Cryptocurrency Taxation in Nepal: Comprehensive Insights
In Nepal, the Income Tax Act of 2058 forms the backbone of cryptocurrency taxation, with all forms of income, including gains from cryptocurrency, being taxable despite the Nepal Rastra Bank (NRB) declaring virtual currencies illegal. Here is a breakdown of how various taxes and reporting requirements apply to cryptocurrency in Nepal:
| Tax Type | Treatment of Cryptocurrency in Nepal | |------------------------|----------------------------------------------------------------| | **Capital Gains Tax (CGT)** | Gains from cryptocurrency are taxable as either *capital gains* or *business income*, depending on the frequency and purpose of trading. Sporadic sales may be treated as capital gains, while frequent trading can be considered business income. | | **Income Tax** | Income from cryptocurrency, whether from trading profits or business activities, is taxed under Nepal’s Income Tax Act. The tax rate depends on the individual or corporate tax brackets applicable to the taxpayer. | | **Value-Added Tax (VAT)** | A flat VAT rate of 13% applies under the Value Added Tax Act of 2052. While no explicit VAT regulations for cryptocurrency exist, VAT could be applicable on commercial activities related to crypto where digital services are involved. | | **Reporting Requirements** | Taxpayers must report cryptocurrency income and gains in their tax returns to the Inland Revenue Department (IRD). Since crypto is treated as property or investment assets, accurate reporting of trading frequency, gains, and business income is essential for compliance. |
Despite the NRB ban on crypto trading, grassroots adoption persists, compelling the tax authority to tax crypto income as regular income or capital gains. Nepal’s digital economy reforms, including a rollout of digital service tax and e-invoicing systems, may impact crypto-related services in the near future.
Crypto gains in Nepal are taxable under existing income and capital gains tax laws with a general VAT framework possibly applicable on related services. Taxpayers must report crypto income in their tax filings for compliance with the IRD, despite the regulatory ban on crypto trading imposed by the central bank.
Value-Added Tax (VAT) of 13% is imposed on a normal supply made in exchange for crypto. VAT is only charged when crypto is used in paying for taxable services or goods. The Parliament is anticipating the first draft bill in Q4 2025, which may introduce VAT exemptions on regulated exchanges and clarify the treatment of crypto in the taxation system.
Your previous undeclared income is still subject to taxation if the NRB legalizes crypto in the future, but the treatment will be subject to the text of the new law. Unless you operate a registered mining enterprise, you can only offset hobby level losses against capital gains and not against employment income. Income Tax is levied on tokens received as rewards in mining, staking, airdrops, or play-to-earn, and tokens paid as salary.
Nepal is ranked 16th in the 2022 Chainalysis Global Crypto Adoption Index, indicating a significant presence of cryptocurrency usage in the country, despite regulatory challenges. As the regulatory landscape continues to evolve, it is crucial for taxpayers to stay informed and comply with the current tax requirements.
- In Nepal, gains from yield farming, mining, staking, airdrops, and tokens received as rewards in play-to-earn are taxable under the Income Tax Act.
- The IRD requires taxpayers to report income from all these activities in their tax returns for accurate compliance with the reporting requirements.
- Crypto tax also encompasses capital gains tax, where sporadic sales of cryptocurrencies may be treated as capital gains, while frequent trading is considered business income.
- The Value-Added Tax (VAT) of 13% is imposed on a normal supply made in exchange for crypto, only when it is used in paying for taxable services or goods.
- The Parliament is anticipating a draft bill in Q4 2025 that may introduce VAT exemptions on regulated crypto exchanges and clarify the treatment of crypto in the taxation system.
- Unless you operate a registered mining enterprise, you can only offset hobby level losses against capital gains and not against employment income.
- Income Tax is levied on tokens paid as salary, and the treatment of undeclared income in the future will be subject to the text of the new law if crypto becomes legalized by the NRB.
- Nepal's ranking of 16th in the 2022 Chainalysis Global Crypto Adoption Index demonstrates a significant presence of cryptocurrency usage in the country, despite regulatory challenges.
- Adhering to the current tax requirements and staying informed about the evolving regulatory landscape becomes crucial for taxpayers as cybersecurity concerns and finance-related activities, like trading, continue to grow in the crypto landscape.
