In Nepal, Value Added Tax (VAT) was introduced on 16 Nov. 1997. VAT is a tax imposed on the value added to goods and services consumed in Nepal or exported outside.VAT is shifted forward completely to the Consumer. In other words, if the tax on sales is more than the tax on purchases, the dealer businessman pays the difference to IRD. If the tax on sales is less than the tax on purchases, the dealer may carry forward this credit to the next month.
The income tax act imposes tax on income or wealth created by a person in the course of an earning activity. In the case of employment and investment of an individual, income is recognized for taxation purposes only at the time when it is paid for. But in the case of an entity, income is recognized in accrual basis. Payments can be made in cash or in kind. If the taxpayer receives a benefit not in the form of money but in the form of other benefits for example, free housing or facility of a car, for which he does not have to pay, this benefit has to be valued at and converted into money and is then taxable.
TDS (Tax Deduction at Source) is deducted at the time of payment made by the payer to the recipient.The TDS withholding agent (payment maker) transfers the TDS deducted to the Inland Revenue Department either in cash, or by cheque or draft, or through the bank.
Withholding agent = payer
Withholdee = receiver
Other Taxation Systems Like Import Duty, Excise Duty, Vehicle Tax Etc.
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