Tax Exempt Entity
What is Tax Exempt Entity ?
NGO’s and INGO’s are an social organizations without any profit motive. Such social organizations are registered as a Tax Exempt Entity under Income Tax Act. Tax Exempt Entity under Income Tax Act of Nepal having obtained affiliation from Social Welfare Council.
Grants received by the NGO’s and INGO’s are exempt from income taxes upon obtaining the tax exemption certificate from the Inland Revenue Department.
Are all income Tax Exempt income ?
The tax exemption is provided for the following income received by tax exempt entity;
a. Donations and Prizes received by the organization
b. Other contributions received by organization for direct activities of organization as per its objectives
Tax Exemptions is not applicable for any other income earned by organization such as interests, rent income, service fees, investment income and other income that has been obtained as a result from competitive bidding.
For any other income earned by the organization except Donations taxes shall be applicable in any surplus funds generated from such activities during the fiscal year.
Renewal of Tax Exemption Certificate
Renewal of Tax Exemption Certificate of NGO/INGO shall be done within six months of fiscal year.
Documents Required to be submitted
- Audited Financial Statement
- Proof of Deposit of Withholding Tax and Tax Return
- Annual Salary Sheet
- Previous Year Tax Exemption Certificate
- Renewed General Agreement/ Affiliation with SWC
- Annual Program Reports
A TAX Exempt Entity cannot enjoy Tax Exemption Benefits until the Certificates are Renewed.
The NGO shall be liable to pay 25% corporate taxes on any surplus fund for the fiscal year if the NGO/INGO has not obtained or renewed the tax exemption certificate.