Foreign Income, Remittances, and NRNs: What Nepal Taxes

Residency decides everything

A person is resident in Nepal for a fiscal year if they are present for 183 days or more in any 365-day period, or if their normal place of abode is in Nepal. Residents are taxed on worldwide income; non-residents only on Nepal-source income.

Residents earning from abroad

If you live in Nepal and invoice foreign clients (software work, design, consulting), that income is taxable here even though it is paid in dollars. The Income Tax Act provides a reduced rate for income from service exports received in convertible foreign currency through banking channels, so the treatment can be materially better than the standard slabs. Keep bank credit advices and invoices to substantiate.

Foreign tax paid on that income can be credited against Nepal tax, up to the Nepal tax on the same income.

Remittances

Money sent home by a family member working abroad is a gift or support, not income, in the hands of the recipient. It is not taxed. The earner may be a non-resident of Nepal and therefore outside Nepal's tax on that salary. Keep the remittance receipts; they matter for later property purchases and source-of-funds questions.

Non-Resident Nepalis with income in Nepal

NRNs are taxed as non-residents on:

• Rental income from Nepal property (taxed at the flat local rate, with TDS at source if the tenant is a business)
• Dividends from Nepali companies (5% final withholding)
• Interest on Nepali deposits (final withholding)
• Capital gains on sale of land, buildings or shares in Nepal

An NRN needs a PAN to receive these amounts and a tax clearance certificate to repatriate sale proceeds through Nepal Rastra Bank channels.

Returning migrants

Savings brought back from abroad are not income. Once you become resident again, subsequent interest, rent or business income is taxable. Timing large transactions around the residency change can matter.

Double taxation

Nepal has tax treaties with India, China, Korea, Thailand, Sri Lanka, Norway, Austria, Pakistan, Mauritius, Qatar and Bangladesh, among others, but not with the United States. For US-linked clients, relief comes through the foreign tax credit rules on each side. Our US and Nepal teams coordinate so the credit is claimed correctly in both returns.