The Department of Industry (DOI) published a notice on 12 December 2022 (2079/8/26 B.S.) in attention to companies/industries who have brought foreign investment into Nepal but have not succeeded in recording the same with the Nepal Rastra Bank, such companies have been given a 35 days period to record the details of such foreign investment with the Foreign Investment and Technology Transfer Section, DOI in the prescribed format. The DOI will assess the volume and nature of submissions and take it up to the Industry and Investment Promotion Board in the future to provide a solution that enables the companies with unrecorded foreign investment to sell shares, make reinvestment and repatriate earnings.
Link : https://doind.gov.np/detail/149
Disclaimer: This Pioneer Law Briefing may not necessarily deal with every important aspect of the subject matter. This Briefing is intended for general information only and not to be construed as legal or other advice.
New Legislation on Industrial Enterprises – Brief Highlights
January 31, 2017
Industrial Enterprises Act 2016 (2073 BS) (the “Act“) has been introduced with effect from November 22, 2016 repealing the Industrial Enterprises Act 1992 (2049 BS) (the “Previous Act”). However, certain provisions of the Act would be issued in the form of Regulation, which has not been formulated as of this date.
The Department of Industries (the “DOI”) continues to operate as primary implementing agency under the Act. The key provisions of the Act are set out below:
Industry Registration
The Act makes it mandatory for all the business activities falling under the definition of “industry’ to be registered as an industry.
Various registration requirements have frequently been cited as areas requiring reforms but the Act has missed this opportunity to re-evaluate the requirement of business registration. Further the Act does not have any new provisions which will assist reduction in cost of registration or doing business in Nepal.
Classification of Industry
Approval and Compliance Requirement
Environmental Compliances
Corporate Social Responsibility
No Work No Pay and Restriction on Strikes
Contract Manufacturing
Incentives and Facilities to Industries
Offences and Sanctions
Annex I
Fiscal Concessions for Different Industries
A. Income Tax Concessions | |
Industry | Concessions |
Manufacturing Industries | 20% exemption on the rate of tax imposed on the income earned from such industries. |
Industries investing in construction of roads, bridge, tunnel, Ropeway, Railway, Tram, Trolleybus, Airport, Industrial Structure and Infrastructural Complex and bringing such constructions into operation | 40% exemption on the rate of tax imposed on the income earned from operation of such infrastructures. |
Manufacturing industries except those producing fruits based cider, brandy or wine established in Under Developed, Undeveloped and Less Developed Region | 90%, 80% and 70% exemption on rate of the income tax for up to 10 years from the date of commencement of commercial production or transaction |
Manufacturing industries producing fruit based cider, brandy or wine established in any Under Developed Region | 40% exemption on the income tax for up to 10 years from the date of commencement of business |
Manufacturing Industries set up with the investment of at least 1 billion rupees and providing direct employment to more than 500 individuals throughout the year | 100% income tax exemption for first five years from the date of commencement of business.
50% exemption on the income tax for next 3 years. Industries already in operation are entitled to the above stated exemption in case such industries enhance their installed capacity by at least 25%, increase investment to 1 billion and provide direct employment to 500 individuals throughout the year. |
Individuals or entities obtaining approval to commercially generate transmit or distribute Hydroelectricity by mid-April 2024 A.D. (Chaitra 2080 B.S.) |
100% income tax exemption for first 10 years 50% income tax exemption for next 5 years. Such exemption is entitled to Solar, Wind and Bio Mass energy as well. In case of industries that have already begun commercial production at the time of commencement of this Act, the exemptions applicable at the time of receiving approval would be applicable. |
Industries conducting research and excavation of natural gas and fuel commercially, if commence the commercial transaction by mid April 2019 A.D. (Chaitra 2075 B.S.) | 100% Income tax exemption for first 7 years from the date of commencement of transaction;
50% exemption on the income tax for next 3 years.. |
Industries relating to Tourism Sector established with the investment of above 2 billion rupees | 100% Income tax exemption for the first 5 years from the date of commencement of commercial transaction
50% exemption on rate of Income Tax for next 3 years Such Industries already in operation are entitled to the above stated exemption in case such industries enhance their installed capacity by 25%, increase investment to 2 billion. |
Tourism Industry including hotel, resort etc. established outside the metropolitan or sub-metropolitan area with the investment of more than 50 million | 100% Income tax exemption for the first 5 years from the date of commencement of commercial transaction
