In October 2024, the Department of Inland Revenue in Nepal issued local Guidelines on Transfer Pricing.
Section 33 of the Nepalese Income Tax Act, 2058, includes provisions related to transfer pricing and other arrangements between related parties. Under this section, the Inland Revenue Department may, in determining income, adjust or allocate amounts by including or excluding certain transactions to calculate taxable income and tax based on the arm’s length principle. The department also has the authority to recharacterize distributions, allocations, or allocations of income between related parties. The provisions under section 33 apply to the transactions between related parties based on the transfer pricing methods determined by the department.
The guidelines applies for the fiscal year 2024/2025 and forward.
The content is devided into the following sections
1 Introduction
2 Definitions
3 Transfer Pricing Determination and Arm’s Length Principle
4 Comparability Analysis
5 Arm’s Length Pricing Methods
6 Documentation Related to Transfer Pricing Determination
7 Administration of Transfer Pricing Determination
Annex 1 – List of Documents to be Maintained by the Taxpayer Related to Transfer Pricing Determination
Annex 2 – Certified Details Submitted by the Auditor in the Income Return Form