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BASIC COUNTRY FACTS

Federal Democratic Republic of Nepal

Kathmandu

  • Nepali
  • Limbu
  • Maithili
  • Nepalbhasa 
  • Angika 
  • Tharu 
  • Majhi 
  • Urdu

28.09 million

Nepalese rupee

.np

+977

Nepalese rupee

STATUTORY LABOR REQUIREMENTS

Probation Period

  • Under the Labor Act 2074, the probationary period is six months.

Annual Leave

  • Employees are entitled to 1 day of annual leave for every 20 worked days.

Public Holidays

  1. Maghe Sankranti (15th January)
  2. Sonam Lhosar
  3. Sahid Diwas (30th January)
  4. Rastraya Prajatantra Dibas (19th February)
  5. Maha Shivratri (21st February)
  6. Gyalpo Losar
  7. International Women's Day (8th March)
  8. Rama Navami 
  9. Nepalese New Year (13th April)
  10. Labor Day (1st May)
  11. Buddha's Birthday
  12. Eid al-Fitr
  13. Republic Day
  14. Eid al-Adha
  15. Raksha Bandhan
  16. Krishna Janmashtami
  17. Constitution Day (19th September)
  18. Ghatasthapana
  19. Fulpati
  20. Durga Ashtami (24th September)
  21. Maha Navami
  22. Vijayadashami (26th October)
  23. Chhath (20th November)
  24. Christmas Day (25th December)
  25. Tamu Lhosar

Maternity Leave

  • The law mandates a total of 98 days of maternity leave

Paternity Leave

  • The newly introduced Labor Act requires employers to provide 15 days of paid paternity leave

Sick Leave

  • Employees are entitled to paid sick leave of 12 days

Work Hours

  • Unlike other countries, Nepalese rest on Saturday and work from Sunday to Friday.
  • Nepal generally has a 48 hour working week

Overtime

  • If any worker or employee is engaged to work for more than eight hours in any day, or for more than 48 hours in any week, he shall be paid remuneration for such overtime work at the rate of 150 per cent of his usual remuneration.

Notice Period

  • The employee or employer terminating the employment should provide a notice except in the situation of termination by dismissal. 
  • The notice requirement is linked to the length of service which is as follows.
    • If the period of employment is up to 4 weeks, then the notice period is of 1 day
    • If the period of employment is from 4 weeks to 1 year, then the notice period is of 7 days
    • If period of employment is more than 1 year, then the notice period is of 30 days

Severance

  • The severance payment is of 30 days per year if an employee is not entitled to unemployment allowance under Social Security Act.

13th Month Salary in Brazil

  • Yes (Mandatory)
  • There is a statutory requirement to pay the 13th month salary which is paid for the festivity that each employee observes and it equates to one month salary.
  • There is also a statutory requirement to pay bonus to their employees.
  • This bonus comes out of the earnings of the company and only full time employees that have stayed in the company for 6 months will be entitled to it.

INCOME TAX

  • Resident individuals are subject to tax on their worldwide income derived from employment, business or investment. 
  • Non-residents are subject to tax on their net income earned or sourced in Nepal.
  • On the Taxable Income computed as per Income Tax Act, Tax will be calculated using the Tax Rates specified in Schedule 1 of Income Tax Act, 2058.
  • The following tables present the income tax distribution as per individual, couples and non-resident Nepalis & couples:

Income Tax Rates of Nepal For Resident Persons

Particulars

Tax Rate

First Tax Slab (3,50,000)

1%

Next (Yearly income up to 4,50,000)

10%

Next (Yearly income up to 6,50,000)

20%

Next (Yearly income up to 20,00,000)

30%

Yearly income 20,00,000 and Above

36%

 

Income Tax Rates for Couples

Particulars

Tax Rate

First Tax Slab (Yearly income up to 4,00,000)

1%

Next (Yearly income up to 5,00,000)

10%

Next (Yearly income up to 7,00,000)

20%

Next (Yearly income up to 20,00,000)

30%

Yearly income 20,00,000 and Above

36%

 

Income Tax Rates in Nepal For Non-Resident Persons

Particulars

Tax Rate

First Tax Slab

1%

Next

10%

Next

20%

Next

30%

Balance Exceeding

36%

 

Income Tax Rates in Nepal For Non-Resident Couples

Particulars

Tax Rate

First Tax Slab

1%

Next

10%

Next

20%

30%

Balance Exceeding

36%

DEDUCTIBLE EXPENSES

  • Self-employed individuals can claim all reasonable expenses incurred in acquiring or earning income. 
  • Salaried employees are entitled to claim only specified deductions and relief.
  • The basic exemption is NRs 400,000 for a couple and NRs 350,000 for an individual. 
  • The exemption limit for the handicapped people is 50 percent in addition to the aforementioned limit. 
  • A rebate of 10 percent of the tax liability is provided to women (not with couple status) on their income from employment.

