The Auditor General has instructed the government to register the services of international e-commerce sites with applications such as Zoom, Google Meet, and Microsoft Teams in Nepal and bring them under the scope of taxation.
After the global lockdown due to corona infection, applications like Zoom, Google Meet, Microsoft Teams are being used for conducting various meetings, school, college classes along with offices, organizations in Nepal.
Apart from the free features provided by this application, you have to pay a fee to use the time.
There are no payment gateways legally available from Nepal for those site operators. To pay for this application from Nepal, money is being paid to the operators of the respective sites using credit cards such as Paytm, PayPal and international financial means.
As those applications provide services in Nepal, based on the principle of source of tax, the Auditor General is of the opinion that even if the transaction is conducted from abroad, tax should be paid in Nepal.
Since the business has not been identified and is not registered in Nepal, the state has not been able to receive tax from that business.
After studying international best practices, the Auditor General has instructed the government to prepare legal arrangements for businessmen conducting e-commerce nationally or internationally to be registered in Nepal.
Similarly, the services of international e-commerce sites are also being used in Nepal. E-commerce sites like Amazon, Alibaba, Rakuten, Fpicart are providing services in Nepal. They have not paid tax for services rendered in Nepal.
The Auditor General has mentioned that because there is no separate commercial code for transactions from the country, it is difficult to monitor and when doing business from home or abroad using foreign sites, such transactions do not come under the scope of tax due to the fact that those organizations are not registered in Nepal.
Due to e-commerce, e-payments and digitization, the old trends of business operations have changed. E-commerce business is increasing day by day in every country of the world. Even in Nepal, goods and services can be obtained through various domestic and foreign, international e-commerce sites.
International practice
It seems that a study has been conducted by the OECD and the European Union regarding taxation of digital businesses. Since 2015, the European Union has made arrangements to impose value added tax on non-residents who provide telecommunication suppliers, information transmission and electronic services.
Serbia, Taiwan and China have extended the scope of value added tax to digital suppliers.
China, Malaysia and Thailand have formulated laws to tax even digital profits. The Auditor General has instructed the government to study the international practices and register the businessmen conducting e-commerce nationally or internationally in Nepal.
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