DOUBLE TAXATION

AVOIDANCE
AGREEMENTS OF NEPAL
Synopsis of DTAA of Nepal with
11 countries
June 2019
CONTENTS

Introduction .......................................................................................... 4

History of DTAA in Nepal ..................................................................... 5

Nepal - India ........................................................................................ 6

Nepal - Norway .................................................................................... 7

Nepal - Thailand .................................................................................. 8

Nepal - Qatar ....................................................................................... 9

Nepal - Mauritius ................................................................................ 10

Nepal - Korea..................................................................................... 12

Nepal - Austria ................................................................................... 13

Nepal - China ..................................................................................... 14

Nepal – Sri lanka ............................................................................... 15

Nepal – Pakistan................................................................................ 16
Tax Avoidance is excused by law,
But not Tax Evasion.
INTRODUCTION

Tax is the liability paid by each bread earner- Individual or corporate, which can’t be escaped
legally. Every tax payer is subject to follow the taxation policy of the country of which s/he/it is
Agreement signed
resident of. However, many times the same income is taxed twice by the same government or by
by Governments of the different government which is termed as Double Taxation.
two countries to
solve the issue of When a business earns profit, initially it is subject to be taxed as corporate tax paid by the
double taxation is company, and when the after tax profit generated is distributed to employees, it is again
DTAA. subjected to be taxed as income tax paid by the individuals. When the same income is subject to
taxation by same government but by two different tax payers, it is Economic Double Taxation.
Similarly, when a tax payer is resident of one country and earns income from the other, it
becomes subject to tax liability for both the countries. Tax subjected to be paid twice by same
taxpayer but to different government means Juridical Double taxation. Juridical double
taxation is further classified as:
• Source based Jurisdiction: As per this taxation principle, importance is given to the
source/ country where income is generated. Individuals who are residents of one
country can be earning income in other country. In such cases, the country which is
providing opportunity and facility to generate income or profits should also have power/
right to collect the tax.
• Residence based Jurisdiction: As per this principle, one is liable to pay tax in the
home country regardless of source of income. If individual holds citizenship or if a
corporation is incorporated/ registered in a country, they are defined as resident of the
country and are liable to pay tax to the country when income repatriated irrespective of
its source country.

Expansion and Growth is a primary objective that any sort of sustainable business seeks today.
Operating as an international company or working in an association of one of them is an easy
step for the businesses. Simply, “Being Global” has become the most uttered word by each
resident in this era of competition and development. But, when operating globally, the issue of
juridical double taxation arises which demotivates corporations.

To avoid this issue of double taxation, governments sign an agreement with each other known
as Double Taxation Avoidance Agreement (DTAA) to ensure that tax is not paid twice in the
same income. Both the governments agree to provide some exemptions, provide tax credits and
lower the withholding taxes in different types of income earned by taxpayers whenever any
business is done between them. However, the primary idea behind DTAA agreement is to boost
up economic growth and minimize the opportunity for tax evasion for tax payers, as tax payers
try to escape the burden of tax payments obliged to make in both the countries.
HISTORY OF DTAA IN NEPAL

Nepal signed it first Double Taxation Avoidance Agreement with the neighbouring country India
way back in January 18, 1987. Prior to that, the provision of giving deduction in foreign tax
already existed through the Income Tax Act, 1974 but the provision of foreign tax credit has
been introduced through tax treaties with various countries thereafter.

