ Although it is purely a transaction between shareholder,
tax liability may increase for the company (lifting of
corporate veil)

➢ Need to Submit Separate Financial Statement. So three

Cannot have
automatic Financial Statement.
Verification -FS for whole year as per Company Act
for Change
of Control. -FS before Change of control (Tax return) (Change of control)
-FS after Change of control (Tax Return) (DO3)

➢ Unabsorbed tax losses cannot be carried forward; all assets and

liabilities will be transferred at market value.
Tax needs to be paid by the company as well as Shareholders.

Company may suffer if there is no real liquidity in the company

Care must be taken if revaluation model is followed..

 Sale of Land & Building only above 1 Million

< 5 YRS 5%
Natural Malpot Office
Person on Gain
> 5 YRS 2.5%

Malpot Office
Entity 1.5% on Sale Value

Not needed for Personal Building lived for more that 10 years or land &
building transferred within 3 generation other than through sale
9851092272