Rulings, reviews and appeals in Nepal

Both the tax administration and the applicant.

It is binding only on the applicant who requested it and on the tax administration implementing it, for as long as it remains in force. It does not bind anyone else. The Inland Revenue Department must follow the ruling for a person who presented full and accurate details of the matter and whose arrangements match those described in the application. For that person, the ruling takes priority over any public circular. If the section of the Income Tax Act or Rule on which the ruling was based is amended, the ruling automatically ceases to apply to the extent of the amendment.

No deposit or fee is required.

The subject must relate to the actual state of the applicant's transactions and involve a genuine legal uncertainty.

If you disagree with a ruling issued by the Director General of the Inland Revenue Department, you can apply to the department for administrative review under section 115, or appeal to the Revenue Tribunal under section 116(4) of the Income Tax Act 2058.

The Director General of the Inland Revenue Department.

The applicant can apply to the department for administrative review under section 115 of the Act, or appeal to the Revenue Tribunal under section 116(4).

The law requires the department to issue it within 45 days of the request.

Apply to the department using the prescribed application format, and provide full and accurate details of the matter. A ruling cannot be requested on a hypothetical matter. Advance rulings are a feature of modern tax systems designed to remove taxpayer uncertainty.

Under section 76, only a taxpayer who applies because of uncertainty about an arrangement they have proposed or entered into.

An advance ruling applies only to the person it was issued to.

If the department does not notify its decision on the application within 60 days, the applicant can register that fact with the department and treat the application as rejected, inform the department in writing, and appeal to the Revenue Tribunal.

The department must investigate and decide within 60 days of the application. If it does not notify the decision within 60 days, the applicant can inform the department in writing and treat the application as rejected, then appeal to the Revenue Tribunal on that basis.

You cannot go directly to the Revenue Tribunal without administrative review. You can appeal if you disagree with the review decision, or if the department does not decide within 60 days of registering your application, in which case it is treated as a decision not received. Administrative review cannot be obtained by complaining to other government bodies such as the Prime Minister's Office or the Ministry of Finance, because the Income Tax Act requires the application to be made to the department, to the Director General. Filing in the wrong place can mean the deadline passes and you lose your remedy through your own mistake.

Administrative review is not designed to settle legal differences of opinion. It is a way to obtain administrative intervention from a senior official, in line with the Income Tax Act, to protect a taxpayer harmed by administrative errors, technical or arithmetic mistakes, or errors made by subordinate tax officers through inadequate knowledge of accounting practice, tax law, departmental circulars, directives or advance rulings, or through wilful negligence. Because administrative review is compulsory before going to the Revenue Tribunal for judicial determination, some expectation of legal remedy from it is reasonable. The aggrieved person can take legal help: appoint a lawyer, or take advice from an accounting expert, and present their evidence and grounds to the department.

The department has not prescribed a form. A person dissatisfied with a reviewable decision must apply to the department within 30 days of receiving notice of that decision, clearly stating the reasons and grounds for review. If the application cannot be made within 30 days, an application to condone the delay can be registered with the department within 7 days after those 30 days, and a further 30 days can then be allowed.

The taxpayer must pay all of the undisputed tax and one quarter of the disputed tax.

The Finance Bill (Replacement) 2078 also offered a one-time settlement: for assessments under the VAT Act 2052, Excise Act 2058 and Income Tax Act 2058 made by the end of Asar 2077 and pending in administrative review, the Revenue Tribunal or a court, excluding cases involving false or fake invoices, a taxpayer who withdrew the case and paid the assessed tax plus 50% of the interest up to the date of application by the end of Mangsir 2078 had the fees, additional charges, fines and remaining interest waived.

A person aggrieved by, or dissatisfied with, any of the following can seek administrative review: an advance ruling issued by the department; an order to pay advance tax or file a statement; a decision by an office under the Inland Revenue Department on estimated tax for instalments; an order to file a return; a decision on an application to extend the time to file a return; a jeopardy or amended assessment; an assessment of auction sale costs; an assessment of fees and interest; an order requiring a recipient to set aside an amount for tax recovery; an order requiring a person holding money owed to a tax defaulter to pay it to the department; an order requiring a person to pay tax on behalf of a non-resident; a decision on a refund application; and a decision on an application to extend the time for an administrative review application.

Administrative review is an administrative application to the Director General of the department for reconsideration of a tax decision made by a subordinate office or tax officer.