After India, second tax treaty was signed with Norway in 1996. Further, bilateral tax treaty has
already been signed with other nine countries till date which are Thailand, Sri Lanka, Mauritius,
Austria, China, Qatar, Bangladesh, Korea and Pakistan, among which Bangladesh being the
most recently agreed country i.e. on March, 2019. So, till date Nepal is in agreement with total of
11 countries. As per the Inland Revenue Department (IRD) report, the negotiation work is in
process with other countries like: Singapore, Malaysia, UK and Oman.
NEPAL – INDIA

Date of 27th November, 2011 Entry into 16th March, 2012

Revised Force
Agreement
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers, shares of
capital stock of company.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artistes/ entertainer or sportsperson.
§ Pensions and other similar remuneration.
§ Government service rendered to the state/ subdivision/ authority.
§ Professors, teachers and research scholars.
§ Payments/ Income received by students for purpose of maintenance, education, training
and any study related employment.
§ Other Income in form of lotteries, crossword puzzles, races, card games, gambling/ betting.
Dividends If taxed at source country it should not exceed:
§ 5% of gross dividend if beneficial owner owns at least 10% shares of
dividend paying company.
§ 10% of gross dividend in all other cases.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest.
§ Exempted at source country, if interest arising in source country paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital - Taxed at other state: If gains derived by resident of contracting state from
Gains alienation of immovable property situated in other state or is part of
permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation ships/
aircraft or movable property pertaining to operation of such ships/aircraft
(except those containers used solely in other state).
§ Any all other gains derived by resident of contracting state.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ As per law of home country, if resident is exempt from tax in home country, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Assistance in the Collection of Taxes
§ Limitation of Benefits
§ Diplomatic and Consular Officers
§ Entry into Force
§ Termination
NEPAL - NORWAY

Date of 13th May, 1996 Entry into 19th June, 1997

Agreement Force
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property and ships/ containers.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artistes/ entertainer or sportsmen.
§ Pensions, annuities and payment under social; security system.
§ Government service rendered to the state/ subdivision/ authority.
§ Payments/ Income received by students for purpose of maintenance, education, training
and any study related employment.
§ Other Income in form of lotteries, crossword puzzles, races, card games, gambling/ betting.
Dividends If taxed at source country, it should not exceed:
§ 5% of gross dividend if beneficial owner owns at least 25% shares of
dividend paying company.
§ 10% of gross dividend, if at least 10% shares owned.
§ 15% of gross dividend in other cases.
Interest If taxed at source country, it should not exceed:
§ 10%, if paid to bank carrying bonafide banking business.
§ 15% of gross interest in all other cases.
Royalties If taxed at source country, it should not exceed 15% of gross royalties.
Capital § Taxed at other state: If gains derived by resident of contracting state from
Gains alienation of immovable property situated in other state or is part of
permanent establishment in other state.
§ Taxed at contracting state: If gains derived by resident of contracting state,
from alienation ships/ aircraft or movable property pertaining to operation of
such ships/aircraft (except those containers used solely in other state). And
any all other gains.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ As per law of home country, if resident is exempt from tax in home country, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Elimination of Double Taxation
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Diplomatic and Consular Officers
§ Entry into Force
§ Termination
NEPAL - THAILAND

Date of - Entry into Force 14th July, 1998

Agreement
Incomes Covered
Income/ capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers, transfer of
shares.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artistes/ entertainer or sportsmen.
§ Pensions and other similar remuneration.
§ Government service rendered to the state/ subdivision/ authority.
§ Professors, teachers and research scholars.
§ Payments/ Income received by students for purpose of maintenance, education, training
and any study related employment.
§ Other Income in form of lotteries, crossword puzzles, races, card games, gambling/ betting
Ship/ Air If taxed at other state, tax imposed should be reduced to 50%.
Transport
Dividends If taxed at source country it should not exceed:
§ 10% of gross dividend, if at least 10% shares owned.
§ 15% of gross dividend in other cases.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest if received by financial institution (including insurance).
§ 15%, in other cases.
Royalties If taxed at contracting state it should not exceed 15% of gross royalties.
Capital - Taxed at other state: If gains derived by resident of contracting state from
Gains alienation of immovable property situated in other state or is part of
permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation ships/
aircraft or movable property pertaining to operation of such ships/aircraft
(except those containers used solely in other state).
§ Gains from sale of transfer of shares or other securities.
§ Any all other gains derived by resident of contracting state.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Elimination of Double Taxation
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Diplomatic agents and Consular Officers
§ Entry into Force
§ Termination
NEPAL - QATAR

