Kathmandu, September 3- Commercial banks have sought Nepal Rastra Bank (NRB)’s favour to apply the traditional method in tax calculation.

Following the execution of the new accounting and reporting standards — Nepal Financial Reporting Standards (NFRS) — banks started publishing financial statements that complied with the NFRS rules from the fourth quarter of the last fiscal. Due to lack of loan-loss provisioning in the new accounting and reporting method, the profits made by banks witnessed a sudden growth from the last quarter of the previous fiscal.

Along with the surge in profits due to the new accounting and reporting system, banks are worried about how the tax administration will calculate their corporate income tax. Banks need to submit 30 per cent of their operating profit as corporate income tax (CIT). However, if the tax administration calculates the tax based on NFRS method, the banking sector will have to pay an additional Rs eight to nine billion in CIT in this fiscal. Apart from the CIT, banks also collect withholding taxes.

The banking sector has been contributing a total of around Rs 50 billion to Rs 52 billion every year, according to Gyanendra Prasad Dhungana, president of Nepal Bankers’ Association — the umbrella network of domestic commercial banks.

As per the provision of income tax, NRB has the authority to prescribe the tax collection method. Banks are scared of having to pay more taxes and have thus sought the central bank’s favour for an interim arrangement in tax calculation as per the traditional method, under which banks will calculate the operating profit based on the loan-loss provision. As per NFRS, banks cannot provision on loans if debt servicing is regular.

However, central bank rule has made it mandatory for banks to set aside one per cent of loans as loan-loss provisioning while floating loans and provisioning is raised based on the performance of repayment of interest and principal and strength of collateral.

NRB has urged the Institute of Chartered Accountants of Nepal (ICAN) — the accounting sector regulatory body — and Nepal Accounting Standard Board (NASB) for giving continuity to the loan-loss provision citing asset impairment provision of the NFRS can take a longer time for its execution.

NRB has developed the regulatory reserve from the difference of the profit as per NFRS and traditional regulatory requirement balance sheets. As per central bank officials, the regulatory reserve will be added to the core capital of the banks after the interim provision of regulatory reserve ends.

Bishnu Nepal, director general of the Inland Revenue Department (IRD) under the Ministry of Finance, said that the government will slap taxes as per the provision of the Income Tax Act.

It is reported that the Ministry of Finance has asked NRB, ICAN and NASB for appropriate suggestions to slap corporate income tax. Banks have to submit 40 per cent of their annual income tax estimation of this fiscal by mid-January.

Source: The Himalayan Bank

Corporate News

Country’s forex reserves slump to 32-month low

Kathmandu, December 24- Nepal’s foreign exchange reserves have slumped to a 32-month low despite robust growth in remittance income and downward revision in foreign exchange facility for Nepalis visiting overseas, raising the spectre of the country facing a balance of payments crisis if the problem continues to grow.

Read more ...

Doha Bank opens representative office in Nepal

Kathmandu, December 19 - Doha Bank, one of the largest commercial banks in Qatar, has opened its liaison office in Nepal as per the permission granted by the central bank about six months ago.

Read more ...

Parliament body asks govt to solve problem of multiple taxation

KATHMANDU, Aug 15: Parliament’s Finance Committee on Tuesday issued directions to the government to take the lead in solving the chronic problem of multiple taxation by the three tiers of government, as well as the exorbitant hike in tax rates.

Read more ...

Trade deficit surged five-fold in last decade

Kathmandu, August 5 - The country’s trade deficit jumped five folds in the last decade as imports have been skyrocketing and exports have slowed to a crawl in the review period.

Read more ...
Symbol % Change Last Price Turnover
NBBL 3.3898 610.0 129,958.0
SLBSL 3.2078 740.0 1,120,390.0
CHL 2.9703 104.0 14,538.0
RLFL 2.5862 119.0 339,371.0
IGI 2.2113 416.0 224,710.0
Symbol % Change Last Price Turnover
UPCL -10.0000 270.0 65,860.0
SHIVM -9.9138 418.0 1,737,870.0
AMFI -4.7546 621.0 57,140.0
NSEWA -3.6893 496.0 354,830.0
AKJCL -3.6585 79.0 70,010.0
Symbol % Change Last Price Turnover
ALBSL -3.5294 492.0 15,575,910.0
SBLPO 1.8519 165.0 10,510,995.0
CIT -1.5038 2,620.0 10,342,811.0
UPPER -0.4167 239.0 9,872,309.0
NLIC -0.0932 1,072.0 8,405,577.0