Nepal budget introduces hedge fund, tax cuts, and legal reforms for FY 2026-27

Finance Minister Swarnim Wagle unveiled Nepal's budget for fiscal year 2026-27, prioritizing legal reforms and tax cuts to stimulate foreign investment and improve the business climate. A central feature is the introduction of a new hedge fund, aimed at attracting Non-Resident Nepalis to the secondary securities market through amended laws on investment approvals, profit repatriation, and capital gains tax.

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To stimulate foreign capital inflows, the government announced crucial legal amendments to investment approvals, profit repatriation, and capital gains tax, effectively paving the way for Non-Resident Nepalis (NRNs) to enter the secondary securities market.

The government also seeks to streamline the judicial process and reduce case backlogs. A tax dispute settlement scheme will allow the withdrawal of pending court cases upon payment of the disputed tax amount, supplemented by a 1 percent surcharge. To further expedite commercial disputes, a dedicated tribunal will be established, alongside updates to the Mediation Act and the drafting of a new debt recovery law. The budget also addresses infrastructure concerns by promising to stabilize public procurement and manage rising construction material costs.

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In a major bid to clear judicial backlogs and improve the business climate, the budget introduced a tax dispute settlement scheme that allows pending court cases to be withdrawn if the disputed tax amount is paid within a set timeframe, along with a 1 percent surcharge.

On the fiscal front, the budget offers significant relief by eliminating excise duties on 360 types of goods and reducing customs duties on 273 industrial raw materials. This creates a progressive tariff structure where raw inputs are cheaper than finished imports. Additionally, the maximum income tax bracket will be capped at 29 percent for the upcoming fiscal year, providing relief to both consumers and domestic industries.

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Minister Wagle also announced the creation of a dedicated commercial tribunal for fast-tracking business disputes, alongside updates to the Mediation Act and the drafting of a new debt recovery law.