Kathmandu: In a significant move to ease the burden on taxpayers and expand the formal economy, Finance Minister Dr Swarnim Wagle has announced a massive relief and amnesty package in the Finance Bill of 2026.
The Minister’s plan introduces 19 critical provisions designed to resolve long-standing tax disputes and encourage compliance. To benefit from these incentives, taxpayers are generally required to settle their dues and file their documentation by mid-January 2027. This initiative is being hailed as a golden opportunity for the business community and individual taxpayers to regularize their financial standing with the government.
One of the highlights of the bill is the recognition of social and political circumstances affecting the economy. Donations made by individuals or institutions to the National Reconstruction Fund during the 2025/26 fiscal year are now entirely tax-exempt and can be recorded as deductible expenses.
Additionally, the government has allowed businesses that suffered uninsured losses during the historic People’s Movement to claim those losses as expenses and adjust their VAT, provided they can furnish an official damage report. The Minister also ensured that foreign entities working on state-partnered projects would receive the income tax exemptions promised under their specific bilateral agreements.
The bill takes a bold step in clearing up the historical tax ledger by completely waiving arrears from several abolished taxes, including the old sales tax, entertainment tax, hotel tax, and contract tax. For non-existent or unregistered businesses that still have debts pending under the 1974 Income Tax Act, tax offices are now authorized to permanently strike those names and arrears from their records.
The jewellery sector has also received a reprieve, as the government will no longer demand luxury fees for gold and gems sold before August 18, 2025, if those fees were not previously collected. Similarly, VAT, interest, and fines on the manufacture of gold and silver ornaments and statues dating back to before the 2025/26 fiscal year have been waived.
To streamline administrative processes, the government is allowing businesses to destroy expired or unusable raw materials and finished goods by mid-January 2027 under official supervision without incurring excise duties or taxes. Excise stamps that were destroyed in storage or during periods of civil unrest will also be removed from official accounts.
Furthermore, the bill offers a pathway for educational and diplomatic institutions, as well as non-profit social organizations, to have their interest and fees waived if they file their outstanding returns and settle their dues by the designated deadline. This extends to insurance agents who failed to collect VAT in previous years, granting them a full waiver on the resulting taxes and penalties.
A major focus of Dr Wagle’s package is the “principal plus one percent” settlement scheme. Taxpayers who are currently engaged in legal disputes with the tax authorities can resolve their cases by withdrawing their lawsuits and paying the disputed principal tax along with a one-per cent surcharge, in exchange for a total waiver of all other interest and penalties. Similar conditions apply to VAT and excise duty defaulters. While the government is offering an interest waiver for those who pay their assessed tax principal by January 2027, the Minister notably clarified that this specific provision would not be available to telecommunications service providers.
Finally, the government is making a concerted effort to bring new taxpayers into the fold. Individuals who have earned income in the past without a Permanent Account Number (PAN) can now register and pay their taxes for the last few fiscal years to have all liabilities from earlier years forgiven.
This amnesty also extends to Nepali citizens employed by the United Nations or various diplomatic missions; if they have not yet paid taxes on their salaries, they can register for a PAN and settle their recent obligations to clear their historical tax record.
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