Brokers willing to pay VAT if old dues waivedStockbrokers have said they are willing to pay value added tax (VAT) on the commission they receive from investors, but expect the government to waive outstanding tax debts for the last four years.
Stockbrokers have said they are willing to pay value added tax (VAT) on the commission they receive from investors, but expect the government to waive outstanding tax debts for the last four years.
Last week, they had threatened to launch a protest if the government went ahead with its move to impose VAT on their commissions, but softened their stance following a meeting with Finance Ministry officials on Friday.
The issue arose after the Inland Revenue Office wrote to three brokerage firms to clear their outstanding VAT for the last four years along with the penalty for late payment.
The three firms, Sundhara Securities, Sewa Securities and Investment Management, had been notified by the taxman last July to clear their tax debts from fiscal 2013-14. Matters came to a head when the tax office sent them a reminder last week.
Among the three, Sundhara Securities owes the taxman Rs6.3 million in VAT, Sewa Securities Rs11 million and Investment Management Rs11.7 million.
Spokesperson for the Inland Revenue Department (IRD) Yagya Dhungel said they had written to these brokerage firms based on their final audit reports.
“We are assessing the audit reports of other brokerage firms, and will soon be sending them letters too,” Dhungel said. According to him, the department initiated action against the stockbrokers for not coming within the VAT net. After the government announced imposing 13 percent VAT on stockbroker commissions, brokerage firms argued that it was inappropriate to charge VAT on their commission as they had to share a portion of it with the Nepal Stock Exchange (Nepse) and the Securities Board of Nepal (Sebon).
As per stockbrokers, they charge a 0.35-0.6 percent commission on the value of the share transaction. Out of this amount, they have to pay 20 percent to Nepse while 15 percent is deducted as tax deducted at source (TDS). In addition, stockbrokers have to pay 0.6 percent of their fee to Sebon as annual levy charge.
Dhungel said many stockbrokers had not even cleared the TDS amount. Brokerage firms said they were ready to pay VAT if there were clear legal provisions.
“We only ask that the government waive VAT dues for the last four years because we have not charged VAT on the brokerage fee for lack of clear provisions in the VAT Act which was revised four years ago,” said Santosh Mainali, general secretary of the Stock Brokers Association of Nepal.
As per the VAT Act, financial services related to banking and insurance are exempt from VAT. The law is silent on imposition of VAT on transactions taking place in the secondary market.
Another stockbroker who wished to remain unidentified said they were not against the government rule. “We are ready to pay all the tax liabilities in the days to come,” the stockbroker said.