investing in nepal - a legal guide

Investing in Nepal www.neupanelegal.com

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INVESTING IN NEPAL

A LEGAL GUIDE

NEUPANE LAW ASSOCIATES

www.neupanelegal.com


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INVESTING IN NEPAL

This “Investing in Nepal – A Legal Guide” introduces you to Nepal's investment

regulations, and business and trading environment with a primary focus on

legal and regulatory matters.

The information in the guide is in summary form, and is intended as an

introductory guide only. The information is accurate as of 30 January 2016,

and will be updated regularly. We aim to cover all details required by foreign

investors and multinational companies that are not usually covered by other

such guides.

It is a general guide only and is not to be relied upon. Detail professional

advice should be obtained to cover a specific fact situation.

If you would like help with business activities in Nepal, please contact us.

Anjan Neupane

Partner and Head of Corporate

(T) +977 1 4101631

(E) [email protected]

Tej Bahadur Katuwal

Partner

(T) +977 1 4101631

(E) [email protected]

First Edition – published December 2013

Second Edition – published October 2015

Third Edition – published January 2016


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ABOUT NEUPANE LAW ASSOCIATES

Neupane Law Associates is a leading international business and dispute

resolution law firm based in Kathmandu, Nepal. We have been advising

leading corporates, multinationals, financial institutions, governmental

organizations and private individuals for over 30 years.

We are recognized as the "go to" law firm for international business and

dispute resolution. We have market-leading expertise in banking, foreign

investments, project finance, joint ventures, mergers and acquisitions,

insurance and reinsurance, and international commercial transactions. We

have represented our clients in many sophisticated international transactions

and highly complex disputes in Nepal.

Our efficacy has further been recognized through the recommendations

made by various International publications. Chambers Asia-Pacific/Global

2016 has ranked us as a Leading Firm ("Band-1") in Nepal for General Business

Law. It states our practice as being “highly recommended by international

law firms and clients” and our team with “excellent knowledge and practice

experience of business law and Nepali legal practicalities”. Additionally,

some recent awards received by the firm include “Investment Law Firm

Nepal - 2015” by ACQ Global Awards, “Overall Leading Law Firm Nepal -

2014” by Acquisition International, and “Leading Law Firm Nepal - 2013” by

ACQ Law Awards.


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INTRODUCTION

Nepal is a landlocked Himalayan nation strategically located between India

and China, two of the largest and fastest growing economies of the world.

This compliments Nepal with tremendous investment potentials.

The Government of Nepal claims that it has adopted and continues to adopt

liberal policies. Nepal continues to attract the attention of many foreign

investors in recent years particularly in hydropower, agriculture,

manufacturing, information technology, tourism, and service sectors.

Doing business in Nepal may not be very easy for foreign investors as legal

rules are often complex and opaque, and often incomprehensible to

foreigners as they are contained in the local language.

Therefore, we felt the need to publish a holistic legal guide to help foreign

investors understand the basic legal processes of investing and doing

business in Nepal. We hope that this will provide the correct information to all

investors and policy makers.


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FOREIGN INVESTMENT REGULATIONS

Applicable Legal Framework

Investment in Nepal by foreign individuals and companies is regulated under

various laws and regulations. Particularly, they are:

• Foreign Investment and Technology Transfer Act 1992

• Industrial Enterprises Act 1992

• Foreign Exchange (Regulation) Act 1965

• Company Act 2006

• Investment Board Act 2013

In addition, investors also need to comply with various additional regulations,

directives and license conditions prescribed by the regulatory bodies that

include:

• Department of Industries

• Investment Board

• Nepal Rastra Bank (the Central Bank of Nepal)

• Insurance Board

• Civil Aviation Authority

• Nepal Telecommunications Authority

• Ministry of Environment


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Other Relevant Laws

Some of the other important laws other than directly related to investment

that investors should take into consideration of are:

• Arbitration Act 1999

• Contract Act 2000

• Customs Act 2007

• Civil Code (Muluki Ain) 1853 (revised 1962)

• Electricity Act 1992

• Environment Protection Act 1997

• Export-Import Control Act 1957

• Income Tax Act 2002

• Labour Act 1992

• Local Self Governance Act 1999

• Private Financing of Building and Operation of Infrastructure Act 2006

• Public Procurement Act 2006

• Value Added Tax Act 1996

Investors also need to be aware of the provisions of the Double Tax

Avoidance Treaties, and Investment Promotion and Protection Treaties

related to their home jurisdiction.


