Having operated without paying municipal taxes for years, luxury hotels have started coming under the city authority’s tax net.

Like any other business operating in Kathmandu, five-star hotels are required to pay land revenue, house and land tax, rent tax, enterprise tax, vehicle tax, advertisement tax and property tax, among others to the Kathmandu Metropolitan City. The KMC had begun a process to punish the defaulters when hotels started showing up. 

“Except for Hotel Yak & Yeti and Hyatt Regency, we have brought all other luxury hotels under our tax net,” said Dhurba Kafle, chief of KMC’s Revenue Division.

According to Kafle, Radisson Hotel, The Malla Hotel, Soaltee Crowne Plaza, Hotel de l’Annapurna and Hotel Shangri-La have already submitted their taxable property details to the metropolis and paid taxes due on them. “Dwarika’s Hotel, Hotel Shanker and The Everest Hotel have submitted their property details and have pledged to pay up taxes due to them soon,” he said.

A hotel has to pay on an average Rs1 million in taxes to the KMC. Luxury hotels had been paying all other taxes to the metropolis except house and land taxes which amount to around Rs40.2 million each year, according to the KMC. The hotels had been avoiding taxes as per a clause in House and Land Tax Act of 1962 that exempts them from the municipal tax. The act has a non-applicability clause for “land where customers of a hotel dine and stay, motor vehicle parking space and garden”. The Hotel Association Nepal had earlier said that there was no legal provision to collect the tax from hotels as per the Act.

However, Kafle said that a hotel has other facilities beside bedrooms and gardens. “Luxury hotels have restaurants, night clubs, casinos, curio shops and conference halls on their premises for which taxes can be levied,” he said. “The hotels had been resisting our call to submit their property details as they had built several structures within their area without acquiring municipal approval.”

However, under the Local Self-governance Act, the KMC can stop providing services like garbage collection and, in coordination with concerned authorities, can deny transfer of ownership of such properties. The properties may even be auctioned to recover the tax amount. Less than 20 percent of around 300,000 businesses in the Capital are under its tax net.