HIGHLIGHTS ON INDUSTRIAL ENTERPRISES ACT, 2020 (2076) - Pioneer ...
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HIGHLIGHTS ON INDUSTRIAL ENTERPRISES ACT, 2020 (2076)
March 12, 2020
Industrial Enterprises Act, 2020 (2076 BS) (the "Act") has been introduced repealing the
Industrial Enterprises Act, 2016 (2073 BS) (the "Previous Act"). The Act has been
authenticated by the President on February 11, 2020 (2076/10/28). The Act is in effect since
the date of authentication.
The Act is a principal legislation for registration, establishment and pre/post operational
compliances of industry. No person (either natural or legal) is permitted to operate its
business without establishing industry under this Act. Company registered under the
Companies Act at the Office of Company Registrar (the “OCR”) is not allowed to operate
business transaction without registering its industry under the Act.
Some of the key provisions of the Act has been set out below:
1. Industry Registration
1.1. Continuing the legacy of the Previous Act, the Act explicitly restricts to establish or operate industry
without registering an industry undergoing through the procedure as provided in the Act. The Act
tries to shift the concept of branch industries and emphasizes on the conversion of branch industries
into unit industry. The Act requires the existing branch industries to either; (a) register itself as a
separate industry within a year from the date of enactment of the Act or (b) establish it as a unit of
the main industry. Further, such unit are required to keep a separate record of the production and
transactions. Such record has to be circulated to the main office of the industry.
2. Classification of Industry
2.1. The Act continues the general classification of industries the based on; (a) size of investment on the
fixed assets, and (b) nature/sector of business. However, there have been changes in terms of
threshold of fixed assets which have been detailed in ANNEX- I. Similarly, there are some changes
in relation to nature and sector of business, which have been detailed in ANNEX- II.
2.2. In the Previous Act, industries provided in the Schedule 1 requiring approval were excluded from the
category of ‘Micro Industry’ the exclusion of which has been removed by the new Act.
2.3. The present Act has replaced the term ‘Construction Industry’ with the term ‘Infrastructure Industry’
and has covered wider areas of infrastructure industries including industries related to construction,
arrangement and operation of installation of pipelines for fuel and gas supply, energy house and
energy transmission line. Further, the Act has broadened the scope of Information, Broadcasting and
Communication Technology based industry to also cover the ‘Information Technology’ based
industry, which includes knowledge process outsourcing, data centers, internet service provider,
industry related to web portal, web design service, web hosting to name a few. The scope of service
industry have been broadened to cover among other the e-commerce, industry business providing
services to the general people using the electronic medium (online or software or apps or other similar
nature of medium), likewise, food court, catering and street food stalls services. Similarly to the
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Excluding such business under the list would create question on the permissibility of foreign
investment in investment business, unless the same is notified by the Government.
3. Regulating Authorities /Implementing Agencies
The Act moves towards regulating the industries in line with the existing three-tires of the federal
structure (Federal, Provincial and Local government) (the “Registering Authority”) and also
segregates powers and authorities of each of them. There are certain changes in terms of industry
registration process and registering authorities, in comparison to the Previous Act. The Act provides
different jurisdiction to following government authorities for registration of industry:
3.1. Department of Industry
Previously, the Department of Industry (“DOI”) was the primary government agency for registration
of industry. However, in current administrative set up DOI would be undertaking registration of
following industries:
a. Industries subject to obtain prior approval before registration as prescribed under Annexure 1
of the Act. (As detailed in ANNEX IV).
b. Industries based on Foreign Direct Investments (“FDI”)
c. Industries falling under Schedule 5 of the Constitution of Nepal. (As detailed in ANNEX V)
d. Industries which fall under the jurisdiction of two or more Provinces.
e. Industries providing academic consultancy services relating to diplomatic affairs.
3.2. Provincial Government
The registration, renewal and regulation of all industries which do not fall under the jurisdiction of
DOI would fall under the jurisdiction of Provincial Government. However, industries subjected to
obtain prior approval are not excluded from obtaining the required approval. Provided, that DOI as a
central authority would be responsible to register, renewal and regulation of such industry until the
provincial laws are not formed.
