Interest, fees and penalties in Nepal

Interest and fees are determined by the relevant Inland Revenue Office or Taxpayer Service Office. Notice of them can be sent attached to the jeopardy or amended assessment order issued under section 102 of the Income Tax Act.

Interest is charged at the standard rate of 15% a year on unpaid tax for each month and part of a month from the due date until payment.

• Instalment tax: from each instalment's due date to the end of Ashwin of the following fiscal year.
• Tax due with the return: from the end of Ashwin after the income year until paid. An extension of time to file the return does not stop interest running.
• Where the taxpayer under-declared income and the office raises additional liability: interest runs as short-paid instalments up to the end of Ashwin after the fiscal year, and as late payment from 1 Kartik.

15% a year. This is called the standard interest rate.

Tax demanded by an Inland Revenue Office notice, instalment tax, withholding tax, and tax due with the return, if not paid on time.

Fees are charged at prescribed rates, like interest, and the tax officer has no discretion over them. However, a person who fails to comply with the Act or Rules, where no specific interest or fee provision applies, can be charged a penalty-type fee of NPR 5,000 to NPR 25,000 depending on the nature of the non-compliance.

Interest and fees serve different purposes, so both can be charged to the same taxpayer on the same return for the same income year. A fee is charged for failing to comply with the law; interest is charged as financial compensation.

A fee is a financial penalty imposed by the tax administration on a person who fails to file a return, files a false return, knowingly helps prepare a misleading or false return, or otherwise fails to comply with income tax law. Interest is financial compensation for paying tax late. It is an economic disincentive that protects revenue collection from taxpayers holding back tax to use the money elsewhere, and compensates the Government when that happens.

Fees are calculated either as a percentage of the tax underpaid or as a fixed prescribed amount. In a self-assessment the taxpayer calculates the fee; in an amended assessment the tax officer does.

• Failing to file an instalment or estimated tax statement: NPR 5,000 per statement or 0.01% of the assessable income shown in the return, whichever is higher.
• Failing to file a presumptive tax statement: NPR 100 per month.
• Any other person failing to file a return: 0.1% a year of assessable income (calculated without deductions, that is on turnover, and including amounts that must be included) or NPR 100 per month, whichever is higher.
• Failing to keep required documents: 0.1% of turnover or NPR 1,000 a year, whichever is higher.
• Filing a false or misleading statement knowingly or recklessly: 100% of the tax underpaid; where the error was a genuine mistake: 50% of the tax underpaid.
• An accomplice: 100% of the tax underpaid by the person helped. Any other breach of the Act or Rules: NPR 5,000 to NPR 25,000.
• A person required to withhold tax who does not file the statement within 25 days of the end of each month: 2.5% a year of the amount required to be withheld.

For failing to keep documents, failing to file a statement or return, filing a false or misleading statement, and knowingly or recklessly helping or advising a person to commit an offence. A fee can also be charged to anyone who fails to comply with any other provision of the Income Tax Act or Rules.

An error in a self-assessment return attracts a fee of 50% to 100% of the tax underpaid as a result. If the error was a genuine mistake, not deliberate, negligent or due to a false statement, the fee is 50%. If the return was false or misleading because of deliberate action or negligence, the fee is 100%.

Interest and fees are assessed by the relevant Inland Revenue Office or Taxpayer Service Office along with any jeopardy or amended assessment, attached to the notice given to the taxpayer under section 102, and recovered in the same way as tax. For penalties and fines, the Government files a case in the District Court as plaintiff, and the court's decision is enforced.

Anyone who commits an offence under Chapter 23 of the Income Tax Act. That includes a person required to pay tax or file a return, an accomplice who certifies false financial or tax accounts, gives wrong advice or helps prepare a misleading return (for example an auditor or legal adviser), and an authorised official or a person impersonating one. They may face imprisonment and fines.

A court can order imprisonment, a cash fine or both for a person who fails without reasonable cause to pay tax on time, knowingly or recklessly files a false or misleading statement, obstructs or improperly influences the tax administration, acts as an accomplice to an offence, or fails to comply with the Act. An authorised official who breaches official secrecy, or an unauthorised person who collects tax or any amount claimed as tax, can also be fined and imprisoned.

Interest applies to tax not paid on time. Fees apply to failing to file returns or instalment estimates on time, failing to keep documents, failing to comply with any provision of the Income Tax Act or Rules, filing false or misleading statements, and knowingly or recklessly helping someone commit a tax offence. Under a court decision, a cash fine, imprisonment or both can be imposed for failing to pay tax, giving false or misleading statements, obstructing or improperly influencing the tax administration, acting as an accomplice, offences by authorised or unauthorised persons, and failing to comply with the Act.

Under the Income Tax Act 2058: interest, fees and fines can be recovered; the tax authority can claim against all property of the person who has not paid; foreign travel can be barred; and the person can face a court case.