Nepal's Double Taxation Treaties and How Relief Is Claimed

Eleven is a small number for a country that wants foreign capital. Nepal’s comprehensive double taxation avoidance agreements cover India, Norway, Thailand, Sri Lanka, Mauritius, Austria, China, Qatar, Pakistan, South Korea and Bangladesh. The list has grown by one country since 2009. An investor arriving from anywhere else gets a short answer to the first question about treaty relief. There is no treaty, and the domestic charge applies at its full rate on the full gross payment.

Partner	Signed	Entered into force
India	27 November 2011	16 March 2012
China	14 May 2001	31 December 2010
Pakistan	25 January 2001	22 October 2008
Qatar	15 October 2007	19 May 2009
South Korea	5 October 2001	29 May 2003
Austria	15 December 2000	1 January 2002
Sri Lanka	6 July 1999	31 May 2000
Mauritius	3 August 1999	10 November 1999
Thailand	Not recorded in the source	14 July 1998
Norway	13 May 1996	19 June 1997
Bangladesh	Signed 2019; published by the Department in 2021	Not established

The dates come from a 2019 synopsis prepared by a Kathmandu chartered accountancy firm, and should be treated accordingly. The Inland Revenue Department publishes the agreements as a single bound collection dating from 2016, with Bangladesh added as a separate item in July 2021. There is no per-treaty landing page, no consolidated status table showing entry into force, and no published record of protocols.

Jurisdictions outside the network

The absences matter more than the inclusions. Singapore, the United Arab Emirates, the United Kingdom, the United States, Japan, Germany, the Netherlands and Australia are all outside the network. So is every Gulf state other than Qatar, which is awkward given the scale of remittance and labour-market ties. Coverage of Nepal’s neighbours is better. India, China, Bangladesh, Pakistan and Sri Lanka are all in, reflecting a treaty policy built around the immediate region plus a handful of opportunistic negotiations elsewhere.

Mauritius sits oddly in that list. A 1999 agreement with a jurisdiction that has historically served as a holding-company platform for South Asian investment is the kind of instrument other countries in the region have spent the last decade renegotiating. We could not establish whether Nepal’s agreement contains limitation-of-benefits provisions, and we assert nothing either way.

What a rate cap is worth

Nepal taxes non-residents largely through withholding that is final. The deduction made by the Nepali payer discharges the non-resident’s liability, and no subsequent return exists in which the non-resident computes a net profit and claims costs. A treaty that cuts the withholding rate on a royalty is therefore reducing a charge on gross receipts.

For a supplier with thin margins, that arithmetic can be brutal. A ten percent cap on a gross service fee weighs far more heavily on a business earning a fifteen percent margin than a headline corporate rate comparison would suggest. The treaty helps. It does not convert the charge into a net-basis tax. Where an investor has a genuine choice of contracting entity, the comparison that counts runs between a final withholding on gross and the alternative of accepting a permanent establishment and being taxed on profit.

The 2019 synopsis records royalty caps of 15 percent across the whole network, dividends ranging between 5 and 15 percent depending on ownership thresholds, and interest between 10 and 15 percent with the usual carve-outs for government-to-government lending. A royalty cap of 15 percent is only useful where the domestic rate sits higher. Otherwise the treaty article is decorative. Nepal’s domestic withholding rates are revised each fiscal year, so any comparison has to be made against the rates in force for the year of payment.

The India agreement

The agreement with India signed on 27 November 2011 replaced an instrument dating from 1987 and entered into force on 16 March 2012. It is the only treaty in the network concluded after 2007, and the only one negotiated in an era when exchange of information and anti-abuse drafting were standard. Every other agreement in force reflects the drafting conventions of its decade.

Anyone structuring an investment should treat that as a live fact. The oldest instruments in the network are the ones most likely to lack the provisions a modern tax administration relies on when it wants to deny a benefit, and equally the ones most likely to lack the provisions an investor relies on when it wants certainty. Age cuts both ways.

