Advanced Taxation

(One Paper- Two sections-Three hours-100 Marks)

Advanced Taxation is the sixth paper of CAP-III. It  covers 100 marks in total. It is the Group 2 paper. The syllabus you need to cover in CAP-III under “Advanced Taxation” is as follows: 

Level of Knowledge : Expert

Course objectives :

— Gain expert knowledge on direct & indirect taxes as well as to make the students acquire the ability to apply the expert knowledge in actual practice.

— Gain expert knowledge of the provisions of the direct and indirect tax laws.

— Acquire the ability to apply the knowledge of the provisions of laws to the various situations.


Course contents for advanced taxation


1.Income Tax Act 2058 and Rules 2059


2.Ethics and professional conduct in providing taxation services

  • Tax services provided by professional accountants
  • Application of IFAC Code of Ethics on taxation services
  • Ethical requirements as per Income Tax Act and Anti Money Laundering provisions

3.Fundamentals of taxation and Nepalese tax system, income heads

a. Basic terms used in tax law and their tax connection

  • All definitions as per sec. 2 and relevant connecting sections

b. Residential concept

  • Concept of resident and non-resident
  • Worldwide taxation and source taxation
  • Concept of Nepal sourced income and provisions
  • Double tax relief mechanism- foreign tax credit and double tax avoidance treaties-(including advance calculation)
  •  Foreign permanent establishment
  • Controlled foreign entities

C. Basis of Taxation

—  Persons liable to pay tax

—  Tax exempt organizations

—  Exempt incomes

—  Taxable income and assessable income

—  Rates of tax and business concessions

—  Head of income

D. Tax Accounting

—  Nepal accounting standard vs tax accounting

—  Cash vs. accrual basis of accounting in taxation

—  Basis of accounting for natural person and entities

—  Change in accounting methods

—  Reverse of amounts including bad debts

E. Calculation of income from business

—  Components of income from business

—  Incomes which do not form part of income from business

—  Deductions allowed from income from business

—  Limitations and conditions for a particular deduction

—  Schedule 2 of the Act

F. Calculation of income from employment

—  Components of income from employment

—  Incomes which are excluded from income from employment

G. Calculation of income from investment

—  Components of income from investment

—  Incomes which do not form part of income from investment

—  Deductions allowed from income from business

—  Limitations and conditions for a particular deduction

H. Deductions allowed from taxable income

—  Deduction for donation and gifts

—  Deductions for contributions to retirement funds

—  Deduction for life insurance premium paid

—  Deduction for losses from income from business or investment

—  Carry forward and carry back of losses for setoff

—  Deductions not allowed

I. Calculation of net gains from disposal of assets and liabilities

—  Net gain and tax calculation from gain from disposal of non business chargeable assets

—  Net gain and tax calculation from disposal of business assets

J. Tax Credits

—  Medical tax credits

—  Foreign tax credits

K. Quantification, allocation and characterization of amounts

—  Quantification

—  Characterization of payments under annuities, installments and leases

L. Special Provisions

—  Taxation of shipping, telecom and air service providers (Sec. 70)

—  Banking business

—  Insurance business


  1. Administration and documentation administration, withholding and payments of tax

  • Administration tax authorities

Revenue structure at the Finance Ministry, Tax department/office: structure, duties and power, management, taxpayers right, advance ruing, public circulars, international agreements, permanent account number.

  • Documentation

Form of documentation, service of documents, defective documents

  • Tax withholding

By employers, from investment and service fee payments, contract payments, final withholding, and tax credit or tax adjustment. Withholding taxes in case of countries with Double Tax Avoidance Treaties.

  • Payment of Tax

Time and mode of payment, Installments, proof of tax payment


  1. Returns and Assessments, Collection, Remission and refund

  • Returns

Time of return of incomes, extension of time of return, return not required estimated return

  • Assessments

Self assessment, jeopardy assessment and amended assessment, assessments order & notices

  • Collection

Preference for tax payable by withholding, claim over assets, auction of assets, prohibition order, liquidities of officers, recovery from recover and agent, suit filing

  • Remission and Refund

Remission by Government, refund & set off and its procedure

  1. Legal Remedies, Interest, Fees, Penalties Offences

  • Administrative review

Decisions, procedures, application to object the review

  • Appeal

Appeal to the Revenue Tribunal

  • Interest

Under payment of installments, failure to pay tax, failure to pay with deposit withholding tax

  • Fees

For failure to maintain documents, for failure to file return, for failure to making false document and aiding and obtains, assessments of interest and fees

  • Penalties

For failure to pay tax, to authorized and unauthorized person, to accomplice, payment of penalties

  • Offence

For misleading statements, for obstructing or using inappropriate influence

All provisions of Income Tax Act 2058 and Income Tax Rules 2069.


  1. Value Added Tax Act, 2052 and Rules 2053


  1.   Introduction, coverage and administration

(i) Introduction of VAT in Nepal

(ii) Spirit of preamble VAT Act, Terms used; Service, Supply, Return, Import, Export, Market price, person, registrant, TPIN, Supplier, value addition

(iii) Coverage: Taxable activities, time of place of supply, tax rate, Zero rated areas, exempted goods and services, Treatment of negative value addition, Capital goods, threshold, determination of market price, and treatment of reconditioned goods, discount and gifts, importation under bank guarantee

(iv) Tax Administration: Registration, tax invoicing, Accounting, Return filing, Tax Assessments, conditions for assessing by tax officer, Collection/payments, Tax credit; full credit, partial credit, proportionate credit, Refunds, Tax audit and investigation, suspension of business transaction

2. Tax Authorities, revision and appeal and fees and interest

(i) Tax authorities and rights and duties of taxpayers

(ii) Administrative revision and appeal to revenue tribunal

(iii) Additional fees and interests, offences and penalties


  1. Excise Act, 2058 and Excise Rules 2059

  • Concept of excise and excise duty, history of excise duty in Nepal in brief
  • Scope and objectives of Excise Act, 2058
  • Terms; goods, service, institution (Pratisthan), license, license holder, production, producer, person, factory price, price, import, invoice
  • Excisable products, exemption of excise, collection of excise, pricing of excisable products, obtaining and termination of license, renew of license, excise duties and fees, special provisions for cigarettes, bidi, alcoholic (madira) and molasses, conditions related to seize, possession and arrest
  • Provisions of self-issue and physical control system, recovery ratios
  • Penalties, administrative review and appeal


  1. Customs Act, 2064 and Rules 2064


  • Scope and objectives of Customs Act, terms: export, import, customs duty, chief of customs, customs officer, customs area, pragyapan patra, demurrage, unauthorized and illegal import and export, customs facility, facility in duty, under invoicing, classification of goods for customs purpose
  • Import and export procedures, documents required for export and import, determination of duty, valuation: procedure and methods in practice, post clearance audit
  • Charging of different duties and charges in customs point
  • Provisions regarding jhitigunta, accompanied and unaccompanied goods
  • Import under duty refundable procedure (DRP) and in bond system, bonded warehouse system, bank guarantee and the provision of re-export
  • Finance act and related schedule
  • Circulars relating to specific acts issued by Department of customs


  1. Double tax avoidance agreement (DTAA) and international taxation

  • Double Tax Avoidance Agreement (DTAA)

Features, general definitions, resident, permanent establishment, income from immovable property, business profit, shipping and air transport, associated enterprises, dividends, interest, royalties, capital gains, personal services, government service, methods of elimination of double taxation, non-discrimination, mutual agreement procedures, assistance in collection of tax

  • International Taxation

Concepts, models, transfer pricing


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