By Dipesh Ghimire
Foreign IT Companies’ Tax Jumps Over 7-Fold in Nepal,– Mixed Signals in Nepal's 11-Month Tax Performance

Nepal’s tax authority has recorded a striking 7.2-fold surge in the collection of Digital Service Tax (DST) from global IT giants such as Meta, X (formerly Twitter), Netflix, Google, and TikTok. According to the Inland Revenue Department (IRD), Nepal collected NPR 49 million in DST during the first 11 months of the fiscal year 2081/82 (2024/25), compared to only NPR 6.8 million during the same period last year.
This massive leap is attributed to stricter enforcement of the Electronic Services Tax Procedure 2079, which mandates registration and tax compliance from foreign digital service providers operating in Nepal. The growing compliance by major international platforms, in response to Nepal’s new regulatory push, has translated into stronger revenue performance in the digital domain.
While digital tax collection is soaring, institutional income tax revenue has declined. The government collected NPR 100.86 billion from institutional income tax in the first 11 months, down 6.71% from NPR 108.11 billion during the same period last year. More strikingly, tax revenue from public enterprises fell by 22.14%, down to NPR 44.24 billion, highlighting potential inefficiencies or shrinking profits in government-owned corporations.
However, the private sector painted a contrasting picture. Tax collection from private companies surged by 28.3%, amounting to NPR 38.49 billion, and capital gains tax from individuals jumped by an impressive 61.11%, totaling NPR 28.4 billion. This signals a growing contribution from individual taxpayers and private firms, likely due to increased investments, better compliance, or strong market returns.
Personal income tax collection increased by 16.92%, reaching NPR 90.89 billion. Notably, tax from capital ownership and gains also rose by 10.71%, indicating a widening tax base among affluent individuals. However, salary tax collection declined slightly by 1.25%, which may reflect stagnating wages or increased exemptions.
Nepal’s VAT (Value Added Tax), one of its key consumption-based taxes, saw a 13.32% rise, with collections reaching NPR 127.18 billion. This reflects resilient consumer spending and perhaps improved VAT enforcement.
The IRD reported a 19% rise in excise tax collection from alcohol, beer, and tobacco products, totaling NPR 113.29 billion. Specifically:
Tobacco excise rose by 3% to NPR 25.56 billion
Alcohol excise soared by 28.57% to NPR 31.15 billion
Beer excise grew significantly, totaling NPR 35.36 billion
Luxury tax collections also rose by 35.10%, indicating increased demand for luxury goods like gold and silver jewelry, while foreign travel taxes and foreign employment-related taxes more than doubled, showing growing outbound movement.
Despite overall tax growth, some indicators reflect contraction. Interest income tax collection dropped by 17.66%, while dividend tax rose by 15.62%, possibly indicating shifts in investor preference towards equity over debt instruments. Rental and lease income tax also increased moderately by 5.39%.
On the investment front, investment income tax barely grew, registering just a 0.14% increase – a sign of stagnation in taxable investment returns, or perhaps tax planning measures by major investors.
Education-related taxes increased by 10.87%, reaching NPR 3.25 billion. However, there’s a sharp 53.57% decline in taxes collected from domestic schools and colleges (just NPR 1.63 million), while tax on foreign education fees surged, contributing almost the entire amount – NPR 3.25 billion. This highlights Nepal’s growing dependence on foreign education and the state’s limited earnings from domestic institutions.
This fiscal snapshot of Nepal’s tax landscape paints a mixed picture:
On the positive side, there is robust growth in digital services tax, private income tax, excise duties, and VAT, reflecting digital compliance, rising private profitability, and consumer activity.
On the concern side, declining corporate tax, public enterprise performance, and interest income tax suggest underlying weaknesses in institutional profitability and the formal lending sector.
The rapid growth of capital gains tax and foreign study-related taxes points to new social and economic trends: increasing investment activity and the "education drain."
To maintain long-term fiscal health, Nepal needs to:
Enhance corporate transparency and accountability in public enterprises.
Expand the digital tax net while simplifying compliance.
Address structural stagnation in formal income sources like salaries and interest.
The year 2081/82 is shaping up to be a transformative one for Nepal's tax ecosystem, with digital compliance and personal tax growth offering a buffer against faltering public sector contributions.