It is an administrative rather than a judicial decision. Because the department is one institution in the eyes of taxpayers, the process lets it correct errors made through ignorance or oversight in decisions on a taxpayer's liability or duties before the dispute goes to a judicial body, the Revenue Tribunal. This settles disputes faster and more cheaply, gives taxpayers quicker satisfaction, and helps the department collect tax promptly while being seen as fair.

The application can be submitted through the relevant Inland Revenue Office or Taxpayer Service Office, or directly to the Director General of the Inland Revenue Department.

You cannot appeal directly to the Revenue Tribunal without administrative review. You can appeal if you disagree with the review decision, or if no decision is made within 60 days of registering your application, in which case it is treated as a decision not received. Complaining to other government bodies such as the Prime Minister's Office or the Ministry of Finance cannot substitute for administrative review, because the Income Tax Act requires the application to be made to the department, to the Director General. Filing in the wrong place can mean the deadline passes and you lose your remedy through your own mistake.

The application can be made through the relevant Inland Revenue Office or directly to the Director General of the Inland Revenue Department. Attach:

• A NPR 10 postage stamp
• A certified copy of the decision
• A certified copy of the receipt showing you received the assessment order from the office
• A copy of the assessment order
• A copy of any letter extending the deadline
• A copy of the voucher showing one quarter of the disputed tax paid under the relevant revenue heading
• A copy of the voucher showing the full amount you accept as due has been paid
• Where the person is not applying themselves, the authorisation and power of attorney from the firm, company or establishment
• The application clearly setting out the reasons and grounds for review, with one additional copy

If the department does not decide within the deadline, you can appeal to the Revenue Tribunal under the Revenue Tribunal Act 2031.

Revenue Tribunals sit in Kathmandu, Biratnagar, Pokhara and Nepalgunj. Each hears appeals against administrative review decisions on matters decided by Inland Revenue Offices in its area: Biratnagar for the former Eastern region; Kathmandu for the former Central region; Pokhara for the former Western region; and Nepalgunj for the former Mid-Western and Far-Western regions.

Immediately. Where tax already paid must be refunded under a decision of the Revenue Tribunal or another court, interest is payable from the date the tax was paid to the date of refund, which is another reason to act quickly. Where the tribunal orders a fresh investigation and assessment, the office must investigate and issue an amended assessment.

You can appeal to the Supreme Court with its leave. Such an appeal must involve a question of jurisdiction, a serious error of law, or evidence that should have been considered but was not, or evidence that should not have been considered but was. Supreme Court decisions are binding precedent: all lower judicial bodies and the Inland Revenue Department must follow them as case law in similar cases.

Under the Revenue Tribunal Act 2031, the deposit was 50% of the assessed tax and the full amount of any fine. Under the Finance Bill (Replacement) 2078, the appellant must pay the undisputed tax, and deposit 50% of the disputed tax, fees and fines, or provide a bank guarantee for that amount. The 25% of tax already deposited with the Inland Revenue Department for administrative review counts towards the deposit or guarantee.

A person dissatisfied with a decision on an administrative review application can appeal to the Revenue Tribunal. Where the decision that could be reviewed was made by the Director General of the department, the appeal goes directly to the Revenue Tribunal without going through administrative review.

Kathmandu

taxpayers in Kathmandu Valley and under the Hetauda, Bharatpur, Simara, Birgunj and Janakpur Inland Revenue Offices

Biratnagar

taxpayers under the Bhadrapur, Damak, Biratnagar, Dharan, Itahari and Lahan offices

Pokhara

taxpayers under the Pokhara, Bhairahawa, Butwal, Kawasoti, Baglung, Damauli and Krishnanagar offices

Nepalgunj

taxpayers under the Nepalgunj, Surkhet, Jumla, Dang, Dhangadhi, Mahendranagar and Dadeldhura offices

Pay the undisputed tax, and deposit 50% of the disputed tax and fines, or provide a bank guarantee for that amount.

You can seek a legal remedy. Until a decision is made on that remedy, you must follow the circular.

Serving tax officers must follow a public circular until the department cancels it. A circular sets out the department's legal interpretation.

Because it is issued as an interpretation of the Act, it carries legal recognition, and it remains in force until the department cancels it or a court orders otherwise. A circular is made under powers conferred by the Act and Rules, so it cannot override or go beyond them.

A document issued to bring consistency to how the Act and Rules are applied, and to make them easier to understand for affected persons and the tax administration by interpreting them.

For the person to whom the advance ruling was issued, the ruling takes priority.

To bring consistency to how the Act is applied and simplify administration, and to guide officers of the department and its offices and persons affected by the Act, the department can publish written public circulars interpreting provisions of the Act on its website and in national newspapers.