Why Setup a Company in Nepal?
Nepal may not be a popular choice among entrepreneurs seeking to extend their business ventures in a foreign country but, visionary and enterprising business opportunists should not dismiss it just yet. Here’s why Nepal may possibly be the next prominent hub for foreign investments.
Excellent Foreign Investment Policies
Some of the policies to stimulate inward investments are:
- Foreign investments are encouraged in practically every sector with only few exceptions like cottage industries, arms and ammunitions etc.
- Nepal government permits 100% ownerships for foreign investments in major profitable industries like tourism, mining hydro power generation, agriculture and dairy, pharmaceuticals, roadways and many others
- Investors may own 100% equity shares of a company
- Technology transfer is permissible even in certain prohibited foreign business sectors
- 100% repatriation on dividend, sale of shares and profit, technology transfer fees and export income and interest on foreign loans
- Companies of any industry are free to determine the price of products without intervention from the government
- Business or residential visas shall be granted to foreign investors and their dependent family members
Low Labour Cost
Minimum wage is Nepal is only Nrs 6205 per month.
Special Economic Zone (SEZ)
Any business venture exporting 70% or more of its products would be entitled to apply for a space in a SEZ where it enjoys:
- Zero customs duty on importations of raw materials, machinery, equipment and spare parts
- 100% exemption from paying income tax for 5 years and 50% exemption for the following 5 years
- Exemption from value added taxes (VAT), excise duty, customs duty and local taxes
- Infrastructures and facilities required will be provided like road, water, electricity
- One window service that includes corporation of companies and other administrative formalities to ensure easy establishment of a business
The Nepal government is currently preparing to develop SEZs in 15 other places in addition to the current operating SEZ in Bhairahawa.
Expanding Market Access for Trade & Development
Goods and services from Nepal have a wide market access to countries like Pakistan, Sri Lanka, Bangladesh, Afghanistan, Maldives, Myanmar, and Thailand since Nepal is signatory of two regional Free Trade Agreements. Nepal also signed the Indo-Nepal Trade Treaty with India, one of its biggest foreign investors.
As a Least Developed Country, Nepal is given preferential market access. It enjoys duty-free and quota- free market access for almost all exports to most OECD countries like Canada, the EU and some developing countries like China and Singapore.
Excellent Security for Foreign Investments
Foreign investments and businesses are well protected through Nepal’s membership with Multilateral Investment Guarantee Agency. The agency provides non-commercial risk insurance for foreign businesses against war, political and civil disturbances.
Nepal is also signatory of agreements such as Bilateral Investment Protection and Promotion Agreement (BIPPA) with Germany and France. It also signed Double Tax Avoidance Agreement (DTAA) with 10 countries through which foreign investments get to enjoy commercial interest protection.
In the event of any foreign investment dispute, settlement through arbitration is available under the International Centre for the Settlement of Investment Disputes.
Attractive Tax Incentives
Foreign investments are entitled to obtain the following tax incentives:
- VAT in Nepal is levied at a comparatively low flat rate of 13%
- No income tax imposed on export oriented industries and certain cooperatives conducting agriculture based activities
- Imported raw materials used by industries in the export processing zone are exempted from premium, customs duty and local tax
- Special industries established in undeveloped areas only have to pay 20% of the applicable tax rate for the first 10 years of its corporation
- No excise duty and VAT on transmission and distribution of electricity.
For the above reasons and more, setting up a business in Nepal can be truly rewarding for bold and adventurous entrepreneurs.