3.3. Government of Nepal
The Act mandates certain industries (such as industry based on atomic energy, industries producing
radioactive material, atomic energy and uranium energy related industries) which can only be
established and operated by the Government of Nepal.
3.4. Local Authorities
After enactment of local, federal, and provincial laws micro entrepreneurship, cottage and small scale
industry having fixed capital as prescribed under the respective provincial law shall be regulated by
the respective local authorities. Until formulation and enactment of separate local laws all industries
shall be regulated by the DOI.
3.5. Timeline of Industry Registration
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Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.comThe timeline of the industry registration is stated as 5 days in the Act. Previously, the time line of
registration was 15 (fifteen) days. In past instances, some cases of industry registration has taken
more than 15 days. In this context, 5 days’ timeline for registration of industry seems attractive to the
investors; however, it may take longer period of time in case to case basis.
4. Approval and Compliance Requirement
The Act mandates numerous approval requirements. Some major approval and compliance
requirements are highlighted as follows:
4.1. Prior Approval for Industry Registration
The Act requires prior approval to be obtained from Industrial and Investment Promotion Board
(“IIPB”) for industry registration. Section 8 of the Act provides specific list of industries which
require prior approval. The list has been attached in ANNEX IV.
4.2. Notification Requirement for Industry Operation and Extension of Industry Operation
The industry registration authority provides specific timeline for each industry to commence its
Operation, Commercial Production or Transaction (the “Operation”). The Act requires industries to
inform the industry Registration Authority about the Operation within 30 days from the date of such
Operation. In case industries fail to operate within the given timeline, it shall obtain industry operation
extension 30 days before the expiry of the given timeline for industry operation.
Previously, failure of filing an application for industry operation extension would have resulted in
immediate cancellation of industry. There was no provision of delay payment and extension of
industry operation after expiry of the given timeline. However, the Act has currently provided
additional 6 months period to obtain industry operation extension and provides provision in relation
to delay fee submission for delay application for industry operation extension. The industry operation
extension can be provided based on the progress of construction work on the site and nature of the
industry. However, approval from IIPB is required to be obtained in case industry operation extension
is required for more than 3 times.
As per the previous Act, failure of obtaining timely extension of industry operation would result in
cancellations of industry registration but under the new Act instead of industry cancellation it would
be automatically be inactive.
Principally, obtaining extension of industry operation is merely a technical matter; default in
obtaining industry registration extension would not cancel the entire business vehicle as such. In this
context, the current Act provides more flexible approach to obtain industry operation extension. For
instance a business vehicle undertaking hydropower project cannot be technically cancelled from its
real existence only because of failure of industry operation extension.
4.3. Approval for changes in capital structure, capacity and objective of industry
The Act mandates prior approval to be taken from the Registering Authority by the industry
which is intending to increase the existing capital, capacity, adding additional objectives, and
changing the existing objectives. However, such approval is not required to be obtained by
the micro industry or cottage and small scale industry with fixed capital of NPR. 10,000,000
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Act envisages that increase in production rate by merely enhancing the capacity without
altering installed machinery, equipment shall not be considered as increase in capacity.
4.4. Requirement to submit “ZERO” details
The industry should forward zero details (Shuunya Biwaran) of production and business transaction
of the industry to the Registering Authority if the industry is closed for more than a year or has no
production or transaction throughout the year.
4.5. Submission of Progress report and other details
The Act requires industry to submit annual progress report, plans and activities in relation to industry
in compliance with corporate social responsibility requirement within the end of 6 months of every
financial year to the Registering Authority.
4.6. Submission of details as prescribed at the time of industry registration
Each industry is required to notify certain details as prescribed in the registration certificate to the
Regulating Authorities within the end of 6 months of every financial year to the Registering
Authority.
4.7. Prior approval for transfer of Location of Industry
The Act requires approval from province or local level if the industry is being transferred within the
province. However, if industry is being transferred from one province to another province, approval
from DOI must be obtained.
