What is Digital Service Tax in Nepal?

As the digital economy continues to grow, many countries around the world have introduced taxes specifically for digital services—and Nepal is no exception. The Government of Nepal has implemented the Digital Service Tax (DST) to ensure that multinational digital companies pay their fair share of taxes when doing business in Nepal.

In this blog post, we will explain what Digital Service Tax is, who it applies to, how it works, and why it’s important for businesses and consumers in Nepal.

What is Digital Service Tax (DST)?

Digital Service Tax (DST) is a tax levied on the revenue earned by non-resident digital service providers from consumers or users in Nepal. This includes companies that do not have a physical presence in Nepal but offer digital services to Nepali users.

DST was introduced in Nepal through the Finance Act 2022 to regulate and tax the growing digital economy.

Who Needs to Pay DST in Nepal?

The Digital Service Tax applies to non-resident companies (companies not registered or based in Nepal) that provide digital services to users in Nepal.

Some examples of such companies include:

• Social media platforms
• Online advertising platforms
• Streaming services (video, audio, or gaming)
• Online marketplaces and e-commerce platforms
• Cloud storage or web hosting providers
• Mobile app stores

For instance, companies like Google, Facebook, Netflix, Amazon, and others may be subject to DST if they earn revenue from Nepal.

How Much is the Digital Service Tax in Nepal?

As per the current rules, the Digital Service Tax rate is 2% of the total gross revenue generated from Nepal-based users.

This tax is applicable only when the annual turnover from Nepal exceeds NPR 2 million (20 lakhs).

How is DST Collected?

Since DST applies to non-resident companies, the process of tax registration and filing is slightly different.

Key points:

• Non-resident digital service providers must register for VAT/DST in Nepal.
• They are required to submit periodic tax returns and pay 2% DST on their revenue from Nepali users.
• The Inland Revenue Department (IRD) of Nepal oversees this process.

Some companies may appoint a local tax representative or consultant to handle DST compliance.

Why is DST Important?

The Digital Service Tax helps:

• Ensure fair taxation for global digital companies operating in Nepal
• Increase government revenue
• Promote tax equality between local and international businesses
• Regulate the growing digital economy

Procedure Relating to Digital Service Tax, 2079 (2022)

Digital Service Tax, 2079 (2022): Download