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Investment and Business Methods

There are several ways through which foreign companies may enter the

Nepalese market:

• Establishing a fully owned subsidiary

Foreign investors can establish a fully owned subsidiary by taking

permission from Department of Industries, Industrial Promotion Board, or

the Investment Board depending on the type of investment.

• Establishing a joint venture company

Foreign investors can establish a fully owned subsidiary by taking

permission from Department of Industries, Industrial Promotion Board, or

the Investment Board depending on the type of investment.

• Establishing a branch office

Foreign companies undertaking business or transactions are required

to open branch office in Nepal if they are providing services from a

fixed location in Nepal for over 30 days. Recommendation from a

relevant ministry will be required to establish a branch office.

• Establishing a liaison office

Foreign companies are required to open a liaison office if they are

appointing its representative in Nepal or intend to open an office to

undertake representative activities. Generally, recommendations from

ministries are not required.

In addition to these methods investors can also undertake technology

transfer agreements (management, licensing, franchising etc) or appoint

local distributors to undertake business in Nepal.


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Required National Participation

Investors from all countries are allowed to invest in Nepal. Government of

Nepal has not discriminated against investors from any particular country.

However, foreign investors are required to partner with Nepalese investors in

some sectors such as consulting (maximum foreign shareholding can be 51%)

and aviation (maximum foreign shareholding can be 49% for domestic and

80% for international operators).

Once a Nepalese subsidiary is registered, such subsidiary is treated as a

Nepalese company. The law does not discriminate between foreign owned

and locally owned companies. However, in relation to some government

procurement, local and international tenders may occasionally require of

local and/or foreign partners from particular countries.

Companies or Individuals?

Both companies and individuals can invest in Nepal. There are no rules

discriminating or restricting natural and legal persons or major procedural

differences during investment.

Minimum Investment

Minimum investment amount for foreign companies and individuals investing

in shares of a company in Nepal has been fixed at NPR. 5,000,000 (Five Million

Nepali Rupees) which is equivalent to around USD 50,000. The investor will

have to purchase shares equivalent to this amount or lend over this amount.

This may not apply in setting up of contact/liaison offices or branch offices of

foreign companies.


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Investment Procedure – New Company

The process to incorporate a company with foreign shareholder (for general

projects) is set out below:

• Obtain foreign investment approval from Department of Industry

• If the foreign investment is of fixed assets up to five hundred million,

then approval of Department of Industry is required.

o If the foreign investment proposes more for an industry requiring

fixed assets beyond an excess of two billion rupees then

approval of Industrial Promotion Board is required.

• Registration of company (private, public or branch) at Companies

Registrar Office

• Register for tax at the Tax Office

• Obtain foreign investment approval from Nepal Rastra Bank

• Register as an industry at the Department of Industry

• Complete the required environmental compliance procedures (if

required by Environmental Protection Act)

Documentation Requirements - New Projects

The following documents are required for approval of Joint Venture or 100%

owned subsidiaries from the Department of Industries:

• Investment Application

• Joint Venture Agreement (if applicable)

• Project Report

• Notarized company registration and constitutional documents of


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foreign companies or passport copies of individuals

• Board of Director resolutions for foreign companies

• Investor Bio-Data/CV or Company Profile

• Financial Credibility Certificate (provided by a foreign bank)

• Power of Attorney for representatives

Additional documents required by Nepal Rastra Bank are:

• Investment timeline

• Commitment letter not to repatriate for at least one year of investment

• Documents providing source of funds of the investor

• Non-blacklisting certificate obtained from Credit Information Bureau

Documentation requirements – Share Acquisitions

Foreign investors may acquire already operating Nepali companies through

sale of shares, or join in as a joint venture partner through issue of new shares.