4.8. Notification in relation to closure of industry
Industry shall notify Registering Authority about the closure of industry within 30 days from the
date of closer of commercial production or transaction.
5. Environment Compliance
5.1. Pursuant to the Act, industry should commence activity related to establishment and operation only
after completion of applicable environment studies such as Initial Environmental Examination (IEE)
and Environmental Impact Assessment (EIA). The Act further mandates to carry out such
environment studies in the events where the industry increases capital, enhances capacity, adds or
changes objective or shifts or changes location of the industry.
5.2. The industry which does not require IEE and EIA should, during registration, disclose grounds and
reasons for the same along with the self-declaration that the industry will take appropriate measures
to mitigate adverse impact on the environment.
6. Incentives and Facilities to the Industries
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Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.com6.1. There have been some major changes in the Act in terms of incentives and facilities to the industries.
A significant change to note in the new Act is the removal of exemption of the Value Added Tax
(“VAT”) on production cost of the exported goods on the basis of export quantity.
6.2. The other remarkable changes include 100% income tax exemption to the Micro Industries being in
operation at the time of commencement of this Act; 50% income tax exemption to the Cottage and
Small Scale Industries with at least 10 Million (Nepalese Rupees Ten Million) being in operation by
the time of commencement of this Act and coming into operation pursuant to this Act; 50%
exemption on the rate of the income tax levied on the income from the sale of production by Local
tea producing and processing industries, dairy industries and clothes producing industries.
6.3. The new Act has brought changes in exemption, facilities and concession on income tax, custom duty
and various other charges on various nature of production. The major changes brought about in the
new Act have been detailed in ANNEX-III.
6.4. The Act provides statutory protection for changes in law regarding benefits and exemption provided
under the Act and other applicable laws. The stabilization provision states that no provisions shall be
made limiting the benefits and exemptions prescribed under the Act and other applicable laws. The
difference with the Act and the Previous Act is that the current law only guarantees non-limitation of
the incentives, concessions, facilities or subsidies guaranteed under the current Act, whereas the
previous IEA had the same provision extending to the scope of concessions, facilities or subsidies
provided by, both, the then IEA and the then prevailing laws.
7. Land Ceiling
7.1. The industry which requires a land area more than the land ceiling prescribed as per the prevailing
laws of Nepal should submit an application to the Registering Authority for the exemption on land.
The industry should use the exempted land as obtained only for the purpose for which the land is
taken. The Act provides restrictive regime in use of land obtained beyond ceiling. The Act explicitly
restricts exempted land from being sold, transferred or used as collateral in consideration of obtaining
loan from the banks or financial institutions. This provision is a hindrance to projects that operate
with loan investment because the land acquired by industries beyond ceiling cannot be mortgaged.
8. Corporate Social Responsibility (CSR)
8.1. The Act provides explicit provision to allocate at least 1% of the annual net profit (which was unclear
in the Previous Act) to be utilized towards Corporate Social Responsibility (the “CSR Requirement”).
The CSR Requirement is applicable to all (i) medium industries and large industries and (ii) cottage
industries and small industries having annual turnover more than NPR 150,000,000.
8.2. The fund allocated for CSR shall be utilized in the specific sector as provided under Rule 37 of the
Industrial Enterprise Regulation, 2019 (2076) (the "Regulation") by formulating annual plan and
program. The Rule 37 of the Regulation provides number of sectors/areas or/and activities where the
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Community Health Centers, (c) Preservation of Nepalese Architect, (d) Culture Socially Backward
Communities,(e) Community Schools, (f) pollution Control, (g) Waste Management, Reforestation,
(h) Preservation of Water Resource, (i) Promotion of Alternative Energy & Environment Protection,
(j) Campaign for the preparation & Broadcasting of Documentary against Smoking, Alcohol use. (k)
Rural Drinking Water, road, sewage & corresponding physical infrastructure for the social benefit.
8.3. The Act further provides that the amount spent under CSR requirement can be deducted for the
purpose of income tax. The plans and programs related to CSR shall be submitted within the end of
6 months of every financial year to the DOI. The plans formulated plans and programs for CSR shall
be implemented in co-ordination with local authorities.
