The proposed regulation has defined OTT as online services accessed and delivered over the public internet that may be a direct technical/functional substitute for voice/video telephony and text messages.
It has been proposed that registration should be mandatory for providing services in Nepal through such applications. “OTT Providers shall be registered in Nepal for providing OTT Services in Nepal,” reads the draft of the regulations. A foreign OTT Provider is required to register a branch office in Nepal, pursuant to the Companies Act, 2006. However, the foreign OTT Provider can also appoint an Intermediary. “Such Intermediary must be registered, as per the Companies Act,” says the draft. The proposed regulation states OTT providers have to maintain security and privacy including network security and data protection issues, related to the consumers. OTT providers have also been asked to establish the Content Delivery Network (CDN) inside Nepal for the purpose of providing faster and more secure services to their Nepali users. Of late, the business of telecom companies in Nepal has declined due to the massive popularity of OTT platforms. As such platforms offer users to connect to other people through the internet, the telephony business of the telcos has taken a beating. According to NTA, the regulatory framework to regulate communication-based OTT services is being brought up keeping in mind issues such as regulatory imbalance, government tax, security threats, and revenue of the telecommunications operators. Over the last few years, debates have increased in the country to bring such service providers under the legal and tax scope. Starting from the current fiscal year 2022/23, a 2 percent digital service tax is being charged on services provided over the internet to Nepalis by non-resident persons. Operators of electronic services such as gaming, video, music and app downloads, streaming services, cloud services, and other services are taxable if their annual turnover exceeds Rs 2 million. The Inland Revenue Department (IRD) issued guidelines on Digital Service Tax from mid-July 2022 making it mandatory for digital service providers such as YouTube, Facebook, Twitter, Netflix, and others to register in Nepal. Recently, the global tech giant Google registered in Nepal's tax system to be the first big company to get registered following the Nepal government bringing a law to bring internet-based companies under taxation. According to IRD, the government will charge a two percent tax on every transaction happening on any of the Google platforms from now onwards. The government made the provision for the registration of internet-based platforms where financial transactions happen for the first time in the current fiscal year budget. Accordingly, a provision for the digital service tax has been introduced.