Documents required for the approval process are as follows:

• Share Purchase Agreement, Share Issue Agreement and/or Joint

Venture Agreement (as appropriate)

• Request letter of existing shareholder to sell share.

• Request letter of foreign investor to buy share.

• Relevant company/board resolutions

• Copy of Passport and CV of a foreign investor if a foreign investor is an

individual.

• Copy of the minute of board meeting of foreign investor regarding

investing in Nepal through purchase of share if the investor in a


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company along with certificate of incorporation and company profile.

• Financial Credibility Certificate of the foreign investor provided by a

bank.

• Current shareholder list of a Nepalese company certified by

Company's Registrar Office.

• Auditor's Report of Nepalese company.

• Tax clearance certificate of Nepalese company.

• Authority letter form the company to sign the documents on behalf of

the company.

After the approval procedures are complete with the Department of

Industries, the investor is also required to take Nepal Rastra Bank’s approval

and complete the deal by registering shares at the Office of the Companies

Registrar. Additional documents required by Nepal Rastra Bank are:

• Investment timeline

• Commitment letter not to repatriate for at least one year of investment

• Documents providing source of funds of the investor

• Non-blacklisting certificate obtained from Credit Information Bureau

• Document issued by a chartered accountant providing fair value

valuation of the sales being sold (regulations generally do not like to

see transactions taking place at lower than fair value and if

transactions have been undertaken below fair value, they impose a

condition regulating future sale price)


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Dispute Resolution in Agreements

In industries with fixed assets investment as per Industry Registration Certificate

of up to NPR 500 millions, the dispute between a foreign investor and national

investor or the industry has to be settled by mutual consent in presence of the

Department of Industries. If the dispute cannot be settled by mutual

agreement then such dispute shall be settled by UNCITRAL model of

arbitration which has to be held in in Kathmandu.

Freedom to choose jurisdiction and law is provided to agreements Industries

with “fixed assets” investment of above NPR 500 millions and disputes may be

settled as mentioned in the Joint Venture Agreements, Share Purchase

Agreement, Licensing Agreements, or other agreements.


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WHAT CAN YOU INVEST IN?

Foreign Investment and Technology Transfer Act 1992 only allows foreign

investors to invest in businesses listed as “industries” as per the Industrial

Enterprises Act 1992. The list of businesses listed as industries are listed below.

If the business you want to invest in is not included in the list below, then

special permission from the Industrial Promotion Board chaired by the Minister

of Industry is required to classify such business as an industry for the Foreign

Investment Approval to be obtained. It is of key importance that investors

structure their business wisely by choosing the correct industry or multiple

industries.

Note: this list does not apply when registering a Liaison Office or Branch

Office of Foreign Companies, and to banks and financial institutions and

insurance companies, which their own respective regulators may permit

under specific laws governing those sectors.

The Government of Nepal has classified the following as “industries”:

Manufacturing Industries

• All manufacturing industries that manufactures goods from raw

materials. This includes assembly industry.

Mining Industries

• Extraction and processing of all types of mines and minerals.

Energy Industries

• Energy production through hydro, wind, solar, coal, natural oil gas and

other sources.