9. Contract Manufacturing
9.1. The content of the contract manufacturing has been updated in the Act in line with the Foreign
Investment and Technology Transfer Act, 2019. Previously contract manufacturing arrangement was
permissible for production of goods and services by the domestic industry. The Act there explicitly
restricts production of main goods of the industry through contract manufacturing. However, the Act
permits contract manufacturing arrangement in case of production of auxiliary products. The concept
also extends to supply of services but has not prescribed in detail.
9.2. The Act does not provide specific criteria to distinguish between main products and auxiliary
products. This provision provides much needed regulatory clarity on the regulation of contract
manufacturing arrangement. The Act does not mandate prior approval from the DOI to enter into a
contract manufacturing arrangement. The Act also entails provision of exemptions and benefits for
industry based on the contract manufacturing. Government is yet to issue notification relating to such
benefits and exemptions.
10. Offences and Sanctions
10.1. In comparison to the Previous Act, the Act provides more comprehensive offenses and punishment
for various non-compliances. The offences under the Act includes; (a) operation of industry without
registration, (b) performance of activities against objectives of an industry, (c) failure of notifying
about industry operation, commercial production or commencement of transaction of an industry
within given time period as provided by the Act, (d) transfer of an industry without obtaining prior
approval, (e) increment of capital, enhancement of capacity, addition or alteration of objectives
without obtaining prior approval, (f) failure to comply with the reporting/filing requirement as set out
under the Act, (g) misuse of incentives, exemptions, facilities and concessions as made available
under the Act, (h) non-fulfillment of the CSR Requirement in compliance with the Act, (i) non-
compliance conditions provided under the Act as well as breach of conditions or any directives issued
by the Ministry of Industry (“Ministry”) and (j) any other non-compliances as stated in the Act and
Regulation formulated under the Act.
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extensive manner which is categorically presented as follows. Additional 50% fine in addition to the
fines stated below is applicable for industries which are subject to obtain approval from IIPB prior
registration.
S.N. Offences Scale of Punishment (Amount in NPR.)
Industry
1. Operation of industry without Micro industry 5,000/-
registration
Small and 25,000/-
Cottage
Medium 50,000/-
Large 100,000/-
Immediate closure of an industry along with above
mention fine.
2. Performance of activities Micro industry Up to 2000/-
against objectives of the
Small and Up to 50,000/-
industry.
Cottage
Medium Up to 100,000/-
Large Up to 500,000/-
3. Failure to notify about industry Micro industry 2,000/- for each 6 months period
operation, commercial
Small and 10,000/- for each 6 months period
production or commencement
Cottage
of transaction of an industry
Medium and 25,000/- for each 6 months period
within given time period as
Large
provided by the Act.
4. Micro industry 5,000/-
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obtaining prior approval and Cottage (Notes: Additional 100% fine for
increment of capital, industry which are subject to
enhancement of capacity, add receive approval for industry
or alter objectives without registration)
obtaining prior approval.
Medium and 100,000/- to 300,000/-
Large (Notes: Additional 100% fine for
industries which are subject to
receive prior approval for industry
registration)
5. Failure of submission of annual Micro industry 1,000/-
detail within stipulated
Small and 5,000/-
timeframe as provided by the
Cottage
Act.
Medium 10,000/-
Large 25,000/-
6. misuse of incentives, For all types of Confiscation of available
exemptions, facilities and industries. incentives, exemptions, facilities
concessions as made available and concession (“Benefits”),
under the Act recovery of amount equivalent to
such benefits or levy fine equivalent
to such Benefits.
7. Non-compliance of CSR For all types of Fine equivalent to 0.5% of gross
responsibility. industries profit.
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Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.com8. Non-compliance of any Micro industry 5,000/-
conditions or directives
Small and 50,000/- to 100,000/-
provided by the Ministry.
Cottage
Medium 150,000/- to 300,000/-
Large 250,000/- to 300,000/-
9. Any other non-compliances Micro industry Up to 15000/-
provided under the Act and
Small and Up to 15000/- to 30,000/-
Regulation framed pursuant to
Cottage
the Act.
