WACC (Weighted Average Cost of Capital)
WACC is the standardized weighted average purchase cost of your shares calculated in MeroShare to determine net capital gains and applicable tax when selling on NEPSE.
Detailed Explanation
Under Section 95Ka of the Income Tax Act 2058 and CDSC regulations, every investor in Nepal must declare and verify their acquisition cost in MeroShare under "My Purchase Source" prior to transferring shares via EDIS. Because investors buy shares at various prices across IPOs, secondary purchases, rights offerings, and bonus issues, MeroShare aggregates the total capital spent (including broker commissions and transaction charges) and divides it by total units acquired. The resulting WACC is subtracted from your net secondary selling price to establish your taxable capital gain.
Why It Matters to You
Failing to calculate and confirm your WACC in MeroShare before transferring shares causes the system to default to the statutory par value (NPR 100), artificially inflating your reported capital gains and causing you to pay massive excess tax to the government.
Formula & Calculation
WACC = Total Capital Expended on Purchases (including commissions) / Total Shares Acquired
- Total Capital = Sum of all purchase prices + broker commission + SEBON fee + DP charges
- Total Shares = Aggregate sum of shares acquired across all lots
10 IPO shares at NPR 100 (NPR 1,000) + 40 secondary shares at NPR 400 (NPR 16,000) = Total NPR 17,000 / 50 shares = WACC NPR 340.00.
Where It Is Commonly Used
- MeroShare EDIS share transfer
- Capital Gains Tax withholding calculation
- Broker trade settlement bills
Key Advantages & Limitations
Key Advantages
- Automated and standardized tax computation
- Eliminates manual tax disputes with brokers
- Fairly factors in transaction fees
Limitations & Risks
- Must be calculated manually after every sell order before EDIS deadline
Common Misconceptions & Beginner Traps
I can choose to sell only my highest-priced shares first to avoid tax.
MeroShare enforces weighted average cost across your entire holding; you cannot selectively pick specific lots.
Nepal Financial & Regulatory Context
Under prevailing CDSC rules, bonus shares and rights shares are entered at the statutory face value of NPR 100 per unit for WACC calculation purposes.
Real-World Practical Scenario
Selling 50 shares with calculated WACC of NPR 340 at NPR 500. Total Selling Proceeds (Gross): 50 × NPR 500 = NPR 25,000. Selling Commission & Charges: NPR 115. Net Sales Consideration: NPR 24,885. Total Cost (50 × NPR 340 WACC): NPR 17,000. Net Capital Gain: NPR 24,885 - NPR 17,000 = NPR 7,885
Capital Gains Tax (5% or 7.5%) is deducted strictly on the net NPR 7,885 gain.