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• Survey/feasibility study of energy projects

Agricultural Industries

• Silk worm farming

• Fruits Farming and Fruits Refinery

• Livestock Farming

• Dairy Industry

• Poultry Farming

• Fish Farming

• Tea Farming and Refinery

• Farming Medical Plants and Refinery

• Seeds Production Vegetable Products

• Mushroom, Vegetable Farming and Refinery

• Tissue culture

• Green House

• Bee Farming

• Production of Honey

• Rubber Farming

• Horticulture

• Private Leased Forest

• Agro-forestry

• Cotton Farming, Production of seeds of Cotton

• Farming of fruits and cash crops for commercial purpose

Tourism Industries

• Tourist residency, motel

• Hotels and Resorts

• Restaurants

• Travel Agency

• Skiing


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• Gliding

• Water Rafting

• Cable-car complex

• Trekking

• Pony-trekking

• Hot air ballooning

• Para sailing

• Golf course

• Polo

• Horse riding

• Entertainment (Amusement) Park

• Adventure Tourism

Service Industry

• Workshop

• Publishing

• Consultancy Services1

• Ginning and Billing

• Cinema

• Construction

• Photography

• Hospital and Nursing Home

• Education and Training

• Laboratory

• Airlines2

• Construction and sale of residential homes

• Telephone (cellular, mobile, paging)

• Television broadcasting

1 Only maximum 51% investment is allowed 2 Only maximum stake of 49% in domestic and 80% in international airlines is allowed


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• Satellite and cable television

• Cloth and yarn dying

• Cloth printing

• Transportation of goods

• Battery recharging

• Security guard

• Advertising designing and ad-agency

• Publishing

• Liquid petroleum gas refilling

• Mapping

• Documentary and television show production

• Construction heavy equipment leasing and maintenance

• Cargo

• Radio

• Veterinary clinic

• Diagnostic services

• Operation and maintenance of buildings, roads, airport, pipelines,

sports complex, rope-way, power projects, inland clearance depo and

others

• Shipping

• Packaging service

• Dry cleaning

• Catering (Local catering is not allowed)

• Video audio recording

• V-Sat

• Internet services

• Interior decoration

• Investment company

• Professional services such as plumbing, wiring,

• Fashion design


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• Ready mix concrete

• Electricity installation and maintenance

• Computer software

• Call centre

• Computer data collection, processing and designing

• Business process outsourcing (BPO)

• ICT value added services

• Email service

• Telex service

• Telegraph service

• Internet protocol television

• Internet Telephony

• Data network

• Waste collection and cleaning service

• Student hostel

• Child care centre

• Elderly care homes

• Sports services

• Theatre and dance

Construction (Infrastructure) Industry

• Construction and operation of roads, railway, rope way, trolley-bus,

tunnel, fly-over bridges, industrial, commercial and residential

complexes

• Construction, management and operation of conference centre

• Construction, management and operation of water pipelines, sewage

infrastructures

• Construction, management and operation of power houses and

transmission lines

• Construction, management and operation of irrigation infrastructure


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WHAT YOU CANNOT INVEST IN?

Annex 1 of the Foreign Investment and Technology Transfer Act 2049 does

not allow investment in the following industries:

• Household industries

• Personal service businesses such as barber shop, beauty parlours,

tailoring, driving training

• Weapons industry

• Radioactive elements related industries

• Buying and selling of lands and houses (except construction businesses)

• Movies, films of Nepali language

• Security printing

• Currency and coins businesses

• Retail businesses with operations in less than three countries

• Beedi (Local/traditional cigarette) industry (except industries that

export more than 90%)

• Internal courier service

• Atomic energy

• Chicken farming

• Fish farming

• Bee farming

• Legal, accounting, engineering and consultancy business3

• Local catering business

• Rural tourism

Technology transfer (franchising, technology licensing, management,

trademark licensing etc) is allowed in all industries. These companies will also

be allowed to open contact/liaison offices.

3 Only consultancy business other than legal, accounting, engineering with up to 51% foreign shareholder stake is allowed


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OPENING A BRANCH OR CONTACT OFFICE

Branch Office

A foreign company can also register its branch to undertake income-

producing activities within Nepal through establishment of a subsidiary or a

joint venture. Establishment of branch offices requires recommendation from

a relevant Nepal government agency or entity. A branch office may be

suitable for one off work e.g. providing construction services, government

procurement, management and other similar activities.