Medium Up to 30,000/- to 50,000/-
Large Up to 50,000/- to 100,000/-
ANNEX- I
Industry Fixed Capital (Nrs.)
Previous Act Act
Micro Up to 500,000 (Five Hundred Thousand) Up to 2,000,000 (Two Million)
[annual transaction increased to less than
10,000,000 (Ten Million) from less than
5,000,000 (Five Million)]
Cottage There has been no Change.
Small-scale Up to 100,000,000 (One Hundred Up to 150,000,000 (One Fifty Million)
Million)
Medium-scale From more than 100,000,000 (One From 150,000,000 (One Fifty Million) to
Hundred Million) to 250,000,000 (Two 500,000,000 (Five Hundred Million)
Fifty Million)
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Million) Million)
ANNEX- II
Schedule New sectors introduced by the Act Remarks
1. Approval • Related to Microbrewery
requiring • Related to LPG Refilling
Industries • Related to manufacturing drone or providing
services through drones
2. Cottage There has been no change.
Industries
3. Energy- • Related to biogas energy
oriented • Related to electricity energy to be produced as a
Industries co-production of sugar industry
• Related to energy potentiality study
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and Forest products
Product • Related to Challa Kadne business
based • Related to milk production and processing of
Industries dairy products
• Related to protection of botanical garden
• Related to operation and management of
agriculture market and Sheet Bhandar
• Related to establishment and management of
agriculture forest
• Related to seed conservation of cash crops
• Related to production of natural Reshajanya
products
• Related to wood industry including shaw-mill
and furniture
• Related to wood industry like parqueting,
seasoning, treatment plant, ply wood,
composite, board.
• Related to non-wood forest products including
paper, resin
• Related to the production of mushroom, tissue
culture, agroforest
• Related to cotton farming, production and
processing of cotton and cotton seeds.
5. Infrastructur • Related to polluted water purification • The current Act has
e Industry • Related to private warehouse replaced
• Related to infrastructure construction, ‘Construction
arrangement and operation of installation of Industry’ with
pipelines for fuel and gas supply ‘Infrastructure
• Related to infrastructure construction, Industry’.
arrangement and operation of energy house and • The following
energy transmission line industries have
been removed from
the Schedule 5.
a) Related to
assembly and
convention centers
b) Related to
sewage and sewage
passage
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Industry • Related to trekking, jip flyer, ultra-light, sky removed industries
walking, sky diving and other similar types of related to operation
excursion activities of mountain flight
• Related to construction and operation of cable from Schedule 6
cars
• Related to agriculture tourism
• Related to water park
7. Information Part (A)
technology, • Related to Knowledge Process Outsourcing
Communicati • Related to data centers
on • Digital signature certifying agency
technology • Related to web portal, web design service, web
and hosting
information
disseminatio Part (B)
n based
• Internet Service Provider In relation to VSAT,
Industry
• Related to satellite phone operator service the Previous Act
• Related to VSAT Service had not included the
• Related to social networking, online message, VSAT as service,
video call, conference but merely provided
‘VSAT’. This Act
has covered VSAT
Services.
Part (C)
• Related to Digital Television Network
• Related to the production of ‘BrittaChittra’
8. Service- • Related to clinic, polyclinic, operation of • The current Act
oriented rehabilitation centre, physiotherapy clinic, tries to cover
Industry aayurved or other alternative hospitals. operation of all
• Related to physical training, operation of Yog- kinds of Sheet
Dhyan or training scentre Bhandar removing
• Related to swimming pool the previous
• Related to operation of Sheet Bhandar limitation of only
• Related to transport and cargo business or the non-agriculture
service Sheet Bhandar.
• Related to Custom Agent (Bhansar Agent) • The Previous Act
service had covered only
• Related to news dissemination service the ‘cargo
• Related to water purification service businesses’. The
cargo as a service
• Related to Cinema Hall (including multiplex)
and transport
• Related theatre (including multiplex)
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providing services to the general people using has also been
the electronic medium (online or software or covered under this
apps or other similar nature of medium). Act.
