Digital Service Tax (DST) Registration in Nepal

Nepal has progressively developed its tax framework to address the challenges posed by the digital economy. The Digital Service Tax (“DST”) was initially introduced through the Procedure Relating to Digital Service Tax in the fiscal year 2022 (2079), and has since undergone several revisions to accommodate evolving needs. The most recent version of the DST framework was promulgated in 2025 A.D. (2082), pursuant to the prevailing Finance Act.

The DST is specifically designed to regulate and tax digital services supplied by non-resident entities to consumers in Nepal. Its primary objective is to ensure equitable taxation of the digital economy and to align Nepal’s fiscal regime with global developments in cross-border taxation of digital services.

This article provides an overview of Nepal’s DST regime, focusing on its legal framework, scope of application, compliance obligations, and procedural requirements for non-resident digital service providers.

Legal Framework

The legal framework governing the imposition and administration of the Digital Service Tax in Nepal is set out in the following instruments:

1. Finance Act, 2082 (2025);
2. Procedure Relating to Digital Service Tax, 2082 (2025); and
3. Procedure Relating to Value Added Tax on Digital Services Provided by Non-Resident Persons, 2079 (2022) (as amended by the Third Amendment, 2082 (2025)).

Scope of Digital Services

As per the Procedure Relating to Digital Service Tax, 2082 (2025), digital service includes the following services whose delivery essentially requires information technology and is provided automatically through the internet with minimal human intervention:

1. Paid personal advertisement services;
2. Targeted online advertisement services;
3. Movies, television, music, over the top (O.T.T.) and other similar subscription based services;
4. Data collection services;
5. Cloud services;
6. Gaming services;
7. Mobile application related services;
8. Online marketplace services, and services and goods provided through it;
9. Supply and update of software;
10. Download of data, images and similar services;
11. Education, consultancy, skill development and training services;
12. E-book, e-library and e-newspaper; and
13. Other similar services.

Applicability and Basis of Taxation

The DST is applicable to digital services supplied by non-resident entities to consumers in Nepal. For the purposes of the DST framework, consumers are defined as individuals residing in Nepal who utilize such digital services for personal consumption, rather than for commercial or business purposes (i.e., Business-to-Consumer (B2C) transactions).

Conversely, Business-to-Business (B2B) transactions fall outside the ambit of the DST Procedure. Such transactions are instead subject to taxation under the Income Tax Act and are not governed by the DST framework.

DST liability arises where non-resident entities provide digital services to Nepali consumers and the aggregate value of transactions exceeds NPR 3 million within a single fiscal year.

Rate of Taxation

The DST is levied at the rate of 2% on the transaction value, calculated exclusive of any indirect taxes such as Value Added Tax (VAT). The DST is characterized as a direct tax, and by express statutory provision, the liability may not be contractually shifted to, or recovered from, the consumer.

In parallel, a 13% VAT is applicable under the reverse charge mechanism on digital services provided by non-resident suppliers. However, the VAT liability does not extend to certain exempt categories of digital services, namely:

1. Educational services;
2. E-books and related digital publications;
3. E-libraries; and
4. E-newspapers.

Registration Procedures

            I.     Administrative Authority

The administration and enforcement of the DST is entrusted to the Large Taxpayer, which is designated as the competent authority for registration, compliance monitoring, and collection of DST.

          II.     Registration Requirement

All taxable persons under the DST framework are required to register in Nepal and obtain a Permanent Account Number (PAN) prior to engaging in taxable transactions. Failure to register does not exempt a person from their tax obligations; liability to DST arises by operation of law once the statutory conditions are met. The other requirements include:

1. Taxable persons must apply for a PAN within 30 days of exceeding the prescribed transaction threshold (NPR 3 million in a fiscal year).
2. Voluntary registration is permitted at any time, even prior to reaching the threshold.
3. Non-resident persons who are already registered for Value Added Tax (VAT) in Nepal are not required to obtain a separate PAN for DST purposes.

       III.     Registration Procedure for Non-Resident Entities

Non-resident digital service providers are required to submit an application for PAN registration via Inland Revenue Department’s online portal. The application must be accompanied by the following supporting documents:

1. Notarized copies in English of the applicant’s company registration certificate issued in the country of residence;
2. Tax registration identification number or equivalent issued in the country of residence;
3. An authorization letter designating a person for tax purposes, along with a notarized copy of the authorized person’s passport (in English);
4. A photograph and specimen signature of the designated authorized person; and
5. Where a Nepali citizen is designated as the authorized person, a notarized copy of their citizenship certificate or passport, together with the authorization letter.

Recording of Transactions

Non-resident digital service providers are required to maintain accounts on an accrual basis and must disclose the value of their transactions in Nepalese Rupees.

Filing of Returns

The filing of returns for DST and VAT differs in terms of frequency and deadline, and is outlined as follows:

Particulars	For DST	For VAT
Filing requirement	Non-resident digital service providers must file returns and pay the applicable DST at the Large Taxpayer Office through the online system.	Non-resident digital service providers must file VAT returns with the Large Taxpayer Office through the online system.
Deadline	Within three months following the end of the income year.	Within twenty-five days after the expiry of each tax period.

De-Registration

Non-resident persons wishing to de-register must apply to the Large Taxpayer Office. The Office either confirms de-registration or provide reasons for refusal within three months of receiving the application. De-registration is not granted unless all outstanding DST and VAT liabilities are cleared.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice, advertisement, personal communication, solicitation or inducement. No attorney-client relationship is created through this content. Gandhi & Associates assumes no liability for any consequences resulting from actions taken based on information contained herein.

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