Section 73 : International agreements

1) If any income of any person is taxable pursuant to this Act or the laws in force and the same income is also taxable in a foreign country, the Government of Nepal may conclude an international agreement with the foreign country for the avoidance of double taxation.

2) This sub-section shall be applicable in cases where, pursuant to any international agreement concluded with Nepal, the competent authority of the other country requests the Department to collect in Nepal the amount payable by any person who is in arrears of that amount, pursuant to the taxation law of that other country.

3) If sub-section (2) is applicable, the Department may, for the purpose of sending that amount to that competent authority, send a notice in writing to the person who is in arrears of tax and require him to pay such amount to the Department within the date mentioned in that notice.

4) This sub-section shall be applicable in cases where any international agreement contains a provision under which Nepal has to exempt income or payment or has to apply the reduced tax rate to income or payment.

5) If sub-section (4) is applicable, any of the following entities shall not be entitled to enjoy tax exemption or tax deduction facility:-

a) An entity that is considered a resident of the other party of the agreement for purposes of the agreement and

b) Where fifty percent or more portion of the vested ownership of that entity is owned by natural persons or by the entities in which any natural person has no interest and, for purposes of the agreement, the persons or entities are residents of both Nepal and of the other country party to the agreement.

Explanation: For purposes of this Section, “international agreement’ means any treaty or agreement containing the following provisions, concluded with any foreign government and applicable to Nepal:

(a) To avoid double taxation and prevent fiscal evasion, or

(b) To render reciprocal administrative assistance in the implementation of tax liability.