Tax exemption to lure investors

By Laxman Kafle Kathmandu, May 30: The government has introduced various tax concession schemes for the businessmen for the promotion of local industries.

While presenting the budget for the fiscal year 2022/23 on Sunday, Finance Minister Janardan Sharma said that the government has proposed to provide 40 per cent income tax exemption for five years from the date of commencement of business if the industry establishes a new industry to manufacture or assemble four-wheel electric vehicles.

“I have made an arrangement to levy only 1 per cent tax on the person who earns foreign exchange by providing services based on software, electronic services, business process outsourcing or similar information technology outside Nepal,” he said.

In order to provide relief to the small entrepreneurs affected by COVID-19 pandemic, 75 per cent income tax exemption has been provided to the taxpayers with an annual turnover of up to Rs. 3 million and 50 per cent income tax exemption with an annual turnover from Rs. 3 million to Rs. 10 million.

The budget has made an arrangement to provide 50 per cent tax exemption on business taxable income of the tourism industries such as hotels, travel, trekking and movie business which were most affected by COVID-19 as per the objective of fiscal year 2021/22, he said.

“I have made an arrangement to give full exemption from income tax for five years from the date of commencement of business if such an industry is established to encourage the opening of agricultural tools factory in Nepal which produces machinery, equipment or spare parts required for agricultural activities,” said FM Sharma.

In the hilly districts of Karnali and Sudurpashchim Provinces, if special industries are established to provide direct employment to more than 100 people, the industry will be fully exempted from income tax for 15 years from the date of starting the business.

The government has made some modifications in the customs duty on raw materials imported by 

manufacturing industries in line with the policy of reducing the customs 

duty on manufactured goods by at least one level.

In addition, to discourage the import of luxury goods, customs duty, excise duty and other import tax rates have been increased.

The government has made an arrangement to give 50 per cent excise duty exemption on the import of spare parts or raw materials required for the production of vehicles if a four-wheeler manufacturing or assembling industry is established in Nepal and also 25 per cent discount on customs duty.

Similarly, the budget has made an arrangement to levy only 1 per cent customs duty on the raw materials or spare parts used by the industries producing electric rickshaws and electric motorcycles or scooters.

Provision has been made to provide a 90 per cent discount on the customs duty on the import of sanitary pads.In order to assist in the transportation and marketing of agricultural products, the local level has made an arrangement to give full exemption from the customs duty on the  import of an agricultural ambulance or vehicle.

The government has made an arrangement to provide a 50 per cent discount in the customs duty on the import of one unit of transport vehicle purchased by the Agricultural Cooperative for the transportation of agricultural products.

Similarly, the government has decided to give 75 per cent discount on customs duty on the import of maximum two school buses purchased by community or public schools.

The arrangement will be made to give a 50 per cent discount on the fee for renewal of passport, consular service and renewal of labour permit to the Nepali citizens who are in foreign employment sending remittances through formal channels.

Along with the development of information technology, necessary structural and legal arrangements will be made to address the opportunities and challenges seen in the tax system in recent times, said FM Sharma.

Necessary arrangements will be made by studying the administration and collection of taxes under the jurisdiction of the federal, province and local levels to prevent duplication, he said.

Income tax ceiling increased 

The government has reviewed the income tax ceiling.

Considering the basic subsistence cost of an individual or family, the limit of income tax exemption provided to natural persons and couples by the Income Tax Act, 2058 has been increased to Rs. 500,000 and in case of couple Rs. 600,000, said Finance Minister Janardan Sharma 

In addition, the government has increased the limit for deducting insurance premiums for income tax purposes to Rs. 40,000.

The government has taken the policy of gradually increasing the share of internal revenue and expanding the scope of revenue by changing the revenue structure dependent on imports, he said.