Nepal’s IT sector faces tax compliance scrutiny: industry leaders urge government clarity

KATHMANDU: The Nepal Association for Software and IT Services Companies (NAS-IT), Confederation of Nepal Industries (CNI), and American Chamber of Commerce in Nepal (AMCHAM Nepal) stand as formidable representatives of the burgeoning information technology (IT) industry in Nepal. These organizations bear the mantle of facilitating legal, policy, and collective inquiries concerning their member companies.

Despite its nascent state, the IT industry in Nepal is steadily advancing, buoyed by foreign direct investment and the creation of employment opportunities for Nepalese nationals. However, recent governmental notices regarding tax compliance within the IT sector have sparked grave concern among industry stakeholders, casting a shadow over investor confidence and potentially dampening morale within the private sector.

The trajectory of governmental efforts to augment financial obligations within the IT sector, characterized by unconventional interpretations and deviations from established tax norms and laws, exacerbates the situation. We implore all stakeholders to refrain from imposing punitive measures that could jeopardize the entire IT industry. Moreover, the indiscriminate imposition of criminal penalties on IT companies is discriminatory and undermines the spirit of fair taxation.

Urgent action is needed to explore viable alternatives that acknowledge the far-reaching consequences at stake. Deterring investment opportunities in Nepal could impede technology transfer and erode the country’s competitive edge, potentially leading to a decline in revenue and adverse effects on the broader economy.

Adhering to the Income Tax Act 2058 (2022) of Nepal is crucial for ensuring equitable treatment of individuals and companies under its purview. However, unjust taxation resulting from misinterpretation of tax laws and resorting to punitive measures threatens to stifle the growth of the IT industry. Such actions not only undermine the industry’s role in job creation and revenue generation but also contravene principles of legality and due process.

It is imperative for the government and relevant agencies to cultivate a business environment that prioritizes the interests of the IT industry while upholding legal clarity. Decisions made prior to the upcoming investment conference organized by the Nepal government, a pivotal event with high expectations, must convey positive signals to investors.

In conclusion, addressing tax compliance issues in the IT industry demands a balanced approach that fosters growth while ensuring adherence to legal frameworks. Failure to do so risks undermining the potential of this vital sector to drive economic development and innovation in Nepal.