DistantNews
🇳🇵 Nepal /Economy & Trade

IT industry urges double taxation avoidance expansion, tax reforms to attract global investment

From Kathmandu Post · (5m ago) English

Summarized and contextualized by DistantNews.

TLDR

  • Nepal's IT industry is pushing for expanded double taxation avoidance agreements (DTAA) and targeted tax reforms to attract global investment.
  • Industry stakeholders emphasize that policy clarity and tax incentives are crucial for attracting multinational companies and boosting foreign direct investment.
  • Key proposals include a preferential income tax regime, an export rebate, and reforms in sweat equity taxation to enhance competitiveness and job creation.

The Nepali IT sector is making a strong case for crucial policy changes to unlock its potential for global investment and job creation. As highlighted by the Nepal Association for Software and IT Services Companies (NAS-IT), expanding Double Taxation Avoidance Agreements (DTAA) is paramount. Currently, Nepali IT firms and foreign investors face the risk of double taxation when dealing with major international markets, a significant deterrent to establishing development centers and outsourcing hubs in Nepal.

Nepali IT companies and foreign tech companies investing in Nepal face the risk of double taxation when engaging with key international markets such as the United States, the United Kingdom and Australia.

— Deepen ChapagainVice-president of NAS-IT, explaining the need for expanded DTAA coverage.

NAS-IT's pre-budget recommendations, presented to the government, are designed to position Nepal as a competitive and attractive destination. Beyond DTAA expansion, the industry is advocating for a preferential income tax rate of just 1 percent on net profits for registered IT companies for a decade. This, along with an 8 percent export rebate, aims to offset cost disadvantages compared to regional competitors like Bangladesh and Vietnam. Such measures are seen as vital for enabling better pricing, driving export growth, and increasing foreign currency inflows.

We are hopeful that the upcoming budget will incorporate key recommendations to accelerate growth and global competitiveness.

— Gaurav Raj PandeyPresident of NAS-IT, expressing optimism about government support.

The proposals also address practical challenges, such as the taxation of sweat equity shares, which currently create liquidity issues for employees. By suggesting taxation at the time of disposal rather than grant, the industry seeks to improve employee incentives and ease operational burdens. The optimism within the private sector is palpable, with a strong belief that the government's prioritization of IT development, as indicated in the upcoming budget, will pave the way for accelerated growth and enhanced global competitiveness. This push is not just about attracting foreign capital; it's about fostering a robust domestic IT ecosystem that generates high-value jobs and drives technological advancement within Nepal.

If implemented, this will enable better pricing, drive export growth, increase foreign currency inflows and support business scaling and job creation.

— Deepen ChapagainDescribing the potential impact of an 8 percent export rebate.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

More Stories

From Our Blog