• Related to services providing machinery
equipment in lease • The industry related
• Related to service businesses such as to mass
purification or processing cut to length sheet, communication
photo film slitting, photo, paper slitting, tissue service has been
paper slitting, ball wiring assembly and removed from the
importing finished goods in bulk and repacking Schedule 8.
having uncountable processing and procedure
• Business related to clothing and Yarn dying, • The Previous Act
Yarn sizing and printing on clothes (except for only covered the
weaving industry doing such for its own ‘water transport and
purpose) distribution
• Related to Veterinary services service’. The new
• Related to service apartment Act added ‘water
• Related to food court, catering and street food purification’ also
stalls under the scope of
• Related to equipment repair and installation, Schedule 8.
ready mix concrete, export house, technology
and innovation center and service of providing • The Act has
facilitated work space covered ‘Cinema
Hall’ along with
‘multiplex’, which
was previously not
covered. Similarly,
the present Act has
also covered all
kinds of theatre
including multiplex
theatre.
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Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.com9. Industries • Infrastructure industry
with National • Shoes sandals manufacturing industry, thread
Priority manufacturing industry, livestock farming, fish
farming, chicken farming, bee farming,
horticulture, preliminary processing of rubber
based on local raw materials and manufacturing
of rubber products, industry preparing
medicines battling snakebite, artificial eye lens
manufacturing industry
• Information technology industry
• Industries established inside the Industrial Area,
Special Economic Zone and Industry Gram
built and operated by the private sector
• Goods production industry with high price low
weight/volume as identified and prescribed by
the Government of Nepal publishing the notice
in the Gazette after making required standards.
• Goods and Services production industry
specified by Nepal Trade Integration Strategy
as approved by the Government of Nepal
• Related to making movie
ANNEX-III
Industry Previous Act Act
A. Income Tax Concession
Manufacturing industries Not Provided 25% exemption on the rate of income tax
producing fruit based cider, for up to 10 years from the date of
brandy or wine established commencement of business
in any Undeveloped Region
Local tea producing and Not Provided. 50% exemption on the rate of the income
processing industries, dairy tax levied on the income from the sale of
industries and clothes such products
producing industries
Manufacturing Industries 100% income tax 100% income tax exemption for
set up with the investment exemption for first first five years from the date of
of at least 1 billion rupees five years from the commencement of business.
and providing direct date of
employment to more than
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the year business. next 3 years.
50% exemption on the Industries already in operation are
income tax for next 3 entitled to the above stated exemption in
years. case such industries enhance their
installed capacity by at least 25%,
Industries already in increase investment to 2 bn. (Nepalese
operation are entitled to Rupees Two Billion) and provide direct
the above stated employment to 300 (thee hundred)
exemption in case such individuals throughout the year.
industries enhance their
installed capacity by at
least 25%, increase
investment to 1 bn.
(Nepalese Rupees One
Billion) and provide
direct employment to 500
(five hundred)
individuals throughout
the year.
Industries conducting 100% Income tax 100% Income tax exemption for
research and excavation of exemption for first first 7 years from the date of
minerals (except white rock 7 years from the commencement of transaction;
(Chundhunga)) petroleum, date of
natural gas and fuel. commencement of 50% exemption on the income tax for
transaction; next 3 years.
50% exemption on the The timeline of commencement of
income tax for next 3 commercial transaction has been
years. extended up to mid-April 2024 A.D.
(Chaitra 2080 B.S.)
Previously the white rock
was not covered.
Further, the timeline of
commencement of
commercial transaction
was mid-April 2019 A.D.
(Chaitra 2075 B.S.).
Pioneer Law Associates Pvt. Ltd. Regd. No. 38549/062/063 Pioneer House, 246-Sahayog Marg, Anamnagar, Kathmandu, Nepal.
Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.comIndustries related to the 50% exemption on tax 50% exemption on tax imposed on
operation of zoological, imposed on income of income of such industries
geological and bio-tech such industries
park, and software
development, data Industries related to the
processing, cyber café and operation of zoological,
digital mapping established geological park was not
inside the technology park covered by the Previous
and information technology Act.
park specified by Nepal
Government by publishing
notice in Nepal Gazette.