Date of 15th October, 2007 Entry into Force 19th May, 2009
Agreement
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers, transfer of
shares.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artistes/ entertainer and sportsmen.
§ Pensions and other similar remuneration.
§ Government service rendered to the state/ subdivision/ authority.
§ Teachers and researchers.
§ Payments/ Income received by students/ trainees for purpose of maintenance, education,
training and any study related employment.
§ Other Income.
Dividends If taxed at source country, it should not exceed 10% of gross dividend.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest.
§ Exempted at contracting state, if interest arising in contracting state paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital - Taxed at other state: If gains derived by resident of contracting state from
Gains alienation of immovable property situated in other state or is part of
permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation ships/ aircraft
or movable property pertaining to operation of such ships/aircraft (except
those containers used solely in other state).
§ Gains from sale of transfer of shares or other securities in which it is issued.
§ Any all other gains derived by resident of contracting state.
Students & Income not excess to US $4000 or its equivalent Qatari Riyals or Nepalese
Trainees Rupees is exempted to be taxed at source country.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Elimination of Double Taxation
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Members of Diplomatic Mission and Consular Post
§ Entry into Force
§ Termination
NEPAL - MAURITIUS

Date of 3rd August, 1999 Enter into Force 10th November, 1999
Agreement
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property and ships/ containers.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Entertainers and sportsmen.
§ Pensions and other similar remuneration.
§ Government service rendered to the state/ subdivision/ authority.
§ Teachers and researchers.
§ Students and Business apprentices.
§ Other Income.
Dividends If taxed at source country it should not exceed:
§ 5% of gross dividend, if holds at least 15% of capital of company.
§ 10% of gross dividend, if holds at least 10% of capital of company.
§ 15% of gross dividend, in all other cases.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest, if beneficial owner is financial institution, an
insurance or investment company.
§ 15% of gross interest, in all other cases.
§ Exempted at contracting state, if interest arising in contracting state paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital § Taxed at other state: If gains derived by resident of contracting state from
Gains alienation of immovable property situated in other state or is part of
permanent establishment in other state.
§ Taxed at contracting state: Gains derived by resident of contracting state,
from alienation ships/ aircraft or movable property pertaining to operation
of such ships/aircraft (except those containers used solely in other state.
§ Taxed in the country of residence: If gains other than above.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Elimination of Double Taxation
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Diplomatic and Consular Officers
§ Entry into Force
§ Termination
Double Tax Avoidance Agreement
between Nepal and Bangladesh signed
on March 2019 has yet not been
published publicly by Government.
NEPAL - KOREA

Date of 5th October, 2001 Entered into Force 29th May, 2003
Agreement
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers, shares of
capital stock and any other property.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artists/ entertainers and sportsmen.
§ Pensions, annuities and social security payments.
§ Government service rendered to the state/ subdivision/ authority.
§ Teachers and researchers.
§ Payments/ Income received by students/ trainees for purpose of maintenance, education,
training and any study related employment.
§ Other Income.
Dividends If taxed at source country it should not exceed:
§ 5% of gross dividend, if holds at least 25% of shares of company.
§ 10% of gross dividend, if holds at least 10% of capital of company.
§ 15% of gross dividend, in all other cases.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest.
§ Exempted at source country, if interest arising in source country paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital Gains - Taxed at other state: If gains derived by resident of contracting state from
alienation of immovable property situated in other state or is part of
permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation ships/
aircraft or movable property pertaining to operation of such
ships/aircraft (except those containers used solely in other state).
§ Gains from alienation of shares of capital stock of company.
§ Any all other gains derived by resident of contracting state.
Students & Income not excess to US $10,000 or its equivalent Korean currency or
Trainees Nepalese Rupees is exempted to be taxed at source country.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
§ If company owns not less than 20% shares of company which is resident of foreign country,
government of home country shall take into account tax paid/ payable by second mentioned
company while determining the tax to paid in home country.
Other Taxation Procedure Covered
§ Relief from Double Taxation
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Members of Diplomatic Mission and Consular Post
§ Entry into Force
§ Termination
NEPAL - AUSTRIA

