Doing Business in Nepal

The main provisions prevail in Nepal regarding Foreign Investment are as follows:

Permission is not guaranteed for foreign investment in the industries reserved for domestic investment specified in table below. For rest of the industries, permission is required.

Foreign investments are permitted up to 100 percent except in the negative list.

Permission can be granted to use foreign technology in the industries specified in Annexure 1.

Repatriation of capital & profits is allowed.

No intervention is made in fixing prices of the products of any industry.

Business visas are granted to foreign investors or their dependent family members or authorized representatives and their dependent family members to stay in Kingdom of Nepal so long as they maintain their foreign investment.

Provided that a Foreign Investor, who makes a lump sum investment of at least US$ 100,000 or equivalent amount in any convertible foreign currency, and his dependent family members are granted residential visas so long as he maintains his investment.

Annexure 1: Industries Reserved for Domestic Investment (As per Industrial Enterprises Act, 1992)

Clause (a)

Clause (b)

Cottage industries.

Personal services (hair-cutting, beauty parlor, tailoring, driving training etc.)

Arms and ammunition industries.

Explosive, gunpowder.

Industries related to radio active materials.

Real Estate business (excluding construction industries)

Motion picture business (produced in national languages and language of the nation).

Security printing.

Currencies and coinage business.

Retail business.

Travel Agency.

Trekking agency.

Water rafting.

Pony trekking.

Horse riding.

Cigarette, bidi (tobacco), alcohol (excluding those exporting more than 90 per cent).

Internal courier service.

Atomic energy.

Tourist lodging.

Poultry farming.

Fisheries.

Bee-keeping.

Consultancy services, such as management, accounting, engineering and legal services.

Beauty Parlour.

Milling, grinding and extracting of food grain on rent.

Local Catering services.

Rural Tourism.

VALUE ADDED TAX (VAT)

1. VAT is levied at a single rate of 13 percent. In certain cases, the rate may be zero and certain goods and services are exempted from VAT.

2. Value Added Tax is collected at every (manufacturing, distribution, wholesale and retail) stage of selling goods and services.

3. Exports of taxable goods are zero rated.

4. A firm whose annual taxable turnover of goods and services is less than Rs.2 million need not be registered with the VAT office and collect VAT on sales. But they can register voluntarily .

5. A firm registered with the VAT Office may claim credit on tax paid on inputs / purchases.

6. VAT paid on inputs can be adjusted while collecting the VAT on finished products.

7. Industries that exported more than 80 percent of total sales in past twelve months and which have a minimum of twenty percent of value addition can import raw materials providing bank guarantee on account of the payable VAT.

8. Certain products such as primary food stuffs, primary agricultural products, industrial machineries are exempted from VAT.

9. VAT Exempted Goods and Services

a. Basic Agricultural Products

b. Goods of Basic needs

c. Live animals, animal product, animals feed and feed supplements

d. Agricultural inputs

e. Education services

f. Transport service

g. Health Services

h. Pharmaceutical industries

i. Books, Newspapers and Publications

j. Industrial machinery

k. Cultural and Artistic goods and Services

l. Specified personal & Professional Services

m. Bet, Casino and lottery

n. Other goods and services such as postal service, financial & insurance service, buying & selling of real estate .

10. Zero Rated goods and services

a) Goods exported or services provided abroad

b) Goods & Services imported by accredited diplomats

c) Goods & services purchased or imported by members of Royal family

d) Pharmaceutical manufacturer may opt for zero rating .

PRODUCTS BANNED FOR IMPORTS

1. Products injurious to health

(a) Narcotic drugs like, opium and morphine

(b) Liquor containing more than 60 percent alcohol

2. Arms and ammunitions and explosives (except under import license of His Majesty’s Government)

(a) Materials used in production of arms and ammunition

(b) Guns and cartridges

(c) Capes without paper

(d) Arms and ammunitions, and other explosives

3. Communication equipment: wireless, walkie-talkie, and similar other audio communication equipment’s (except under import license of His Majesty’s Government)

4. Valuable Metals and Jewelleries (except permitted under baggage rules)

5. Beef and beef products

6. Any other product notified by His Majesty’s Government in the Nepal Gazette.