Deductible Expenses

  • Self-employed individuals can claim all reasonable expenses incurred in acquiring or earning income. 
  • Salaried employees are entitled to claim only specified deductions and relief.
  • The basic exemption is NRs 400,000 for a couple and NRs 350,000 for an individual. 
  • The exemption limit for the handicapped people is 50 percent in addition to the aforementioned limit. 
  • A rebate of 10 percent of the tax liability is provided to women (not with couple status) on their income from employment.

IMMIGRATION

  • Only Foreign nationals holding working visa are allowed to accept job and work in Nepal. 
  • Working Visa is issued by the Department of Immigration (Non Tourist Visa section) only upon the recommendation from line agency (concerned Ministry of Government of Nepal), Labor Permit from the Department of Labor and Work Agreement (excluding few exceptions) from the Ministry of Home Affairs. 
  • Applicants should go through various Government agencies and finally apply at Department of Immigration for the Visa.
  • Foreign nationals undertaking paperwork and legal formalities for Work Visa with concerned institutions (Ministry/Department) of Nepal Government can stay in Nepal under 'Tourist Visas'. 
  • His/her category of visa changes from 'Tourists' to 'Non Tourist' once all necessary paperwork is completed and applied for 'Working Visa' at DOI. 
  • Tourist visa gets automatically cancelled when visa category is changed. Length of Working Visa is determined by the period for which work/labor permit has been obtained from the Department of Labor.

Type of Visa 

Documentation

Validity

Eligibility

Tourist Visa

  • Duly filled-up visa application form with two copies of passport size photographs
  • Original Passport with at least 6-months’ validity
  • A copy of the passport
  • Hotel booking confirmation.
  • Return air ticket
  • If you are a business person, letter from your firm/company/no objection letter
  • If you are invited to a seminar/workshop/meeting/conference, a copy of invitation letter

6 months

  • Applicants must apply for a tourist visa for short stay visit and prior to obtaining a working visa

Working Visa

  • Recommendation letter from the concerned Government line agency
  • Work Permit from Department of Labor
  • Work Agreement from Ministry of Home Affairs
  • Appointment/contract letter
  • Tax clearance of hiring organization/ institution/agency
  •  Tax clearance of applicant (for renewal) if taxes has been paid individually
  • General Agreement with Social Welfare Council (NGOs/INGOs)
  • Passport and  Visa Photocopy

Determined by the period for which work/labor permit has been obtained from the Department of Labor.

  • Working Visa is issued by the Department of Immigration (Non Tourist Visa section) only upon the recommendation from line agency (concerned Ministry of Government of Nepal), Labor Permit from the Department of Labor and Work Agreement (excluding few exceptions) from the Ministry of Home Affairs. 

 VALUE ADDED TAX

  • The normal VAT rate is 13%
  • Some goods or services are exempted from VAT.

VAT

Standard Rate

13%

Exempt

0%

WITHHOLDING TAX

Dividends

  • Dividends are subject to 5% withholding tax

Interest

  • Interest payments are subject to 15% withholding tax

Royalties

  • Royalties are subject to 15% withholding tax 

WHT

Dividends

5%

Interest

15%

Royalties

15%

TERMINATION

  • The employee can terminate the employment voluntarily by submitting a resignation letter.
  • The employment of the worker on work bound employment is terminated after the completion of the work provided in the employment agreement.
  • If the performance of the employee is found to be unsatisfactory or below the standard in the performance appraisal for three or more times, the employment of such worker may be terminated by the employer. 
  • However, prior to terminating the employment the performance appraisal as per the Regulation under the Act or Bylaws should have been conduct. 
  • Such employee should be provided an opportunity to submit explanation giving at least seven (7) days by the employer where ten (10) or more people work.
  • In case any employee is physically or mentally disabled or injured rendering him/her unable to work or requiring a long period for medical treatment effecting in the work of the entity, the employer, on recommendation of a medical practitioner may terminate his/her employment.
  • The employee or employer terminating the employment should provide a notice except in the situation of termination by dismissal. 
  • The notice requirement is linked to the length of service which is as follows.
    • If the period of employment is up to 4 weeks, then the notice period is of 1 day
    • If the period of employment is from 4 weeks to 1 year, then the notice period is of 7 days
    • If period of employment is more than 1 year, then the notice period is of 30 days

STATUTORY BENEFITS

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Paternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

 PAYMENTS AND INVOICING

  • The tax period is the financial year of the government, which is the 12-month period commencing on July 16 and ending on July 15 of the following year (corresponding to NFY which commences from Shrawan and ends in Ashad). 
  • In general, every resident and non-resident individual must file a personal income tax return by within 3 months from the end of the NFY of the following year. 
  • However, individuals who only have income from employment are not required to file tax returns subject to the condition that the annual remuneration income does not exceed NRs 4 million. 
  • An employer must submit annual tax returns for each employee showing total remuneration due or paid permissible deductions and the amount of tax due, deducted and deposited with the IRO. 
  • An employer is obliged to deduct tax at the time of payment of salary and forward the amount withheld to the tax authorities within 25 days from the end of the month of withholding

 EASE OF DOING BUSINESS

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Nepal ranked 94th in the World in 2019 in terms of ease of doing business.

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