Snapshot of Tax Litigation in Nepal
Taxation is a branch of public finance. With regards to taxation mainly two taxes are familiar, Direct taxes and indirect Taxes. Direct tax is a form of tax paid by a person on whom it is legally imposed whereas an indirect tax is imposed on one-person but partly or wholly paid by another. The legal framework regarding Direct taxes and indirect taxes in Nepal are as follows:
Authorities involved in imposing, implementing and monitoring tax are as follows:
Ministry of Finance is responsible for the preparation of the budget and bringing amendments in the tax laws. The Inland Revenue Department is responsible for the enforcement of the Tax Laws and administration of, Income Tax, VAT, Excise Duty inter alia. DGs, DDGs and Tax officers are responsible for the collection of Tax and monitoring of taxpayers’ activities. They are the actors involved in the implementing and monitoring tax The tax offices are categorized as per the amount of tax paid by taxpayers.
Tax Assessment, Administrative Review, and Appeal
Self-assessment tax refers to any balance tax that has to be paid by a taxpayer on his assessed income. Income tax requires the taxpayer to keep a record of various documents. The Income Tax officer can make amendments in the tax assessment where if the taxpayer is not satisfied with the amendment they can follow these procedures in the following institutions as mentioned below:
Administrative Review (sec 114) In case a taxpayer is not satisfied with the decision of IRD or respective IRO or the Tax officer, it has to file an application, as the first step, to IRD for an Administrative Review. The taxpayer has to submit an application including the sections, rules circulars, decisions of the court, etc if these matters were not considered at the time of taking the decision.
Appeal in the Revenue Tribunal If the taxpayer is dissatisfied with the outcome of the administrative review, it may file an appeal at Revenue Tribunal established under Revenue Tribunal Act, 2031 (acc. Sec 116)
Appeal at the Supreme Court Sec 8(Revenue Tribunal Act) If the taxpayer is dissatisfied with the outcome of the Revenue Tribunal, it may file an appeal at Supreme Court under grounds such as error of jurisdiction; error in procedure; error in evaluation of evidence; and gross error of law.
Snapshot of Judicial Process in Tax Cases