New Tax Policy to Fuel Nepal’s Digital Service Exports
Only 5% Tax for Nepalese IT Professionals Selling Services Abroad
The Government of Nepal has announced a major incentive to boost the country’s IT sector and digital exports. Under the new provision introduced in the Fiscal Year 2082/83 National Budget, IT professionals and companies based in Nepal who sell services internationally will now be taxed at a flat rate of 5% final income tax.
This new policy was formally presented by Finance Minister Bishnu Paudel in his annual budget speech on Jestha 15, 2082 (May 30, 2025), and includes a 75% income tax exemption for individuals or firms exporting IT services.
Who Can Benefit from This Policy?
The tax policy is designed to benefit:
- Freelancers and remote tech workers
- Software companies and IT startups
- Digital marketing agencies
- App and web developers
- Outsourcing firms operating in Nepal
Any individual or entity operating from Nepal and earning income in convertible foreign currency by exporting IT services will be eligible for this 5% final income tax scheme.
You can verify eligibility criteria and tax compliance information by visiting the official Inland Revenue Department of Nepal.
Recognized IT Services Under This Scheme
According to the government’s outline and similar provisions in the past, the following services typically fall under the “IT Service Export” category:
- Software development
- Application and mobile development
- Web design and development
- UX/UI services
- Data analytics
- Server management and cloud computing
- AI and machine learning solutions
- IT consulting
- Cybersecurity services
The income must be generated from clients abroad and routed through legal, banking channels in Nepal as per guidelines from the Nepal Rastra Bank.
Key Details of the 5% Income Tax Policy
- Final tax: No additional income tax will be applicable beyond the 5%.
- Documentation required: Maintain payment records, client contracts, and banking statements.
- Applicable only on foreign income: Local clients are taxed under regular slabs.
- Declared through formal channels: All income should be declared during the annual tax filing process with appropriate documentation.
Finance Minister Paudel emphasized that this move is to support digital entrepreneurs and tech professionals who have helped Nepal grow as a global IT outsourcing destination.
Why This Policy Matters Now
The number of Nepalis working online or in tech-based remote jobs has risen dramatically, especially after the COVID-19 pandemic. Platforms like Upwork, Fiverr, and Toptal have helped skilled Nepalis connect with international clients.
However, lack of clarity in tax obligations often discouraged full-time freelancing. This new 5% rate simplifies the system, bringing more people into the formal tax net while reducing their burden.
Experts from Nepal’s private sector, including CAN Federation, have also welcomed the announcement, stating that it will encourage more young professionals to stay in Nepal while working for foreign clients.
Common Questions About the 5% Tax
Is the 5% tax applicable on net or gross income?
It applies to gross foreign income received via banking channels.
Do I need to register a business to be eligible?
Not necessarily. Individuals can also declare income under a personal PAN and still benefit.
What if I earn income both locally and internationally?
You will need to separate the two streams and declare them under different income heads. Local earnings will follow regular tax rates.