50% exemption on rate of Income Tax for next 3 years |
Industries related to software development, data processing, cyber café and digital mapping established inside technology park, bio-tech park and information technology park specified by Nepal Government by publishing notice in Nepal Gazette. | 50% exemption on tax imposed on income of such industries |
Manufacturing Industries and Information and Communication Technology Industries employing 300 or more Nepalese throughout the years | 15% exemption on tax imposed on income of such industries on that year
(Additional 15% exemption on income tax on that year in case the industry has 50% of its employees from among Women, Scheduled Caste and Disabled person) |
Manufacturing Industries and Information and Communication Technology Industries employing 1200 or more Nepalese throughout the year | 25% exemption on tax imposed on income of such industries on that year
(Additional 15% exemption on income tax on that year in case the industry has 50% of its employees from among Women, Scheduled Caste and Disabled person) |
Manufacturing Industries exporting goods or commodities produced | 25% exemption on the rate of tax imposed on the income earned. |
All industries | Expenses made by industries for long term welfare and benefit of employees or workers such as housing, life insurance, health facility, education and training, child care, sports etc. can be deducted for purpose of income tax.
Expenses made for equipment & technology used to reduce or control the pollution or re-processing or reuse of wastages can be deducted up to 50% of the adjusted taxable income of the same fiscal year. In case the expenses cannot be deducted in full the remaining amount is allowed to capitalize the depreciation on which may be claimed in the subsequent fiscal year. Expenses incurred for the machine or equipment used for reducing power consumption can be deducted for the purpose income tax. The costs incurred for increasing entrepreneurship, research and development and creation of new technology for enhancing the productivity of the industry can be deducted while calculating taxable income for an income year from business provided that such deduction does not exceed 50% of the adjusted taxable income from all business of the industry. In case the expenses cannot be deducted in full the remaining amount is allowed to capitalize the depreciation on which may be claimed in the subsequent fiscal year. |
Costs incurred in market promotion, survey and advertisement relating to the business can be deducted for the purpose of income tax.
Costs incurred for the security of the physical assets as prescribed and actual premium paid for insurance can be deducted for the purpose of income tax.
Costs incurred for the protection of industrial property in Nepal which is registered in Nepal can be deducted for the purpose of income tax.
25% exemption on the rate of income tax on royalty received from export of Intellectual Property created and registered in Nepal.
50% exemption on the rate of income tax on income earned from transfer or sale of intellectual property created by the industry.
Government of Nepal may reimburse the registration fee paid to register the intellectual property in foreign country for its protection in the manner as prescribed by Nepal Government.
Gifts or donations given to tax exempted organization can be deducted up to Rs. 100,000 or 5% of adjusted taxable income of the industry, whichever is less
The Government of Nepal may also provide other exemptions by publishing a notice in Nepal Gazette.
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Industries established inside Industrial Estate | Local Taxes including Unified Property Tax is not levied |
Note:
i. Industries based on tobacco, liquor and kachha or kattha are not entitled to any of the exemptions or facilities listed above. However, such industries may deduct actual expenses incurred in business promotion activities including long-term welfare and benefit of employees or workers, in reducing or controlling pollution, re-processing of waste materials, in technologies and devices used reducing environment effects, in machine or equipment used for reducing power consumption, research and development expenses.
ii. In case an industry qualifies for more than one exemption in respect to similar income from among those listed above, the industry is only entitled to one exemption. Such industry is entitled to select the applicable exemption.
B. VAT Exemptions | |
Industry | Benifits |
All Industries | VAT imposed on production is reimbursed if such goods are exported, based on the quantity of export. |
C . Customs duty Exemption | |
Industry | Benifits |
Industries not having Bonded Warehouse or Passbook facility | The Government of Nepal may refund the amount of Duty Draw Back in export of goods after determining the aggregate of costs incurred in import (Samadar) as prescribed in Nepal Gazette. |
Industries not having Bonded Warehouse approval exporting goods through existing Banking Channel or Letter of Credit or selling such goods in domestic market in convertible currency | Raw materials or auxiliary raw materials as well as packaging materials that are not produced in Nepal can be imported by furnishing the required guarantees under prescribed conditions and procedures.
