From IRD's Clarification To Investor Association Protests To NEPSE Panic With Regard To Uncertain Tax Provisions

Thu, Jun 1, 2023 11:00 AM on Latest,

-ShareSansar

The Inland Revenue Department (IRD) has clarified the contentious taxation provision announced on Monday for the budget 2080-81.

IRD issued a press release stating that, it has been understood through several media outlets that the investors are still in limbo particularly with regard to Rule no 29 of the Economic Bill, 2080. IRD claimed that the rule is intended at providing Nepali citizens concessions on taxes levied during transaction of shares.

The press release issued by the IRD mentions that only irregular/infrequent(पटके) share traders can entertain the said tax concessions as opposed to regular/frequent (नियमित) share traders.

Today, talking over the phone to ShareSansar, a source from IRD stated that as of now, the department has not distinguished between regular/frequent (नियमित) and irregular /infrequent (पटके) share traders in the capital market. However, according to the source, the as the department has provided a time limit of up to Chaitra, 2080 to file for such pending share trading income despite advanced CGT deduction, in the meanwhile the Department will provide further clarification/description to distinguish the two types of traders in the capital market.

The sources at the Department added that, as of now there has been no changes in the Income Tax Act, 2058 in line with which capital gain tax (CGT) of 5 per-cent (for long-term holding) and 7.5 per cent (for short-term holding) is the final tax.

The source further stated that yesterday, personnel from the investor forums/associations had visited concerned officials at IRD and their concerns have been according addressed via the press release issued by the IRD.

However, as the investors forums had already warned of staging protests given that their demands are not met, the investor forums are staging at protest this morning in Kamal Pokhari, Kathmandu.

Yesterday, in a joint press release, Nepal Investor Forum, Share Investor Federation and Nepal Capital Market Federation, had expressed their concerns, which has been acknowledged by IRD, as per the press release.

According to the investors, this provision contradicts the instructions provided by the Inland Revenue Department (IRD).

In a letter dated Ashad 05, 2077, the Department of Revenue informed the Securities Board of Nepal (SEBON) about the process of advance tax recovery on capital gains resulting from securities transactions. It stated that eligible individuals could obtain a tax payment certificate from the Internal Revenue Office or Taxpayer Service Office by filing through the electronic tax system.

However, the investor associations argue that, up until now, transactions conducted by individuals, as opposed to firms or companies, have not been considered as business activities and, as a result, have not been subject to tax return submissions.

According to the arrangements indicated by rule 29, if a Nepali citizen declares income from share or real estate trading from FY 2076/77 to 2078/79, until Chaitra, 2080, the 50 percent tax levied tax in accordance with Income Tax Act, 2058 will be waived.

Although, the intention of the Inland Revenue Department (IRD) to bring-in such policies intended at providing tax concessions is in the best interest of the investors, the department should have done their homework by providing proper distinctions and immaculate clarification into the matter rather than maintaining ambiguity open to subjective interpretation of Rule 29 in the Economic Bill, 2080.

As a result of the now highly-debated tax arrangement, a panic can be witnessed in the share-market. Consequently, in the past three business day due to the uncertainty and expectations surrounding the nature of the budget and post confusion with regard to the announced provision by the Finance Minister on Monday, the market has plunged a massive 109 points.

Read Rule no 29 of the proposed Economic Bill, 2080, here: