How to pay income tax, if one works remotely from Nepal on an org that is completely based/registered on another country(US)? The monthly salary is send to the personal bank account. So If anyone has knowledge on this, Do suggest a way.
View on r/Nepal by Hey_Bannana
If your bank is not deducting 5% TDS, it means your bank is not receiving FCY. They are receiving NPR, and your money is being treated as remittance.
Legally, your total tax liability for **income in FCY** is only 5% at max, if you do not file Income Tax Return (not compulsory if your income is < 40 Lakh per annum). However, it seems your bank is not receiving money in FCY, so you may not be entitled to this benefit. I am not sure how IRD will interpret this. This might be up for debate.
If you do not earn in FCY, your tax liability can be regular slab rate.
So, the best thing you can do to make it all legal, is to receive money in FCY, and ask your bank to deduct 5% TDS. The agency your client is using should send FCY and not NPR. Usually remittance agency do local transfer in your account using NPR.
You can also keep quite and do nothing. Many are doing the same, and IRD is not pro-active in this sector at the moment.
I tried to explain it in general terms, but with law there are many gotchas.
Also, you do not need to be concerned about US Tax laws. Your client is liable to pay US Taxes and not you.
If your employer sends money in $ or other foreign currency, 5% will be automatically deducted by banks. If you have aubmitted PAN in the bank, it will show up in nagarik app as well. My assumption in your case is that your client are sending NPR directly instead of $ by converting currency in their end. Contact your bank and see if you are receiving NPR or $.
Long wall of text ahead and I don’t even know why am I doing this, well lets go ahead.
The information has been provided based on additional information you have provided in comment.
Since you are Nepali resident and not residing in US or US citizen in addition to being contract employee of US based company, I believe your company has prepared IRS form W-8BEN for you and has been shared with you. This in layman terms means your tax in your income is NOT being deducted in USA and you are responsible for your tax payment here in resident country which is Nepal.
Now, with recent law introduced in Nepal for foreign remote worker, your bank should have automatically deducted 5% from your deposited income in your account and you would have been sorted out with your tax payment. But since that has not been made, like other commentator said, your bank may not be receiving money in foreign currency. The basic criteria for this law was country had to receive foreign currency which I guess is not happening which means as far as I know you will not be given this facility of 5% income tax rate and will move into slab based income tax rate which can go upto 39%. Your bank is treating your income as remittance and it is not taxed in Nepal which however at its root level is misclassification of your income type.
Now this maybe short-term gain for you but you are young and you may want to go abroad or any other life circumstances that may require you to submit Tax clearance certificate which I believe is going to be compulsory with the tax policy and system IRD is slowly heading towards. Your income will go into tax slab rate and I presume your foreign income will go into quite a big slab of income tax rate. So the very wise and far sighted thing would be to make sure that your receiving bank receives foreign currency and your bank will have internal system to automatically to tax you 5% and also go to bank and declare your income as earned from foreign income as remote IT worker (I doubt this will work though if your bank continues to get NPR currency and not foreign currency)
Another thing many IT worker I have seen fail to do so is getting their TAX CLEARANCE CERTIFICATE from IRD. Once their bank deducts taxes, they donot care about this one. This letter is IRD basically certifying that for said fiscal year your income and tax payment was xyz amount. This will be compulsory once your income exceed 40 lakh but its always wise to get this even if you are below threshold. This also will help in legitimizing your employment and tax payment which is one of your concern.
Also I’m side eyeing your decision to use Nepal Bank ltd, like boy why? Out of all the bank, you choose this one that too for foreign income dealing.
And I think I answered all of your queries.
Yetti lekya ra type gareko paisa haldeu hai. dollar kamauchau.
your nepali bank will only provide you your payment after deducting 5% tax.That’s all that you eed to pay.