However, in case of packaging materials not produced in Nepal, a recommendation is required from IRD to enjoy stated benefit. The Custom Duty levied in the import of such raw materials, auxiliary raw materials and packaging materials required for production shall be one level below the existing Custom Duty rate in import of finished goods using such materials. |
Laboratories for Quality Assurance | Custom Duty is levied in the minimum rate for the import of machinery and scientific devices that re being imported to ensure quality as well as such machinery and equipment imported by industries for research and development. |
All Industries | Custom duty is levied in the minimum rate on import of machinery, transformers, generators having a capacity of 10 Kilowatt and other industrial devices imported by an industry for commercial purpose. |
D . Customs duty Exemption |
Notwithstanding anything mentioned in existing acts, no fees or charges is levied on registration of micro industry pursuant to this Act. |
Micro Industries already under operation at the time of commencement of this Act are entitled to 100% income tax exemption for at least 5 years from the date of commencement of this Act. |
Micro Industries registered and operating pursuant to this Act are entitled to 100% income tax exemption for at least 5 years from the date of commencement of commercial transaction. |
E . Additional benefits for Female Entrepreneurs : Industries registered under the ownership of Female Entrepreneurs only are entitled to following additional benefits and concessions: |
35% exemption in existing Industry Registration Fees |
20% exemption in existing rate of registration of Industrial property used inside the industries |
Female entrepreneur shall be prioritized while allocating the areas inside Industrial Estate |
In case such industries require loan for exporting produced goods, export loan will be provided to the industry depending upon the financial status of the transaction of the industry. |
F. Other Exemptions and facilities |
Industries based on forest products can be given possessory right pursuant to existing laws over forest in any region through lease or other promissory guarantee under prescribed conditions. |
No fees or royalty pursuant to the existing laws shall be applicable in electricity produced by industry for its own consumption.
Such industry willing to sell surplus electricity to any other industry, may sell so pursuant to existing laws in the rate agreed upon by both parties. |
Government of Nepal may provide additional exemptions and facilities to export based industries and prescribed industries established inside Special Economic Zone or inside Government or Private Industrial Estate by publishing notice in Nepal Gazette. |
Government of Nepal may provide additional exemptions and facilities by publishing a notice in Nepal Gazette to National Priority Industries or industry making optimum use of domestic raw materials, labor or skill or industries established by inventing new technology or goods inside Nepal upon recommendation of Industries and Investment Promotion Board. |
Government of Nepal may provide exemptions in Demand Charge added in Electricity cost under prescribed conditions and procedures. |
Government of Nepal may provide aid assistance as seed capital to cooperatives, micro industry, small and cottage industries to establish industries inside Under Developed Region under prescribed conditions. |
Industries operating under Foreign Investment may be given approval to import goods produced by the head office located in foreign countries for production, market development and promotion of new goods for a prescribed period under prescribed terms and conditions. |
Disclaimer: This Pioneer Law Briefing may not necessarily deal with every important aspect of the subject matter. This Briefing is intended for general information only and not to be construed as legal or other advice.
Social Welfare Council (the “Council”) is the main regulatory body responsible for regulating INGOs in Nepal. The Council was established under the Social Welfare Act 1992 (the “Act”); Social Welfare Rules 1992 (the “Rules”) is the subsidiary legislation to the Act. Besides the Act and the Rules, the Council adopts various guidelines to regulate INGOs effectively. These guidelines are updated periodically. At present, the Guidelines for General Agreement, Service and Facilitation, Guidelines for Project Appraisal, Guideline for NGO Approval, Guidelines for NGO Affiliation, Guidelines for Monitoring and Evaluation, and Guidelines for Project Advisory Committees, are the key guidelines regulating the establishment and activities of INGOs in Nepal. The INGOs are required to take approval as well enter into agreements with the Council to carry out their functions.
Is it mandatory to obtain approval from the Council?
Yes, it is mandatory for INGOs desirous of conducting developmental, social or welfare activities in Nepal to obtain approval from the Council.
What are the approval requirements?
Following are the requirements to be met by the INGO to obtain the approval:
Is it also mandatory to obtain approval for providing financial assistance only?
