Share Capital of Cooperatives

As per the IFRIC 2 on Members' Shares in Co-operative Entities and Similar Instruments, the amount which is collected as capital is not necessarily the Equity of the entity. The said capital may either be classified as Equity or as Financial Liability.

Equity has been defined as the residual interest on the entities assets. On the other hand Financial Liability is simply a contractual obligation to pay. So, there is huge difference between these two. A Financial Liability is payable anytime whereas, an Equity is payable only after the settlement of all external liabilities.

Now, lets review the conditions mentioned in IFRIC 2, for confirming whether the capital amount is equity or a financial liability. It bases the decision on the right to redeem. The Capital can be classified as Equity only if the holder does not have right to request redemption.

The basic point of concern is whether unconditional withdrawal of said capital is possible or not. If, the capital can be redeemed unconditionally, the said amount of capital is just a financial liability and if not, the capital is equity.

It is a matter of fact that, the capital in SACCOS is not the same as in the companies. A company issues its share capital. It is paid up by somebody, and the share keeps on circulating. Share capital moves from one hand to another and the capital of the company does not change. Such capital is redeemed by the company only at liquidation. But in case of SACCOS, its members contribute capital.

NEPAL : A prospective tax haven

Tax Haven is a country where certain taxes are are levied at lower rates or not at all while offering due process, good governance and low corruption.

Features of Tax Haven

1. Low or no TAX at all.

2. Due process

3. Good Governance

4. Low Corruption

Income Tax in Nepal : Present Status

1. Manufacturing Industries in Nepal are chargeable at 20%, which is much lower as compared to more than 80% of the countries in the world.

2. In addition to this, there are a lot of concessions with respect to location of business, employment generation, listing status, etc.

3. Bottling plant of the world renowned company, COCA COLA has been enjoying the Tax rate of just 18% in Nepal.

4. Dividend is subject to very low rate of just 5% and is a Final Withholding Taxed Income, irrespective of person paying or receiving it. Rates of dividend ranges up to 35% in big economies.

5. Nepal has a default TAX rate of just 25%, which is much lower as compared to the prevailing rates globally.

6. The provision of Income Tax are up to European Standard.

Future of Income Tax in Nepal

1. Nepal is a small economy with low population.

2. Revenue requirement is also very low.

3. Nepal has huge prospects of Hydro-power and Tourism.

4. Once its Hydro Electric and Tourism prospect is explored, Nepal will become a Tax Free State.