Contact/Liaison Office

Contact/liaison office may only spend and have employees but may not

undertake “income generating activities” within Nepal. Contact office may

be appropriate for those wishing to have a point of contact for their business

within Nepal.


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LOAN TRANSACTIONS

Foreign Investment and Technology Transfer Act 1992 and Foreign Exchange

(Regulation) Act 1965 allows foreigners to lend money to industries and

businesses in Nepal. Regulatory permission needs to be obtained from two

institutions – Department of Industries and Nepal Rastra Bank (Central Bank of

Nepal) in order to do so. Interest, principal, fees, and other charges can be

repatriated to foreign convertible currency after approvals have been

obtained from both Department of Industries and Nepal Rastra Bank.

The Central Bank of Nepal has introduced a directive stating that it shall only

approve loan transactions with maximum interest rate of One Year LIBOR +

5.5%. Shareholder loans are capped at LIBOR + 2% and need to maintain

debt-equity ration of 60:40. Withholding tax of 15% applies on interest

payments made to foreign banks and companies that do not have a Double

Tax Avoidance Treaty with Nepal.

Security can be obtained on assets of the borrower company or the

guarantors (e.g. land, houses, movable assets, shares, off-take agreements,

government licences and other assets) after the loan transaction has been

approved by the Department of Industries. Additional approvals may also be

required to register security depending on the structure of the transaction.

Security has to be registered at the local land revenue office or the Secured

Transactions Registry. Security registration charges at land revenue offices are

1% of the loan amount (the registration fee is NPR 40,000 maximum for banks

licensed by the Central Bank of Nepal). NPR 500 is charged for registration of

security at Secured Transaction Registry.


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SPECIAL SECTOR RULES

Airlines

• Maximum Foreign Investment Permissible: 49 to 95 %

• Regulatory Body: Civil Aviation Authority of Nepal

• Foreign Investment is permissible in domestic airlines, international

airlines, flying schools and repair and maintenance work

Hotels

• Maximum Foreign Investment Permissible: 100%

• Regulatory Body: Ministry of Tourism

• Applicable Act and Policies: Tourism Policy, Tourism Act

• Approval from the Department of Tourism required for operating

restaurant, hotels, and resorts

Higher Education

Medical Education


• Regulatory Body: Ministry of Education

• Applicable Act and Policies: Directive of Ministry of Health and

Population on Establishment, Operation, Standards and

Infrastructure of Private and Non-governmental Health Institution,

2061

• Affiliation to a University has to be entered into and approval from

the Ministry of Education required.

Engineering Education/ Management Education


• Regulatory Body: Ministry of Education


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• Applicable Act and Policies: Technical Education Policy of Ministry

of Education

• Approval is granted under the Technical Education Policy of Ministry

of Education

Mining


• Regulatory Body: Department of Mines

• Applicable Act and Policies:

o Department of mines and Geology (Department) Act, Mines

and Minerals Act, 2050 (1993) Mines and Minerals Regulations,

2056 (1999)

o License from the Department of Mines has to be obtained for

mining activities in Nepal

Telecommunications

• Maximum Foreign Investment Permissible: 80% (Telephone operations)

• Regulatory Body: Nepal Telecommunication Authority,

• Ministry of Information and Communication

• Applicable Act and Policies: Telecommunication Act

• Approval of Nepal Telecommunication Authority is required to operate

services and obtain license prior to operation

Energy


• Regulatory Body: Ministry of Energy/Department of Electricity

Development

• Off taker: Nepal Electricity Authority

• Applicable Act and Policies: Electricity Act


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Infrastructure and Public Private Partnership

• Investors can propose the relevant ministries directly or bids may be

invited by the government. A concession agreement will be signed

by the relevant Ministry. Some concessions will be processed,

negotiated and signed by the Investment Board.

• Applicable Act: Private Financing in Build and Operation of

Infrastructures, 2006.

