Capital Gain Tax - Nepal

Capital Gain Tax 

Capital Gains (Losses) means any profits or gains (Losses) arising from transfer of Capital Assets/ Capital Liabilities.

Transfer means: Transfer of ownership, distributions, mergers, Leases, extinguishment, destroy, lost, expired.

Gains from the transfer of Business Assets or Depreciable Assets are included in Business Income.

Gains on transfer of Non-Business Chargeable Assets (NBCA) are taxed at the prescribe rates. Other Capital Assets are not taxed e.g. Gains on Gold.

NBCA includes land, building, an interest in entity or securities. However, it does not includes:

1. Business Asset, Depreciable Asset or Trading Stock
2. A private building of an individual that has been owned continuously for ten years or more.
3. Interest in a retirement fund of a beneficiary
4. Land, House and land and building of an individual disposed off (sold/transferred) in less than thirty lakh rupees.
5. Assets of an individual that is disposed off by way of any type of transfer other than sales and purchase made within three generations.

NBCA hence includes only three types of assets:

• Land: all types of land
• Buildings: all buildings (except some residential)
• Securities: shares, debentures in an entity

Some to the information is given through following Questions and Answers.

Q. When the Tax on Land and Building collected?

Ans: Land Registration Office (Malpot) at the time of registration should collect the income tax.

Q. what is the tax rate for transfer of land and building (a) owned more than 10 years (b) owned 6 years (c) owned less than 5 years?

Ans:

a.       If owned more than 10 years, it is not considered NBCA, hence not taxable.

b.      If owned 5-10 years, tax rate is 2.5%.

c.       If owned for less than 5 years, tax rate is 5%

For entity who is not in real estate business:  tax rate is 10%

The tax so collected by the Malpot is considered as advance and it can be claimed as tax credit while submitting the income tax return.

Q. What is the area of a personal buildings?

Ans: The area of personal building and equal land area around the building or 1 ropani, whichever is less.

Q. What is the exemption limit for land and Building?

Ans: Upto NPR 30 lakh. Transfer of land and building below NPR 30 lakh is not taxable.

Q. what is any person has two houses?

Ans: one house is considered as personal(residential) building at the discretion of that person.

Shares and Debentures

Q. How the taxation is done on Securities?

Ans:

If listed in Nepal Stock Exchange:

1. For Natural Person: 5% (Final)
2. For Other (entity): 10% (Not Final)

If Not listed in Nepal Stock Exchange:

1. For Natural Person: 10% (Final)
2. For Others (entity): 15%(Not Fianl)

Q. How TDS is calculated on transfer of Securities?

Ans: if selling price of the share is more that the purchase price:

Income = Selling Price – Purchasing Price

In case, Purchase price is more than selling price there will be Capital Loss. Capital Loss can be set-off against capital gains.