Nepal is in DTAA agreement with 11 different countries. A short comparative study of the DTAA of Nepal with Austria and Bangladesh is shown in the table below. Please refer desktop version for more clarity.
| Article | Austria |
| Immovable Property | Where the asset is situated |
| Business Profits | Only profits as are attributable to PE to be taxed in the country of source |
| Shipping and Air Transport | Where place of effective management is located. If such place is onboard a ship - Home harbor of such ship. if no home harbor - where operator of this ship is a resident. |
| Dividends | May be taxed by the country of residence. May be taxed by source state, tax so charged shall not exceed. a) 5% of the gross amount if the beneficial owner is a company which holds directly at least |
| Interest | May be taxed in both states. Limit for tax in the source state is 15% of the gross amount and 10% for banking business (Only banking is mentioned). Exempt in the source country if derived by central banks, government or political subdivisions or a loan guaranteed by such institutions. If such interest income is effectively connected with PE, such interest is to be charged as business income |
| Royalties | Taxed in both states, Limit in the source state is 15% |
| Capital Gain | CG from immovable property - where the asset is situated. alienation of movable property of PE or fixed base - where such PE is located. Alienation of ships and aircrafts - where effective management is situated. Other cases - country of residence. |
| Independent Personal Services | To be taxed in the country of residence, but, in the following circumstances, taxed in the country of source - a. has fixed base in another country. b. stay in the other country exceeds 183 days or more in any 12 months. |
| Dependent Personal Services | Taxed in the country of source. however, in the following conditions taxed in the country of residence. a)not present in another country for more than 183 days in the last 12 months. b)Remuneration is paid by a employer who is not resident of the other contracting state and remuneration is not borne by PE in the other state. Remuneration provided in ships/aircrafts operating in international traffic - Place of effective management |
| Directors Fee | State of Source |
| Artists and Sportsmen | Taxed in the state where the activities are performed. Activities performed under a cultural agreement or arrangement between the Contracting States shall be exempt from tax in the Contracting State in which the activities are exercised if the visit to that State is wholly or substantially supported by funds of either Contracting State, a local authority or public institution thereof. |
| Pensions and Social security payments | Country of Residence (excluding government pensions).May also be taxed in source country if the pension is paid by a resident of that state or by a PE situated therein. Pension under social security scheme - State of Source. |
| Government Service | Salaries, wages, and other similar remuneration -Country of Source. However, in the following conditions Country of Residence - a) National of that state. b) did not become resident solely for the purpose of rendering services. c) services are performed in that state. Pension paid out of government funds to be taxable only in that state except when the individual is a resident and national of the other contracting state, Country of residence in that case. |
| Student and Trainees | Following incomes are exempt from tax - a) remittances from abroad for the purpose of maintenance, education, study, training b) grants allowance, rewards c) income from employment for the purpose of practical training for a period of less than 6 months in a year. Should be solely for the purpose of a) studying b) securing training c) carrying out research not for private purpose. |
| Other Income | May be taxed under both states |
DTAA with Bangladesh
The income tax treaty between Bangladesh and Nepal was signed on 5 March 2019. The treaty is the first of its kind between the two countries.
Taxes Covered :
The treaty covers Bangladesh income tax and Nepal income tax.
Service PE:
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.
Withholding Tax Rates
Dividends - 10% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
Interest - 15%, although a 10% rate applies on interest paid to a bank that is the beneficial owner
Royalties - 15%
Fees for technical services (managerial, technical, or consultancy) - 15% Capital Gains
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of immovable property situated in the other State and gains from the alienation of stocks and shares in a company, the assets of which consist principally of such immovable property; and
Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State.
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Double Taxation Relief
Both countries apply the credit method for the elimination of double taxation.
Entry into Force and Effect
The treaty will enter into force once the ratification instruments are exchanged. It will apply in Bangladesh from 1 July of the year following its entry into force and will apply in Nepal from the first day of the Nepalese fiscal year (16 July) next following that of its entry into force.
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