Industries under the Jurisdiction of Investment Board

• Fast Track Road, Tunnel, Railway, Ropeway, Trolley Bus

• Construction of international as well as regional level airport and in

modernization and management of the running airport

• Waste management and refinement plants

• Chemical Fertilizer Production, Petroleum Refinery

• Construction of big bridge specified by the Government of Nepal,

• Bank and Financial Institution to be established in foreign investment

having more than 51% or in the establishment or operation of

Insurance or Reinsurance Company

• Medical college as well as hospital or nursing home having more

than three hundred beds

• Hydropower project having the capacity of Five Hundred or more

than Five Hundred Megawatt (500 or more MWs)

• Establishment of Special Economic Zone, Export Promotion or

Refinement Zone, Special Industrial Zone or Information Technology

Park,

• Construction Industry, Mine Industry, Tourism Industry, Air industry or

Productive Industry having fixed capital of Ten hundred million

rupees or having more than Ten hundred million rupees project cost

• Concession agreement has to be signed with the Investment Board

to undertake these projects


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OTHER ISSUES FOR FOREIGN INVESTORS

Real Estate Acquisitions

Real estate can be acquired without permission for the activities of the

subsidiary. Branch and liaison offices cannot purchase real estate.

Exchange Controls

Nepal implements strict foreign exchange controls. Usually, permission from

the Nepal Rastra Bank is required to remit funds abroad. However, foreign

exchange requirements are slowly becoming flexible, eg. permission is not

required to import goods through letters of credit. Regulatory permission is not

required to remit above USD 10,000 per remittance for fees, royalties,

advertising and other purposes through wire transfers.

Post-Incorporation Legal Compliance

There are various post-incorporation compliances that need to be

undertaken regularly such as (a) undertake annual filing of the company at

Office of Company Registrar; (b) approve of shareholders list, directors list

from Office of Company Registrar; (c) certificate of investment from banks

should be obtained once funds are remitted, (d) all investment and

transactions should take place through proper banking channels (amount

invested or consideration of purchase price should be deposited in the

company accounts), (e) fulfil other compliance requirements, licence

requirements depend on the industrial sector, and (f) environmental

regulations have to be complied with depending on the industry sector.

Business Visa and Work Permits

Foreign visitors other than Indian nationals need valid passports to enter

Nepal. There is a provision in the Foreign Investment Act to provide six month


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investors visa for feasibility study , however, is not currently granted, and

investors have to use tourist visa instead.

A foreign investor or the authorized representative of such investor and their

dependent family members are provided business visa until such investment

is retained. First a six-month visa is granted and extended gradually based on

progress of the project. After the project has achieved commercial operation

or required amount has been invested, a five-year business visa may be

provided.

Foreign workers (including Indian nationals) will require work permit to work in

Nepal. Work permit can only be obtained by proving that employees of such

skill, education and experience are not available in Nepal. The process to

obtain work permit is lengthy and clearances from over 4 government

departments are required.

Repatriation

The foreign investor can repatriate (a) the amount received by the sale of

the share of foreign investment as a whole or any part thereof; (b) the

amount received as profit or dividend from foreign investment; (c) the

amount received as the payment of principal or interest on any foreign loan;

(d) the amount received under the agreement for the technology transfer in

such currency as set forth in the concerned agreement as approved by the

Department of Industries.

Repatriation approvals can take several months. Recommendation of the

Department of Industries and approval from Nepal Rastra Bank is needed for

the repatriation. Audit reports, resolutions, bank account statements, tax

clearance certificates, and various other documents need to be presented

for obtaining remittance approval from repatriation for dividends/profits.


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TAXATION

Corporate Taxation

There is a 25% tax imposed on the taxable income of any corporate institution

for any income year. However, the tax rates may vary according to the

business of the corporation. Special income tax rates apply as follows:

Type of Business Tax Rate

Banks, financial institutions, general insurance 30%

Entities engaged in manufacturing (except alcohol and

tobacco industries)

20%

Entities constructing and operating roads, bridges,

tunnels, ropeways, flying bridges, trolley buses and trams

20%

Entities engaged in building and operating public

infrastructure to be transferred to the government

20%

Entities engaged in power generation, transmission or

distribution

20%

All income earned from export of goods and services

20%

*Please note that other special exemption or reductions are also available.