INGO is not required to obtain the approval to provide financial assistance. However, the receiving NGO must obtain the approval from the Council in order to receive such assistance.
What is the General Agreement?
The General Agreement is a bilateral agreement which generally serves as a main agreement forming the basis for the presence and operation of the INGO in Nepal and outlines the areas in which the INGO can support in Nepal, minimum amount it has to fund annually in Nepal, provisions for establishing its office in Nepal and filing and reporting requirement, etc. The most recent template of the General Agreement at be found at [insert link].
What is the procedure (and the documents required) to enter into the General Agreement?
An application, along with the following documents, is required:
If the charter documents of the INGO are not in English, English notarized translated versions notarization are required.
What is the term of General Agreement?
The General Agreement is entered only for a certain period of year (minimum 3 years and maximum 5 years) and is subject to the renewal requirement thereafter.
Can the General Agreement be terminated before the expiry date? If yes, how?
Yes, the General Agreement can be terminated. The agreement can be terminated by the either party by giving a six months advance notice.
What are the procedures to renew the General Agreement?
In order to renew the General Agreement for a next term, following information/documents shall be provided:
Is it mandatory for an INGO to open an office in Nepal?
Yes. It is mandatory to open an office in Nepal.
What will be the legal status of the local office?
The local office established under the General Agreement will not have independent legal status or corporate personality separate from the INGO incorporated and existing under the laws of foreign jurisdiction. It will also not have authority to implement any project in Nepal directly without the involvement of local NGOs. The local office of the INGO will also have to be registered with the tax authority of Nepal and obtain permanent account number.
What is Project Agreement?
Project Agreement is a tripartite agreement between the INGO, NGO (as the local partner), and the Council which outlines the areas of activities in which the INGO will assist the local NGOs, annual funding the INGO shall make in implementing the projects, the areas within Nepal where the projects will be implemented, role and responsibilities of each party to the Project Agreement.
What will happen when there are multiple local partners?
In such case, the Project Agreement will be concluded between the INGO and the Council.
Is it possible to carry out the project without a local partner?
No. INGO cannot implement its projects directly in Nepal without the involvement of local entities as partner organizations.
When shall the the Project Agreement be entered into?
The Project Agreement shall be entered into within three (3) months from the date of the signing of the General Agreement.
What is the term of Project Agreement?
The term of the Project Agreement will be linked to the duration of the project to be implemented under the Project Agreement.
What are the consequences of failing to enter into the Project Agreement?
Failure to enter into the Project Agreement even after the considered period of three months, provided by the Council after initially failing to enter into the same within the initial period of three months, will cause the invalidation of the General Agreement and may also lead to the cancellation of the work permit and visa of the INGOs representatives.
How many Project Agreements can be concluded under one General Agreement?
More than one Project Agreement can be concluded under one General Agreement. The number is not fixed.
What are the filing and reporting compliances to be met by the INGO?
The INGO is required to:
What are the consequences for non-compliance of the General and Project Agreements?
The non-compliance of the General and Project Agreements may result in the following consequences:
Is there any requirement on the allocation of the budget?
Yes. The budget shall be allocated in such a way that the administrative cost does not exceed twenty (20) percent of the budget.
Is it mandatory to open a bank account in a commercial bank in Nepal?
Yes. It is mandatory to have a bank account in one of the commercial banks of Nepal. Also, the INGO will have to deposit the amount of the Financial Commitment as committed under the General Agreement for the implementation of the project.
Disclaimer: This Pioneer Law Briefing may not necessarily deal with every important aspect of the subject matter. This Briefing is intended for general information only and not to be construed as legal or other advice.
The Government of Nepal has recently amended the minimum wage under Labor Act, 1992 (2048) (“Labor Act“) by publishing a notices in Nepal Gazette Part 5, Volume 63, Number 43, dated February 01, 2016 (2072-10-18) (“Gazette Notice“).
Separate minimum wage has been fixed for the workers / employees working in tea estate (“Tea Estate Minimum Wage“) and the workers / employees working in enterprises other than tea estate (“Other Enterprises Minimum Wage “).
The minimum wage is applicable to all workers / employees irrespective of status of the employment or the length of service. Section 21(4) of the Labor Act prohibits an employer from entering into an agreement with its employee for paying salary / wage and benefits that are less than what is prescribed by the Government of Nepal. Therefore, the prescribed minimum wage is mandatory.