Manufacturing industry Not Provided. Such industries are entitled to deduct for
having interns equivalent to the purpose of income tax any such cost
at least 10% of the total incurred in providing subsistence
human resource expenses, internship expenses and
expenses incurred in enhancing the
production capacity of human resource
working in the industry.
Industry registering the Reimbursement of cost Such industries are entitled to deduct
intellectual property in was available from the such cost for the purpose of income tax
foreign country for its Government of Nepal
protection
Industries, other than Not Provided. 100% exemption on dividend tax levied
tobacco and liquor as a dividend distribution on such
industries and Casinos, capitalization
utilizing the accrued
proceeds in capitalization in
shares for expansion of the
capacity of the same or for
other production or energy
oriented industries or for
the industries relating to
agriculture and forest
products
Pioneer Law Associates Pvt. Ltd. Regd. No. 38549/062/063 Pioneer House, 246-Sahayog Marg, Anamnagar, Kathmandu, Nepal.
Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.comCottage and Small Scale Not provided. 50% exemption on the income tax as
Industries with at least 10 applicable
Million (Nepalese Rupees
Ten Million) which are
already in operation by the
time of commencement of
this Act and coming into
operation pursuant to this
Act
B. VAT Exemption
The arrangement of VAT refund has been removed by the new Act. Previously, there
was the arrangement of providing refund of the VAT to the industries exporting
goods manufactured in Nepal.
C. Custom Duty Exemption
Industries not having The Government of The Government of Nepal Ministry of
Bonded Warehouse or Nepal may refund the Finance shall determine the rate of Duty
Passbook facility amount of Duty Draw Draw Back in export of goods by such
Back in export of goods industries and then, through the One Stop
after determining the Service Centre, shall refund the amount
aggregate of costs of Duty Draw Back as per the determined
incurred in import rate.
(Samadar) as prescribed
in Nepal Gazette.
For all industries Custom duty is levied at Custom duty is levied at the minimum
the minimum rate on rate on import of machinery, generators
import of machinery, or industrial equipment with 10 Kilowatt
transformers, generators capacity imported by an industry for
having a capacity of 10 commercial purpose.
Kilowatt and other
industrial devices [Import of Transformer has been
imported by an industry removed from this category.]
for commercial purpose.
Industries producing Not provided. Such industries are entitled to refund of
intermediate goods used in the custom duty on the produced goods
based on the quantity of export.
Pioneer Law Associates Pvt. Ltd. Regd. No. 38549/062/063 Pioneer House, 246-Sahayog Marg, Anamnagar, Kathmandu, Nepal.
Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.comthe industrial goods being
imported
D. Duty Exemption
Micro Industries already under operation at the time of commencement of this Act are entitled to 100%
income tax exemption.
Previously, the exemption was available only for up to 5 years from the date of commencement of
business or transaction.
E. Additional benefits for Female Entrepreneurs
There has been no significant change in relation to the benefits available to the industries registered
under the ownership of female entrepreneurs. In terms of availing export finance, such can be made
through banking channel from the Financing Female Entrepreneurs Fund. Previously, there was no
clarity as to the means and source of financing.
F. Additional Exemptions and benefits
The new Act has also covered female entrepreneurs and industries operating inside the
industrial zone to become entitled of the additional exemptions and benefits. In addition
to the previously available exemptions and benefits, following benefits have been added
by the new Act:
1. Government of Nepal may provide incentives, exemptions, benefits or concessions to the
production oriented industries, industries related to agriculture and forest products and minerals
industry.
2. The exemption may be provided on the custom duty to be levied to the micro and cottage and small
scale industries while importing novel technologies including machineries, tools and equipment as
required for enhancing capacity of such industries.
3. The Government of Nepal may make special arrangement in relation to providing incentives,
exemptions, benefits or concessions to the industries operating inside industrial zone, product
specific zone and industrial cluster.
4. The Government of Nepal may provide incentives, exemptions, benefits or concessions to the
industries established in the under developed, undeveloped and least developed regions.