Date of 15th December, 2000 Entered into Force 1st January, 2002
Agreement
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers and any
other property.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artists/ entertainers and sportsmen.
§ Pensions, annuities and social security payments.
§ Government service rendered to the state/ subdivision/ authority.
§ Teachers and researchers.
§ Payments/ Income received by students/ trainees for purpose of maintenance, education,
training and any study related employment.
§ Other Income.
Dividends If taxed at source country it should not exceed:
§ 5% of gross dividend, if holds at least 25% of shares of company.
§ 10% of gross dividend, if holds at least 10% of capital of company.
§ 15% of gross dividend, in all other cases.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest, if beneficial owner is bank carrying banking
business.
§ 15% of gross interest in other cases.
§ Exempted at source country, if interest arising in source country paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital Gains - Taxed at other state: If gains derived by resident of contracting state
from alienation of immovable property situated in other state or is part
of permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation
ships/ aircraft or movable property pertaining to operation of such
ships/aircraft (except those containers used solely in other state).
§ Gains from alienation of shares of capital stock of company.
§ Any all other gains derived by resident of contracting state.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then
when calculating tax on remaining income/capital, exempted income/capital can be taken
into account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Elimination of Double Taxation
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Diplomatic Agents and Consular Officers
§ Entry into Force
§ Termination
NEPAL - CHINA

Date of 14th May, 2001 Entered into 31st December, 2010

Agreement Force
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers and any
other property.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artists and sportsmen.
§ Pensions and social security payments.
§ Government service rendered to the state/ subdivision/ authority.
§ Teachers and researchers.
§ Payments/ Income received by students/ trainees for purpose of maintenance, education,
training and any study related employment.
§ Other Income.
Dividends If taxed at source country it should not exceed 10% of gross dividend, when
recipient is beneficial owner.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest.
§ Exempted at source country, if interest arising in source country paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital Gains - Taxed at other state: If gains derived by resident of contracting state from
alienation of immovable property situated in other state or is part of
permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation ships/
aircraft or movable property pertaining to operation of such
ships/aircraft (except those containers used solely in other state).
§ Gains from alienation of shares of capital stock of company whose
property consist directly or indirectly principally of immovable
property.
§ Other gains from alienation of shares of company which represents at
least 25% participation in company.
§ Any all other gains derived by resident of contracting state.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Elimination of Double Taxation
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Diplomatic and Consular Officers
§ Entry into Force
§ Termination
NEPAL – SRI LANKA

Date of 6th July, 1999 Entered into 31st May, 2000

Agreement Force
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers, shares of
stock and any other property.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artists/ entertainers and sportsmen.
§ Pensions and social security payments.
§ Government service rendered to the state/ subdivision/ authority.
§ Teachers and researchers.
§ Payments/ Income received by students/ trainees for purpose of maintenance, education,
training and any study related employment.
§ Other Income.
Dividends If taxed at source country it should not exceed 15% of gross dividend, when
recipient is beneficial owner.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest, if interest paid to bank carrying bona fide
business.
§ 15% of gross interest in other cases.
§ Exempted at source country, if interest arising in source country paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital Gains - Taxed at other state: If gains derived by resident of contracting state from
alienation of immovable property situated in other state or is part of
permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation ships/
aircraft or movable property pertaining to operation of such
ships/aircraft (except those containers used solely in other state).
§ Gains from alienation of shares of capital stock of company whose
property consist directly or indirectly principally of immovable
property.
§ Other gains from alienation of shares of company which represents
at least 25% participation in company.
§ Any all other gains derived by resident of contracting state.
Students & Income not excess to US $3,000 or its equivalent Sri Lankan or Nepalese
Trainees Rupees is exempted to be taxed at source country.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Non- Discrimination
§ Mutual Agreement Procedure
§ Exchange of Information
§ Diplomatic and Consular Officers
§ Entry into Force
§ Termination
NEPAL – PAKISTAN

