SEBON Introduces Major Reform: Companies to Pay Bonus Share Tax on Behalf of Shareholders

In a significant policy shift aimed at simplifying the dividend distribution process, the Securities Board of Nepal (SEBON) has implemented a new provision requiring all listed companies to pay the dividend tax applicable on bonus shares themselves, rather than making shareholders pay it separately. The change comes through the 10th amendment to the Securities Issuance and Allotment Directive, 2074, which officially took effect on Monday.

SEBON stated that the new rule was necessary because many companies had been withholding the crediting of bonus shares into shareholders’ DEMAT accounts until investors personally paid the associated tax. This delay created heavy inconvenience—shareholders had to visit banks or company offices just to settle small tax amounts, often resulting in long waits, additional paperwork, and significant time loss.

Under the revised directive, SEBON has clearly stated:
“All organized institutions listed with the Board must adjust and pay the dividend tax applicable on bonus shares themselves while distributing bonus shares to their shareholders.”
This means companies will now deduct the tax amount internally before issuing bonus shares and directly remit the tax to the government. Shareholders will receive the bonus shares without having to make any separate cash payment.

Previously, when companies announced bonus-only dividends, investors were required to deposit the applicable tax in cash before bonus shares could be credited to their DEMAT accounts. While the tax amount was often small, the procedural hassle was disproportionately burdensome. Investors had been raising concerns for years, arguing that the system was outdated, inefficient, and created unnecessary delays.

Responding to consistent complaints, SEBON finally amended the rule by adding Sub-section (7) to Section 40 of the Securities Issuance and Allotment Directive. With this, the legal responsibility for bonus share tax payment has officially shifted to the company itself. This amendment marks one of the most investor-friendly reforms in recent years.

According to market analysts, the new rule is expected to simplify the bonus distribution process, reduce administrative load on investors, and eliminate delays caused by unpaid tax obligations. Shareholders will no longer need to stand in queues or deal with manual processes just to claim bonus shares. The reform also enhances efficiency, improves market confidence, and aligns Nepal’s dividend distribution system more closely with international standards.

Investors have welcomed the change as a “positive structural improvement”, noting that it removes a long-standing hassle and ensures smoother, quicker crediting of bonus shares. Companies, meanwhile, will now handle the tax adjustment directly, reinforcing a more transparent and investor-centric operational model.