KATHMANDU, Sept 23: The government has taken a step toward signing the treaty for the avoidance of double taxation and prevention of fiscal evasion with various countries including the United Kingdom.
The agreement, commonly referred to as Double Taxation Avoidance Agreement (DTAA) or simply the Tax Treaty, is carried out between two countries that aim at avoiding or eliminating double taxation of the same income. Through a cabinet meeting on Thursday, the government has formed a committee to start the process of identifying countries for signing the DTAA, preparing the draft of the tax treaty, and negotiate with them at the initial phase including with the United Kingdom.
"The government has formed a committee under the leadership of Inland Revenue Department's director general Bishnu Prasad Nepal to negotiate with the UK government to negotiate the agreement for avoidance of double taxation and prevention of fiscal evasion," said Gokul Baskota, the Minister for Communication and Information Technology.
The committee will also work toward signing such tax treaty with other possible countries, according to senior government officials.
"The cabinet has decided to initiate the process of identifying possible countries that Nepal should sign tax treaty to attract foreign investment," Shishir Kumar Dhungana, Revenue Secretary at the Ministry of Finance, told Republica.
"The committee will first identify countries, prepare the text of the agreement and negotiate with them. Once the text is okayed, the cabinet will make decision again to sign the agreement with the individual country," he added.
According to Dhungana, the government will first focus on negotiating with the UK for DTAA. He added that the UK has already shown interest for such agreement.
Dhungana said that such treaty will help in attracting foreign investment in Nepal. "These agreements are signed to assure investors that they are not required to pay taxes in two countries as they can adjust such tax in the country where they are based," he said. "This will encourage investors to come and make investment in Nepal," he added.
Nepal has already signed double taxation avoidance agreement with 10 countries: India, China, Pakistan, South Korea, Qatar, Mauritius, Austria, Norway, Sri Lanka, and Thailand.
Nepal is almost ready to sign the tax treaty with Bangladesh. Minister for Finance, Yuba Raj Khatiwada, will sign the agreement with Bangladesh at a mutually convenient time as the text for the agreement is already finalized and okayed by both countries, said Dhungana.
Meanwhile, the government has formed a dialogue council for the promotion of industrial and commerce sectors. According to Information and Communications Minister Baskota, the council will be headed by Prime Minister KP Sharma Oli and include 'prestigious' industrialists and entrepreneurs and senior government officials.