Date of 25th January, 2001 Entered into Force 22nd October, 2008
Agreement
Incomes Covered
Income or capital gain earned by/ as:
§ Direct use/ letting the immovable property, livestock & equipment.
§ Business profits derived by enterprise.
§ Operation of ships/aircraft or use, maintenance, rental of containers used for transport of
goods, in international traffic.
§ Associated enterprises.
§ Dividend.
§ Interest income from debt claims of every kind, whether secured or not.
§ Royalties from copyright, patent, trade mark, design, plan, secret formula, etc.
§ Capital gain from alienation of immovable/ movable property, ships/ containers, shares of
stock and any other property.
§ Independent and Dependent Personal services which includes any scientific, literary,
artistic, educational, or teaching activities.
§ Physicians, lawyers, engineers, architects, surgeons, dentists and accountants.
§ Director’s fee.
§ Artists and sportsmen.
§ Pensions and social security payments.
§ Government service rendered to the state/ subdivision/ authority.
§ Professors, Teachers and researchers.
§ Students Income and Other Income.
Ship/ Air If taxed at other state, tax imposed should be reduced to 50%.
Transport
Dividends If taxed at source country it should not exceed:
§ 10% of gross dividend, if beneficial owner holds at least 10% of
company.
§ 15% of gross dividend, in other cases.
Interest If taxed at source country it should not exceed:
§ 10% of gross interest, if interest paid to bank carrying bona fide
business.
§ 15% of gross interest in other cases.
§ Exempted at source country, if interest arising in source country paid to
government of other state.
Royalties If taxed at source country it should not exceed 15% of gross royalties.
Capital Gains - Taxed at other state: If gains derived by resident of contracting state
from alienation of immovable property situated in other state or is part of
permanent establishment in other state.
- Taxed at contracting state:
§ Gains derived by resident of contracting state, from alienation
ships/ aircraft or movable property pertaining to operation of such
ships/aircraft (except those containers used solely in other state).
§ Gains from alienation of shares of capital stock of company whose
property consist directly or indirectly principally of immovable
property.
§ Other gains from alienation of shares of company which represents
at least 25% participation in company.
§ Any all other gains derived by resident of contracting state.
Students & Income not excess to US $3,000 or its equivalent Pakistani or Nepalese
Trainees Rupees is exempted to be taxed at source country.
Double Taxation Relief / Tax Credit
§ Amount equal to income tax/ capital tax already paid in foreign country is allowed as tax
credit against any income/ capital tax payable by resident in home country.
§ If resident is exempt from tax in home country under its specific law/ provisions, then when
calculating tax on remaining income/capital, exempted income/capital can be taken into
account and apply the tax rate applicable as if such income was not exempted.
Other Taxation Procedure Covered
§ Non- Discrimination § Limitation of Benefits
§ Mutual Agreement Procedure § Diplomatic and Consular Officers
§ Exchange of Information § Entry into Force
§ Assistance in Collection of Taxes § Termination
CONTACT US

NBSM Consulting Private Limited

Four Square Complex
Narayan Chaur, Naxal,
Kathmandu, Nepal.
T: 977-1- 4433069 / 4415242
E: [email protected]

The information contained in this document is compiled by NBSM Consulting Private Limited, and is exclusively for the information of clients and staffs. However,
further detailed study is recommended for the clearer and complete knowledge. We further believe the information contained herein to be correct, but we cannot
accept any responsibility for any loss occasioned to any person from action or refraining from action as a result of any item herein. Printed and published by
NBSM Consulting Private Limited. NBSM Consulting Private Limited, a company incorporated in accordance with the laws of Nepal, and in association with
Moore Stephens International Limited primarily provides audit and other professional services to clients. No member of NBSM Consulting Private Limited, has any
authority (actual, apparent, implied or otherwise) to obligate or bind firm in any manner whatsoever.

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