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Embassy of Nepal, New Delhi
   
नेपाली राजदूतावास नयाँ दिल्ली

  Economy and Trade

Incentives

Income Tax
  • Exemption of income tax upto to 10 years for industry established in remote area.
  • Exemption of income tax for first five year and 50 percent rebate thereafter on taxable income for industries established in Special Economic Zone
  • Industries can get depreciation of fixed assets by adding one-third to the rate of depreciation allowed under the existing income tax law.
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VAT

Machinery and Equipments required for the hydro power projects which are not produced in Nepal, Machinery and their spare parts, Penstock pipe or steel sheet to build penstock pipe are exempted from the VAT on project basis on the recommendation from the Department of Electricity Development. Such projects can also apply for zero rate VAT to Inland Revenue Department.

Customs:

7 percent rebate on applicable duty up to the 25 percent for the products which are manufactured and imported from India. If the applicable duty is more than 25 percent, then the rebate will be 5 percent.

Export Industry can import raw material either under bonded ware house system or under cash deposit of applicable duties. If the company imports raw material under this provision such products should be exported or sold in foreign currency within the country not more than 12 month from the date of import and asked for payment of such deposit. The deposit duty can be rolled out to other consignment.

Custom duty exemption on construction materials, machinery, equipment, tools and spare parts of hydro power project Plant, machinery and equipment under chapter 84 of the harmonized customs classification are entitled to a 50 per cent rebate on the applicable customs duty and to full exemption from VAT. Concessional Rates of Custom Duty, Excise Duty and Refunds

Plant, machinery and equipment under chapter 84 of the harmonized customs classification are entitled to a 50 per cent rebate on the applicable customs duty and to full exemption from VAT.

Duty Drawback

Any duties or taxes levied on the raw materials, auxiliary raw materials, etc used for producing goods for export/deemed export are entitled to get refund of such duties and taxes based on the quantity of export. The application for this must be submitted within a year of the date of export. Any industries not using the duty drawback facility will also get the VAT and Excise on the basis of exported quantity.

Bonded Warehouse Facility

Export-oriented industries may obtain the bonded warehouse facility. The raw materials for the products of such nature can be imported without paying any customs duty or sales tax by just entering the details of such transactions in a passbook made available by the Department of Customs. The industry must also submit a bank guarantee sufficient to cover the duties. The finished product must be exported within 10 months from the date of import of raw materials.

Opening of Foreign Exchange Account

Foreign and local companies conducting export businesses and export-oriented industrial companies can open and operate foreign exchange accounts in any commercial bank in Nepal. Industries incorporated as 100 per cent foreign-owned or as joint venture may also open foreign exchange accounts to put in the equity share of the foreign party in a convertible currency. This can only be used to import equipment, plant and other fixed assets for the industry.


REPARTRIATION

The Foreign Investment and Technology Transfer Act 1992 allows foreign investors investing in a foreign currency to repatriate the following amounts out of Nepal:

  • Income from the sale of the share of foreign investment as a whole or part thereof
  • Profit or dividend from foreign investment
  • Payment of principal and interest on foreign loans
  • Income from the agreement for transfer of technology in such currency as set forth in the agreement concerned approved by the DoI.