A. Tea Estate Minimum Wages:
Different rates of minimum wage / salary have been prescribed for the period (1) commencing on the date of publication of the Gazette Notification (i.e. February 01, 2016) and ending on July 15, 2016 (2073-03-31) (“Current Fiscal Year“), and (2) commencing on July 16, 2016 (2073-04-01) and ending on July 15, 2017 (2074-03-31) (“Post Fiscal Year“).
1. Minimum salary / wage prescribed for the Current Fiscal Year
S.N | Nature of Payment | Minimum Monthly Salary/Wage | Remarks |
1 | Minimum Salary | Rs. 6,375/- | |
2 | Daily Wages | Rs. 228/- per day | |
3 | Daily Allowances for the workers working at Tea Refinery and Tea Factories and Sardar, Naike and Gatekeeper working in the Tea Estate | Rs 30 per day | Such allowances are not applicable to workers who are paid monthly salary. |
2. Minimum salary / wage prescribed for Post Fiscal Year
S.N | Nature of Payment | Minimum Monthly Salary/Wage | Remarks |
1 | Monthly Salary | Rs. 7,075/- | |
2 | Daily Wages | Rs. 253/- per day | |
3 | Daily Allowances for the workers working at Tea Refinery and Tea Factories and Sardar, Naike and Gatekeeper working in the Tea Estate | Rs 30 per day | Such allowances are not applicable to workers who are paid monthly salary. |
B. Other Enterprise Minimum Wage:
1. Minimum Wage
S.N | Nature of Payment | Minimum Monthly Salary/Wage | Dearness Allowances per Month | Total |
1 | Monthly Salary | Rs. 6,205/- | Rs. 3,495/- | Rs. 9,700/- |
2 | Daily Wages | Rs. 395/- | – | Rs. 395/- |
2.Effective Date
The Other Enterprise Minimum Wage is effective from the date of publication of the Gazette Notice (February 01, 2016).
Section 9C of the Foreign Exchange (Regulation) Act, 1962 (the “FERA”) specifically requires a person / entity residing in Nepal to comply with the provisions specified by Nepal Rastra Bank (the “Central Bank”) for any indirect or direct: (i) payment to a person residing outside Nepal, (ii) creation of any payment obligation to a person residing outside Nepal, or (iii) payment to any person on the instruction or on behalf of a person residing outside Nepal.
By way of a background, for payments made outside Nepal, the Central Bank has generally been authorizing Class “A” and Class “B” licensed banks and financial institutions to approve repatriation of such payments upon the submission of certain documents; this limit was increased to USD 10,000 from USD 6,000 vide Circular No. 578 dated August 08, 2012[1]. Such facilities are generally applicable to all payments made outside Nepal (including payment of royalties, services fees, etc.) but cannot be used to make capital account transactions (such as payments for acquisition of shares of a foreign entity).
For repatriation of an amount above USD 10,000, there was uncertainty as to whether prior approval of the Central Bank was required to be obtained for entering into any agreement, pursuant to which repatriation of more than USD 10,000 would have to be made. The general practice though was to obtain approval of the Central Bank at the time of repatriation of payments, and not at the time of entering into the agreement pursuant to which such payments are made. It may be relevant to note that pursuant to Circular No. 620 dated August 04, 2014[2], such limit for payment of service fees for- (A) lease / right to use of satellite service by telecom operators from foreign service providers and, (B) maintenance service from foreign service providers by airline operators, was capped at USD 100,000.