ANNEX IV: List of Industry Requiring Prior Approval before Registration
1. Industries producing explosives including arms and ammunition and gunpowder,
2. Security printing, bank notes and coin industries,
3. Cigarette, bidi, cigar, chewing tobacco and industries producing other goods of a similar nature
utilizing tobacco as the basic raw material and industry producing electric cigarettes,
4. Microbrewery, Alcohol, beer producing industries,
5. Stone, ballast, sand excavation processing industry,
Pioneer Law Associates Pvt. Ltd. Regd. No. 38549/062/063 Pioneer House, 246-Sahayog Marg, Anamnagar, Kathmandu, Nepal.
Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.com6. Industries producing radio communication equipment,
7. Industries like mining of precious minerals and petroleum products ,
8. Liquefied petroleum gas (L.P.G) refiling industries,
9. All kinds of industries that produce drone products or provide services through drone,
10. Other industries that need to take permission as prescribed by the prevalent laws.)
ANNEX V: Industries falling under Schedule 5 of the Constitution of Nepal
S. MATTERS
No.
1. Relating to defense and military
(a) Protection of national unity and territorial integrity
(b) Relating to national security
2 War and defense
3 Arms and ammunitions factories and production thereof
4 Central Police, Armed Police Force, national intelligence and investigation,
peace, security
5 Central planning, central bank, finance policies, monetary and banking, monetary
policies, foreign grants, aid and loans
6 Foreign and diplomatic affairs, international relations and United Nations related
matters
7 International treaties or agreements, extradition, mutual legal assistance and
international borders, international boundary rivers
8 Telecommunications, allocation of radio frequency, radio, television and postal
matters
9 Customs, excise-duty, value-added tax, corporate income tax, individual income
tax, remuneration tax, passport fee, visa fee, tourism fee, service charge and fee,
penalty
10 Federal civil service, judicial service and other government services
11 Policies relating to conservation and multiple uses of water resources
12 Inland and inter-State electricity transmission lines
13 Central statistics (national and international standards and quality)
14 Central level large electricity, irrigation and other projects
15 Central universities, central level academies, universities standards and
regulation, central libraries
16 Health policies, health services, health standards, quality and monitoring, national
or specialized service providing hospitals, traditional treatment services and
communicable disease control
17 Federal Parliament, Federal Executive, Local level related affairs, special
structure
18 International trade, exchange, port, quarantine
19 Civil aviation, international airports
20 National transportation policies, management of railways and national highways
21 Laws relating to the Supreme Court, High Courts, District Courts and
administration of justice
Pioneer Law Associates Pvt. Ltd. Regd. No. 38549/062/063 Pioneer House, 246-Sahayog Marg, Anamnagar, Kathmandu, Nepal.
Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.com22 Citizenship, passport, visa, immigration
23 Atomic energy, air space and astronomy
24 Intellectual property (including patents, designs, trademarks and copyrights)
25 Measurement
26 Mines excavation
27 National and international environment management, national parks, wildlife
reserves and wetlands, national forest policies, carbon services
28 Insurance policies, securities, cooperatives regulation
29 Land use policies, human settlement development policies, tourism policies,
environment adaptation
30 Criminal and civil laws making
31 Security printing
32 Social security and poverty alleviation
32 Constitutional Bodies, commissions of national importance
34 Sites of archaeological importance and ancient monuments
35 Any matter not enumerated in the Lists of Federal Powers, State Powers and Local
level Powers or in the Concurrent List and any matter not specified in this
Constitution and in the Federal law
**DISCLAIMER: This document is prepared for general
understanding and should not be taken for any legal purpose
without consulting legal professionals. ** The copyright of the
document is vested with PLA. **
Pioneer Law Associates Pvt. Ltd. Regd. No. 38549/062/063 Pioneer House, 246-Sahayog Marg, Anamnagar, Kathmandu, Nepal.
Phone No.: +977-1-5705340, +977-1-5707102 Email: info@pioneerlaw.com, www.pioneerlaw.comYou can also read
