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TAX AMNESTIES: AN INSTRUMENT FOR SMEs TAX COMPLIANCE (Session on “Tax Administration”)

TAX AMNESTIES: AN INSTRUMENT FOR SMEs TAX COMPLIANCE (Session on “Tax Administration”). Krishna Hari Banskota Secretary(Revenue) Ministry of Finance, Government of Nepal 04 March, 2010

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TAX AMNESTIES: AN INSTRUMENT FOR SMEs TAX COMPLIANCE (Session on “Tax Administration”)

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  1. TAX AMNESTIES: AN INSTRUMENT FOR SMEs TAX COMPLIANCE(Session on “Tax Administration”) Krishna Hari Banskota Secretary(Revenue) Ministry of Finance, Government of Nepal 04 March, 2010 International Tax Dialogue Conference "Taxing Micro and Small Businesses" March 2-5, 2010 , Manila, Philippines

  2. SOURCES OF INCOME TAX • Employment • Business • Investment • Windfall Gain Income from any of the activities mentioned above is subject to Income Tax

  3. PERSONAL INCOME TAX INDIVIDUAL Below Rs. 160,000.00 per year – 1% + Rs.100,000 per year - 15% Balance Exceeding Rs. 260,000 per year- 25% COUPLE Below Rs. 200,000 per year- 1% +Rs. 100,000 per year- 15% Balance Exceeding Rs. 300,000- 25%

  4. CORPORATE TAX • Manufacturing Industries- 20% • Trading Business - 25% • Banks and Financial Institutions- 30% • Insurance Business – 30% • Liquor and Beer - 30%

  5. TDS WITHHOLDING • Allowances - 15% • House Rent - 10% • Wind Fall Gains – 25% • Dividend – 5% • Contract Payments- 1.5% • Service Contract- 10% • Capital Gains(Land & Buildings)- 5% and 10% • Capital Gains (Others)- 10%

  6. TAX AMNESTIES • Agricultural Income • As defined by the law Industries Established in the following areas has income tax waive of normal rate for 10 years as: • Remote areas - 100% • Very undeveloped areas -50% • Undeveloped areas - 30 • Underdeveloped areas - 25%

  7. TAX AMNESTIES • Industries Established under SEZ in mountainous and certain hilly areas- 100% rebate for the first 10 years and 50% rebate for the next years • Industries Established under SEZ in other areas - 100% rebate for the first 5 years and 50% rebate for the next years

  8. TAX AMNESTIES • Dividend distributed by the industries in SEZ – 100% income tax exempt for the first 5 years and 50% exempt for the next 3 years • Income earned from service fee and royalty by foreign investors whose investment is in the industries in SEZ – 50% exempt • Gods imported in Donation

  9. TAX AMNESTIES • Investment in Hydro power- 100% income tax exempt for the first 7 years and 50% exempt for the next 3 years • For the industry which provides employment • To 300 or more Nepali citizens year round - 10 % exempt • To 1200 or more Nepali citizens year round - 20 % exempt • To Women, Deprived and Disabled (33% or more out of 100) Nepali citizens year round - 20 % exempt

  10. CHANGES OBSERVED • Increase in Permanent Account Number (PAN) Registration • Registration Increase of Previously Non- Registered: • Consultants • Doctors • Lawers • Business • Professionals • Tax fillers increased - @ 5-8% every year since 2003

  11. GAINS AND LOSSES FROM TAX AMNESTIES • GAINS * Significant Increase in numbers(Registration and Filers) LOSSES * The current Collection from new filers is 20% lower than Exempted amount

  12. WAY FORWARD • Areas of Tax Amnesties needs to be narrowed • Tax Rebate must be linked with Tax Compliance • Policy of Ad-hoc Vs. Strategic Incrementalism should be followed

  13. THANK YOU

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