We have information on the Dividend Tax Rate in Nepal.
The dividend is a portion of the profit which is given to its shareholders. There are two types of dividends. They are bonus shares and cash dividends. The shareholder has to pay tax on both bonus shares and cash dividends.
Read More: Capital Gain Tax on Shares in Nepal.
Dividend Tax Rate in Nepal
Following are the rules for dividends in Nepal.
Dividend distributed by a resident company and partnership firms is subject to a final withholding tax at the rate of 5% to the resident and the non-resident person.
Example of applying dividend tax rate.
Cash Dividend Tax Rate
Cash Dividend means giving a portion of the profit to its shareholder in the form of a cash dividend. The company normally deposits cash in the respective shareholder’s bank account. 5% is the rate of cash dividend tax.
For Example.
For example, ABC Company Pvt Ltd announced a 20% cash dividend to its shareholders. Suppose Mr. A Has 1000 Units of Shares of ABC Company Pvt ltd.
Cash Dividend: 1000*100*20% = Rs.20,000.
Tax on Divided: Rs. 20,000*5% = Rs. 1000.
ABC Company Pvt Ltd deducted Rs. 1000 from Rs. 100,000 and deposited Rs. 19,000 to Mr. A’s Bank Account.
Read More: Broker Commissions in Nepal 2081.
Bonus Share Tax Rate in Nepal
Bonus Share is the portion of the profit that is given to its shareholder in the form of Bonus Share. Here, the company keeps cash and distributes the equity to its shareholders. The tax on Bonus shares is 5% in Nepal.
For Example:
For example, ABC Company Pvt Ltd announced a 20% bonus to its shareholders. Suppose Mr. A Has 1000 Units of Shares of ABC Company Pvt ltd.
Bonus Share: 1000*20% = 200 units
Tax on Bonus Share: 200 units *100*5% = 1000.
So, the shareholder Mr. A needs to pay Rs. 1000 as tax or the company needs to increase the dividend to pay the tax on bonus shares. Normally, in Nepal, the company pays the tax on bonus shares.
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Frequently Asked Questions?
a. Cash Dividend Tax Rate in Nepal?
= 5% is the cash dividend tax in Nepal.
b. Bonus Share Tax Rate in Nepal?
= 5% is the bonus share tax rate in Nepal.
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