Please consult for detailed advice.


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Personal Taxation

All companies employing staff should deduct taxes for each employees at

the following rates:

Income (per annum) Tax Rate

NPR 250,000 or less

1%

More than NPR 250,000 less than NPR

350,000

15% of taxable income of more than

NPR 250,000

More than NPR 350,000

25% for taxable income of more than

NPR 350,000

More than NPR 2,500,000

Additional 40% on the taxable amount

calculated under 25% rate on the

taxable income of more than NPR

2,500,000

Rates vary by a small degree for married couples.


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Withholding Taxes

• Resident entities must pay a 5% withholding tax on dividends. A

withholding tax of 5% is also levied on profits repatriated by a

permanent establishment to its parent company.

• Withholding tax of 15% applies to royalties, lease, commission, interest

paid (except to Nepalese banks).

• Withholding tax of 10% applies to real estate leases/rental payments

and aircraft lease payments

• Withholding tax of 1.5% applies for service fees, construction or

contract fees paid to VAT registered entities

Capital Gains Tax

For corporate entities and businesses incorporated, capital gains are treated

as income and taxed at the same rate as income.

For natural persons, the tax rates are as follows:

• 2.5% if the ownership of disposed non-business taxable property (land

and building) is held for more than five years

• 5% if the ownership of disposed non-business taxable property (land

and building) is held for less than five years; and

• 5% on all gains in the stock market securities transactions.


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Value Added Tax (‘VAT’)

VAT is levied at a single rate of 13%. Leasing and buying/selling of real estate

are VAT-exempt. VAT is not levied on goods and services exported, which are

zero rated. Goods such as basic agricultural products, medicine, education

services, air transport, and certain financial services are also exempt from

VAT.

Tax Depreciation

Assets depreciation rates are as follows:

Class Assets Rate

A Buildings, structures and similar works of a permanent

nature

5%

B Computers, data handling equipment, fixtures, office

furniture and office equipment

25%

C Automobiles, buses and minibuses 20%

D Construction and earth moving equipment and any

depreciable asset not included in another class

including pollution control, research and

development, natural research exploration

equipments

15%

E Intangible assets other than depreciable assets

included in class D

Average rate

according to

the useful life.


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Land Registration Tax

Land registration tax (similar to stamp duty) has to be paid when

selling/transferring land to a new owner at the following rates:

Property Type Municipal Areas Tax Non-municipal Area

Tax

For land/houses worth Rs.

10,000 or less

Rs. 400 Rs. 300

Property worth Rs. 10,001 –

25,000

Rs. 1000 Rs. 500

Property worth Rs. 25,001 or

more

4.5% 2%

Taxes on Possession of Real Estate

Municipal House Tax

The annual tax for the possession of houses in municipal areas has to be paid

to the Municipal Office. The rates are as follows:-

Class Type of House Tax Rate (per sq.

feet)

A Raw bricks with mud mortar or made of wood

(timber)

Rs. 450

B Kiln bricks/stones with mud mortar Rs. 525

C Kiln bricks/stones with cement mortar. Rs. 575

D RCC frame structure Rs. 635


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Property Tax

Property tax is levied on the following rates in municipal areas:-

Property Valuation (NPR) Tax Rate

Up to 1 million none

1 million – 2 million Rs.300

2 million – 3 million 0.05%



Over 10 million 1.50%

Other Taxes

Other taxes such as Customs Duty, Excise Duty and specific royalties for

power production and operation of casinos are also applicable. Customs

and excise duty refund for imported raw materials and machineries for export

oriented industries and exported goods are available under Industrial

Enterprises Act 1992.


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END

If you have any questions or require further information, please feel free to

contact us at [email protected]