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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.
  • Reductions of up to 50 percent from the taxable income for investment in environment control processes and equipment by Industry.
  • 10 percent of the gross profit may be deducted from taxable income on account of expenditures related to technology, product development and skill improvement.
  • Income tax at the rate of 20 percent on most of the manufacturing Industries.
  • Tax exemption up to seven years and 50% rebate there after for three year, if the company either produce the power or install the transmission line or distributes the generated power commercially by 20 April 2019.
  • Provision of loss carry forward of one year up to seven years for other industry and 12 years for Hydro and infrastructure project.
  • Projects under national priority such as Hydro power, International airport, Tunnel road, Highway, Railroad and the productive sector industry which provides employment to more than 300 national workers and use 50 percent domestic materials are exempted to show the source of income if such investors invest before April 2019.
  • Industry established in Special Economic Zone is exempted from tax up to 5 years and 50 percent rebate there after. Such Industry will also be exempted from dividend tax up to five years and 50 percent rebate there after for three years. Foreign Investor who earn royalty income by providing foreign technology and management service can get fifty percent rebate on income tax
  • Information technology industry established in Technology Park will get 25 percent tax rebate.
  • The projects which are established under the BOOT can enjoy the facilities mentioned in the contract at the time of approval of such project.
  • There is some rebate for those industries established in under developed region. The percentage of rebate varies according to the location and the number of local employment provided by the industry.

The new income tax law has been in force from the year 1998. Since then there has not been frequent changes in the tax rate. The change in the tax rate which was taken place in the recent years is in decreasing trend. From that experience we can assume that there will not be any upward revision in the tax rate at least in the coming future. The government of Nepal has initiated this policy to attract more foreign investors especially in the infrastructure sector. Therefore, the tax policy in Nepal is more stable.

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