Nepal’s Transfer Pricing Directive 2024 sets out a detailed benchmarking framework. But it cites data sources that are practically inaccessible to taxpayers and practitioners alike. Without urgent reform to financial disclosure laws, meaningful compliance will remain out of reach for most businesses. Here is why this matters, and what your options are right now.
The Directive’s Benchmarking Framework and the Data Paradox
Nepal’s Transfer Pricing Directive 2024 (hereafter ‘the Directive’), issued by the Inland Revenue Department (IRD) under the authority of Sections 33 and 139 of the Income Tax Act 2058, is the most comprehensive explanation of Nepal’s transfer pricing framework to date. Effective from income year 2024/2025, the Directive requires any taxpayer conducting cross-border controlled transactions exceeding NPR 100 million with associated persons to maintain full transfer pricing documentation including a comparability analysis, a functional, asset and risk (FAR) analysis, and a benchmarking study demonstrating that the arm’s length principle has been followed.
Chapter 4 of the Directive identifies the permissible data sources for selecting comparable uncontrolled transactions: the IRD’s own tax filings database, government agencies including the Office of Company Registrar (OCR) and the Department of Commerce, trade and international organizations such as the World Bank and IMF, and commercial databases accessible through paid membership. The Directive further specifies a rigorous three-stage selection process which includes database screening, quantitative filtering, and qualitative review.
Here is the problem: the government-sourced data the Directive cites is not publicly accessible to taxpayers.
Chapter 4.4.2 lists OCR and IRD as primary data sources for external comparables. In practice, OCR’s CAMIS portal provides only identity-level access like company name and registration number while audited financial statements submitted to OCR are not publicly downloadable. IRD data, meanwhile, is protected as taxpayer confidential under Section 81 of the Income Tax Act 2058. The Directive has prescribed a benchmarking regime that assumes a data infrastructure which simply does not exist yet. No wonder that practitioners and taxpayers are left wondering how this data is supposed to be obtained.
The Practical Impact on Nepali Businesses
A directive that mandates comparability analysis without ensuring access to comparable data does not create compliance but rather creates exposure.
When a Nepali subsidiary of a multinational seeks to demonstrate that its intercompany service fee, intragroup loan, or management charge reflects the arm’s length principle, it must identify comparable uncontrolled transactions using the methodology prescribed in Chapter 4. The Directive’s preferred approach i.e. the Transactional Net Margin Method (TNMM), requires identifying comparable independent companies with similar functional profiles and deriving an arm’s length range using the interquartile method (35th to 65th percentile) when seven or more comparables are available, or the average method for six or fewer, as set out in Chapter 5.
To meet this standard with defensible, auditable data, practitioners in Nepal currently have no viable domestic option. The Nepal Stock Exchange (NEPSE) lists approximately 200 companies which is also overwhelmingly concentrated in banking, insurance, and hydropower. These sectors offer negligible functional comparability for manufacturing, IT services, trading, and professional services transactions that are most commonly subject to transfer pricing scrutiny. OCR’s CAMIS system which is fully implemented now, digitised compliance submissions but did not extend to public financial disclosure.
In other words: the data needed to comply simply isn’t available through the channels the Directive assumes practitioners and tax payers will use.
Current Solutions: Commercial Databases for Nepal Transfer Pricing Work
The good news is that Nepali companies and their tax advisors do have actionable options. The Directive’s permissive stance on commercial databases with requirement that their reliability be verified, provides a solid legal basis for relying on regional and global databases when domestic comparables are unavailable.
Under Chapter 4.2.4 of the Transfer Pricing Directive 2024, while “priority should be given to businesses operating in the same geographical area,” transactions from different geographical areas are expressly permissible “where the geographical difference does not result in a significant difference in the transaction price” or “where the difference in price due to geographical variation can be adjusted,” providing Nepali taxpayers a direct and documented legal basis for regional comparable use once a good-faith domestic comparable search has been conducted and its absence established.
The following represent current best practice for Nepal TP benchmarking, ranked by geographic defensibility:
1. Prowess IQ by CMIE (India) — Most Defensible for Nepal
Prowess IQ, developed by the Centre for Monitoring Indian Economy (CMIE), covers over 37,000 Indian companies — both listed and unlisted private entities drawing from mandatory MCA21 filings. For Nepal TP purposes, Prowess is the most geographically proximate database available. Indian comparables carry strong functional relevance given shared economic characteristics, labor cost structures, and service sector profiles between Nepal and India.
Prowess is widely recognised as the most extensively used database for transfer pricing work in India, with CMIE describing it as the standard for Indian TP benchmarking. Its TP-specific module, ProwessTraX, provides a structured 13-step comparable search workflow aligned with OECD guidelines.
2. Capitaline TP (India) — Purpose-Built Alternative
Capitaline TP, developed by Capital Markets Publishers India, is purpose-built for transfer pricing benchmarking with a cleaner interface than Prowess. It provides web-based access to Indian company financials and is particularly useful for service sector and distribution transactions.
3. AceTP by Accord Fintech (India)
AceTP is the only Indian database designed exclusively for transfer pricing, offering a step-by-step workflow aligned with OECD-standard search methodology and NIC Activity Classification built in. Its web-based interface is accessible from Nepal without installation making it well-suited for straightforward service and distribution transactions where a smaller comparable universe is acceptable.
Other databases may also be used, provided adequate justification can be presented to the IRD as to their reliability and relevance to the Nepali context.
The Path Forward: What Nepal’s Data Infrastructure Needs
Nepal’s data gap is not inevitable. It is a policy choice — and one that several comparable economies have addressed with relatively modest legislative intervention.
India’s MCA21 portal makes audited financial statements of all registered companies publicly downloadable that underpins the entire Indian TP ecosystem. The United Kingdom’s Companies House provides free full-text access to annual accounts of all limited companies. Singapore’s ACRA BizFile similarly provides structured financial data. In each case, the enabling mechanism was a statutory amendment requiring not merely the submission of financial statements to a regulator, but their public availability.
Nepal currently has the former without the latter. The Companies Act 2063 requires submission of audited accounts to OCR — but contains no parallel requirement for public disclosure. Two reforms would fundamentally transform Nepal’s TP data landscape:
- Reform 1: Amend the Companies Act 2063 to mandate public disclosure of audited financial statements on CAMIS for companies above NPR 50 million in revenue. This would build a free domestic comparable database over three to five years — creating a foundation that genuinely supports the compliance framework the Directive envisages.
- Reform 2: The IRD should exercise its existing authority under Section 77 of the Income Tax Act to publish anonymised, sector-level operating margin benchmarks derived from income tax return data structured by NIC industry code, functional classification, and company size band. This would provide taxpayers with a legitimate safe harbour reference point and significantly reduce audit disputes arising from benchmarking uncertainty.
Where Does This Leave Practitioners Today?
Until domestic reforms mature, Nepali companies and their advisors must navigate this gap using the best available commercial tools. Prowess IQ and AceTP stand out as the most geographically appropriate for most Nepal TP engagements and the Directive’s own language on commercial databases gives you the legal basis to rely on them.
The Directive represents a genuine step forward for Nepal’s transfer pricing framework. But a framework is only as strong as the data it can be applied to. Until the structural reforms above are in place, businesses operating in Nepal need to be clear-eyed about what compliance actually requires — and seek specialist advice accordingly.
If your organization has cross-border controlled transactions above NPR 100 million and have transfer pricing documentation need under the Directive, SACA can provide further information.
This article is intended for general informational purposes and does not constitute legal or tax advice. For guidance specific to your organisation’s transfer pricing obligations under the Directive, please contact our tax advisory team.