If you are running a hotel, resort, jewelry shop, or importing liquor in Nepal, understanding Luxury Tax 2081 B.S (2024 A.D) is very important. The Inland Revenue Department (IRD) introduced the Luxury Tax, 2081 to make the collection and administration of luxury taxes clear and simple.
What is Luxury Tax?
Luxury Tax is a tax on high-end services and products, such as:
- Services by five-star and high-rated hotels
- Luxury resorts
- Imported liquor
- Gold jewelry (including diamonds, pearls, or gemstones) if the value exceeds NPR 1 million per transaction
This tax became effective from 1 Shrawan 2081 B.S (2024 A.D).
How is Luxury Tax Collected?
Luxury Tax is collected at 2% of the pre-VAT amount in the following ways:
- Hotels & Resorts:
- Five-star and other high-rated hotels or luxury resorts collect 2% from customers on the pre-VAT amount for services.
- Imported Liquor:
- Customs collect 2% luxury tax from importers at the customs point.
- Jewelry Shops:
- Jewelers collect 2% luxury tax on gold jewelry (including diamonds, pearls, or gemstones) if a single transaction is over NPR 1 million.
Who Manages Luxury Tax?
The tax is managed by:
- Taxpayer Service Office, IRD
- Medium Taxpayer Office
- Large Taxpayer Office
- Customs Office (for imported liquor)
Note: If you already have a PAN, you do not need separate registration for luxury tax.
How to Record Transactions
Businesses collecting luxury tax must keep proper records:
- Record transactions on an accrual basis
- Submit monthly transaction details to the tax office by the 25th of the following month using the official format (Schedule 1 of the procedure)
- Late submission attracts an additional fine of 2.5% per year
Imported liquor is exempt from this step because tax is collected at customs.
How to Deposit Luxury Tax
Collected taxes should be deposited at the tax office by the 25th of the following month. When depositing:
- Mention the tax office code and revenue code
- Late deposits incur 15% per year interest
Again, liquor imports are handled by customs.
Tax Office Review and Penalties
The IRD may review your transactions to check tax compliance. Penalties apply if:
- You do not collect tax from customers
- You underreport transactions or split sales to reduce tax liability
In such cases, an additional 25% fine may be applied.
Key Takeaways
- Luxury Tax applies to high-end hotels, resorts, jewelry, and imported liquor.
- The standard rate is 2% on pre-VAT amount.
- Keep accurate records and submit them monthly.
- Pay taxes on time to avoid interest and fines.
Following these steps ensures your business stays compliant with Luxury Tax 2081 B.S.