Double Taxation Avoidance Agreement (DTA): Nepal's Treaty Countries List

If you earn income in more than one country — as a freelancer, a remote employee, an investor, or a business owner — you already know the fear: getting taxed twice on the same rupee. Nepal solves this problem through bilateral tax treaties known as Double Taxation Avoidance Agreements (DTA), sometimes also called DTAA (Double Taxation Avoidance Agreements). This guide breaks down exactly what a DTA does, which countries Nepal currently has one with, and how you can legally use it to reduce your tax burden.

What Does a DTA Actually Do?

A DTA is a treaty signed between two governments that decides which country gets the primary right to tax a specific type of income — salary, business profit, dividend, royalty, interest, or capital gain — when a person or company has ties to both countries. Without such a treaty, the same income could be taxed once in the country where it is earned (the source country) and again in the country where the taxpayer normally lives (the residence country).

A DTA typically does three things: it assigns taxing rights between the two countries, it sets a reduced withholding tax rate on cross-border payments like dividends and royalties, and it creates a legal mechanism — either exemption or tax credit — so the taxpayer never pays full tax twice on the same income.

Full List of Countries Nepal Has a DTA With

As of the current fiscal year, Nepal has Double Taxation Avoidance Agreements in force with the following countries:

Nepal's treaty network has changed in recent years — an older agreement with Mauritius was formally terminated by the Inland Revenue Department, so it should no longer be treated as active. Nepal is also in various stages of negotiation with several other countries, including the United Kingdom, Malaysia, Singapore, Japan, Oman, and the United States. These are not yet in force, so no treaty benefit can be claimed against them until a final agreement is signed, ratified, and notified.

Because this list changes periodically, always verify the current status of a specific treaty with the Inland Revenue Department (IRD) before relying on it for a transaction, especially for a country not shown in the table above.

How to Claim a DTA Benefit

Claiming a treaty benefit is never automatic — you have to actively prove your eligibility to the tax authority. In practice, the process generally involves these steps:

1. Obtain a Tax Residency Certificate (TRC) from your country of tax residence (or from Nepal's IRD, if you are a Nepal-resident claiming benefit abroad).
2. Identify the correct treaty article that applies to your type of income — salary, dividend, interest, royalty, or business profit each has a separate article with its own conditions.
3. Submit the TRC along with supporting documents (invoice, contract, or payment proof) to the payer or to the relevant tax office, depending on whether tax is being withheld at source or claimed as a refund.
4. Where withholding tax has already been deducted at the domestic rate, apply for the treaty's reduced rate or a refund of the excess amount deducted.

Banks and companies making cross-border payments in Nepal will typically apply the domestic withholding rate by default unless a valid TRC and treaty declaration are presented in advance, so timing your application before the payment is made saves you from a lengthy refund process later.

Foreign Tax Credit vs Treaty Exemption

A DTA generally relieves double taxation using one of two mechanisms. Under the exemption method, one country simply agrees not to tax the income at all, leaving the entire taxing right to the other country. Under the credit method (the more common approach used by Nepal), both countries may tax the income, but the country of residence allows a credit for the tax already paid abroad, so the net effect is that you only pay the higher of the two applicable rates rather than both combined.

For most individuals and businesses dealing with Nepal's treaty partners, the credit method is the relevant one — meaning you should still declare your foreign income in Nepal but claim a foreign tax credit for tax already paid overseas, up to the limit of Nepal's own tax rate on that income.

Why This Matters for Freelancers and Remote Workers

With more Nepali freelancers earning through international clients, platforms, and remote employers, treaty knowledge is no longer just for large corporations. If your client is based in a DTA partner country and withholds tax on your invoice, you may be able to claim a credit for that tax when filing in Nepal — but only if you keep proper proof of the foreign tax paid and, where required, a TRC on file.