Claiming relief

This is where the article stops being able to help. We could not locate any published Departmental procedure, form, circular or directive setting out how a non-resident or a Nepali withholding agent claims the benefit of a treaty. No citable instrument tells us whether relief is applied at source by the payer on production of a certificate of residence, or claimed afterwards by refund; what documentation the tax office requires; who signs it; or how long a determination takes.

Practitioners describe the process as documentation-heavy. We cannot say what the documentation is, and we will not invent a checklist. Anyone planning a payment into or out of Nepal in reliance on a treaty rate should establish the current requirement directly with the Inland Revenue Department before the payment is made. The withholding agent carries the exposure if the deduction turns out to have been too low.

What this means for structuring

Treaty coverage is rarely the reason an investment is routed through one jurisdiction rather than another, and in Nepal it is a weaker reason than usual. The eleven agreements are old, the caps are modest, the charge they cap falls on gross amounts, and the relief procedure is undocumented. Meanwhile Nepal’s foreign investment approvals, its repatriation rules and its sectoral restrictions all attach to the identity of the investing entity, and those regimes are administered by bodies with no connection to the tax treaty.

The realistic question is narrower than it looks. Are the payments a project will generate of a kind the treaty actually addresses, and will the counterparty relationship survive the documentation the tax office turns out to require? A holding structure chosen for a treaty rate that cannot be claimed at the counter has bought nothing, and has added a layer the investment approval process will notice.

Open questions

Three things sit open. Whether Nepal has signed the OECD Multilateral Instrument, which would modify its treaties without renegotiating them one by one, could not be verified from the OECD’s own list. Whether the Bangladesh agreement has entered into force, and from which tax year, is not stated on the Department’s page. And whether any protocol has amended the older treaties since 2019 is not recorded anywhere we could find.

For a network this small, the absence of a published status table is a real administrative gap. A single page listing eleven agreements with their signature dates, entry-into-force dates, effective tax years and amending protocols would take an afternoon to compile and would remove most of the uncertainty described here.

Sources

1. Treaty and Agreement (सन्धि तथा सम्झौता) — document category

   Inland Revenue Department, Ministry of Finance · Category page; most recent item 3 Bhadra 2078 (19 July 2021). Accessed 26 August 2026 · Tier 2 — Official publication

   Supports: That the Department publishes its double taxation agreements as a single collection, and that the Bangladesh agreement was added as a separate item.

   Accessed 26 August 2026

2. नेपाल सरकार र गणतन्त्र बाङ्गलादेश सरकारबीच भएको द्वैध कराधान मुक्ति तथा वित्तीय छल निरोधका लागि सम्पन्न सम्झौता

   Inland Revenue Department, Ministry of Finance · Published 3 Bhadra 2078 (19 July 2021) · Tier 1 — Primary legal instrument

   Supports: The existence of a Nepal–Bangladesh double taxation avoidance and fiscal evasion agreement published by the Department.

   Accessed 26 August 2026

3. दोहोरो करमुक्ति तथा वित्तीय छल निरोध सम्झौता संग्रह (Collection of double taxation avoidance and fiscal evasion agreements)

   Inland Revenue Department, Ministry of Finance · Published 27 Shrawan 2073 (12 August 2016) · Tier 2 — Official publication

   Supports: That the Department maintains a consolidated collection of the agreements rather than separate pages for each treaty.

   Accessed 26 August 2026

4. Synopsis of DTAA of Nepal with 11 countries

   NBSM & Associates, Chartered Accountants · June 2019 · Tier 6 — Professional or news source

   Supports: The list of eleven treaty partners; signature and entry-into-force dates; and the dividend, interest and royalty rate caps described as at 2019.

   Accessed 26 August 2026

5. आयकर ऐन, २०५८ (आर्थिक ऐन, २०८२ ले गरेको संशोधन सहित) — Income Tax Act 2058, as amended by the Finance Act 2082

   Inland Revenue Department, Ministry of Finance · Posted 18 Poush 2082 (January 2026); Act in force · Tier 1 — Primary legal instrument

   Supports: That the Income Tax Act 2058 is the domestic instrument through which international agreements take effect, and the Department's own consolidated text was current only to the Finance Act 2082 as at 26 August 2026.

   Accessed 26 August 2026