Sector Specific Incentives

·       17% return on equity guaranteed by Electricity Regulatory Commission (ERC)

·       Maximum permissible FDI in energy is 100%

Hydropower

·       Only 1 storage project; All other power stations operate on run of river

·       Current 10-year government plan include development of 15000 MW

Solar energy

·       Potential of 2,100 MW

·       Wind energy: Potential of 3,000 MW

·       100% tax exemption on the first 10 years;

·       50% tax exemption on the next five years

·       VAT exemption on import of necessary construction goods not manufactured in Nepal.

Capital investment of more than NPR 1 billion

Capital investment of more than NPR 3 billion

Capital investment of more than NPR 5 billion NPR 5   billion

No tax for a period of 5 years from the date of commencement of business or transaction 50% concession on the applicable rate thereafter for 3 years

No tax for a period of 10 years from the date of commencement of business or transaction 50% concession on the applicable rate thereafter for 5 years

No tax for a period of 15 years from the date of commencement of business or transaction.

(Concession based on size of investment and number of employees)

Newly set up special industry and tourism industry (except casino business) having a capital investment of more than NPR 1 billion, with direct employment for more than 500 individuals throughout the year.

Existing industry increasing their installed capacity by at least 25%, increasing their investment to NPR 2 billion and direct employment to more than 300 people throughout the year

No tax for 5 years from the date of operation, and 50% concession on the rate otherwise applicable for next 3 years

No-tax for a period of 5 years from the date of operation and thereafter 50% concession on the rate otherwise applicable for next 3 years, on the income generated from its increased capacity.

(Employment concession)

(NB. The applicable rate of tax for the special industry is 20%)

Direct Employment to 100 or more Nepali Citizens throughout the year

Direct Employment to 300 or more Nepali Citizens throughout the year

Direct Employment to 500 or more Nepali Citizens throughout the year

Direct Employment to 1,000 or more Nepali Citizens throughout the year

Direct Employment more than 100 Nepali Citizens covering at least 33% from among women, marginalized (Dalits) or persons with Disability throughout the year

10% concession on the rate otherwise applicable (Effective rate 18%)

20% concession on the rate otherwise applicable (Effective rate 16%)

25% concession on the rate otherwise applicable (Effective rate 15%)

30% concession on the rate otherwise applicable (Effective rate 14%)

Additional 10% concession is allowed

• Operation of Tram or Trolley Bus.

• Construction and operation of ropeway, cable car, overhead bridge.

• Construction and operation of Airport, Road, Bridge, Tunnel, subway

40% concession on the applicable tax rate

40% Concession on the applicable tax rate

50%Concession on the applicable tax rate

(Exemption applicable for 10 years from the operation of business transaction)

Maximum permissible FDI in private healthcare companies is 100%

Key growth drivers are rising demand for high quality and accessible healthcare and improving efficiency in partnership development supported by increasing partnership between Nepalese and foreign hospitals

Customs Duty: VAT exemption for schools and universities, different research programs, income earned from professional/ vocational trainings conducted with non-profit earning motive

1% service tax is levied on admission and tuition fee operated by private sector

▸ Only 1% customs duty on all equipment/machineries and parts imported by medicine manufacturing industry

▸ Full exemptions on various equipment used by blind and incapacitated peopled

Maximum permissible FDI in private healthcare companies is 100%

Key growth drivers are rising demand for quality education, enabling policy and supportive regulatory environment, employability gap in domestic market, and increasing demand for skilled Nepalese workforce outside Nepal

VAT exemption for schools and universities, different research programs, income earned from professional/ vocational trainings conducted with non-profit earning motive

1% service tax is levied on admission and tuition fee operated by private sector

• A deduction from the profit as expenses for bad debt while in the existence of the risk bearing fund shall not be allowed, and if any amount of such the fund is capitalized or distributed as profit or dividend, the amount shall be included in calculating income of the year when it is so capitalized or distributed.

• 50% of net insurance premium as shown in the income statement of the particular year and115% of the outstanding claim at the end of the financial year. The closing balance of such unexpired risk fund claimed as deduction in the current income year should be carried forward as income in the next income year.

• Amount received from premium or reinsurance premium received during the year.

• Amount received from reinsurance, guarantee, or any indemnity contract during the year.

The following amount shall not be deducted while computing the expense of the life insurance

business:

• Any amount paid or reimbursed as an insurer during the year.

• Refund of premium to the insured during the year.

• Retirement contributions received by the fund shall not be included in the calculation and shall not be an incoming of the fund.

• Retirement payments shall not be deductible in the calculation and shall not be an outgoing of the fund.

• The interest of a beneficiary in a retirement fund shall not be a liability of that fund.

• The income of an approved retirement fund shall be exempt from tax.

Person engaged in exploration and excavation of minerals,

petroleum, natural gases and fuel Started commercial

operation by Chaitra, 2080 (mid-April, 2024)

Ø In case of special industry if provides direct employment to at least 100 Nepalese national during a whole year, the effective tax rate shall be 70% of applicable tax rate.

Ø There shall be exemption of dividend tax in case of special industry, industry based in agriculture and tourism sector capitalizes its profit (issues bonus shares) for the purpose of expansion of capacity of industry.

•Special industry with capital of NRs. 1billion and providing direct employment to more than 500 persons can enjoy 100% exemption for first five years from the date of operation of business and 50% concession for next 3 years.

•Special industries established in least developed, underdeveloped and undeveloped regions applicable tax rate shall be 10%, 20% and 30% of normal tax rate for first 10 years respectively.

•Started commercial operation by Chaitra, 2080 (mid-April, 2024) years.

• Losses can be carried forward up to 12 years instead of 7 years for petroleum extracting industries.

•15% exemption for special industries listed in stock exchange.

•Export income tax rate: 20%

established within Ashadh 2082 (Mid-July 2025)