Revised Norms for Reparation of Payments for Services
The Central Bank came out with Circular 645 dated August 22, 2015 (the “Circular”[3]) pursuant to which the Central Bank has sought to clarify the norms for repatriation of payments for services obtained by Nepalese resident entity / person from foreign service providers. The Circular sets out the different procedure required to be followed for the repatriation of service fees based on certain monetary threshold applicable to the transaction. The procedure set out in the Circular is provided in the table below:
S.N | Monetary Threshold | Authorizing Entity | Documents to be Submitted |
1 | Up to USD 10,000 | Class “A” and “B” Banks and Financial Instructions | Documents as required by Class “A” and “B” licensed Banks and Financial Institutions, including relevant invoices, documents evidencing deposit of the withholding of tax (where applicable). |
2 | USD 10,000 and above (where the relevant regulatory authority can be identified) | Central Bank | In addition to the documents under (1) above: (A) Registration certificate of the remitting entity; (B) Tax clearance certificate; (C) Latest audit report; (D) Agreement with the service provider; (E) Copy of minutes of the meeting of the board of directors (such other corporate decision) of the remitting entity containing (a) details of the services provided by the foreign entity under the service agreement and agreeing to obtain foreign exchange for the payment of the same, and (b) decision to take responsibility in case of misuse of foreign exchange; (F) Documents evidencing fulfillment of the services under the service agreement; (G) Bank statement and documents from the employer / service recipient evidencing payment, where payments have been received from the employer / service recipient[4]; (H) Recommendation of the relevant regulatory authority. |
3 | USD 10,000 – USD 50,000(where the relevant regulatory authority cannot be identified) | Central bank | All of the documents under (2) above except (H).In case the remitting entity is a company / industry, the Office of the Companies Registrar (“OCR”) or the Department of Industries (“DOI”) will need to inform the Central Bank regarding whether or not it will be able to provide recommendation for the transaction. |
4 | Above USD 50,000 (where the relevant regulatory authority cannot be identified) | Central Bank (Prior approval required) | All of the documents under (2) above except (F) – (H). |
The Circular provides that, where a firm / company / organization has already availed of consultancy or other services form a foreign service provider prior to issuance of the Circular, and such entity has not obtained the recommendation of the relevant regulatory authority (or the relevant regulatory authority cannot be identified), then such entity is required to obtain the approval of the Central Bank for the repatriation of payments for such services, within 6 months from the date of the Circular.
While the purpose of the Circular appears to be to provide clarity to Nepalese companies for repatriation of service fees to foreign / multinational service providers, there are number of issues it raises. The same have been outlined below:
In case of repatriation of amount in excess of USD 10,000, would the recommendation of the relevant regulatory authority be required prior to entering into the service agreement, or at the time of repatriation of the payments under such service agreement?
The Circular clearly provides that prior approval of the Central Bank will be required for entering into service agreement pursuant to which service fees of more than USD 50,000 is proposed to be paid to the foreign service provider, in the event the relevant regulatory authority cannot be identified. Further, the Circular appears to also suggest that the requirement to obtain information from the DOI / OCR (on whether or not they can provide recommendation), where the service fees for the services is more than USD 10,000 but less than USD 50,000, and the relevant regulatory authority cannot be identified, is also not a prior requirement and is only applicable at the time of repatriation of the service fees.
However, where the service fees to be paid under a service contract is above USD 10,000 and where the relevant regulatory authority can be identified, it is not clear whether the recommendation from the relevant regulatory authority is required to be obtained prior to the entering of the service contract, or only at the time of repatriation of payments. What adds to the confusion is the fact that the Circular states that the recommendation of the relevant regulatory authority will be required in the event “a firm / company / organization registered in Nepal is required to (i) enter into an agreement with a foreign service provider pursuant to which an obligation to make payment of more than USD 10,000 arises, or (ii) is required to make payment of such amount to a foreign service provider”.
In case of the relevant regulatory authority cannot be identified, whether the OCR / DOI will provide information on whether or not it can provide its recommendation?
While in case of certain entities it may be apparent as to who the relevant regulatory authority is (for instance in case of hydropower company, the relevant regulatory authority is Department of Electricity Development with the specific authority to provide recommendation as contemplated by the Circular), in case of other entities (IT companies, as an example), it may not be possible to identify the relevant regulatory authority. In such cases, the Circular requires the OCR or the DOI to provide information to the Central Bank on whether or not they can provide recommendation which is not very practical as they do not have the authority to provide such recommendation. In absence of such authority, it may be challenging to even obtain a written statement of their inability to provide such recommendation.
What constitutes documents evidencing fulfillment of the services under the service agreement?
As discussed in the table above, the Nepalese service recipient company is required to submit documents evidencing fulfillment of services under the service agreement to the authorized banks and financial institution for the repatriation of service fees. It is however not clear what would constitute fulfillment of services under the service agreement. Whether a written statement of the service recipient would suffice, or the actual documents submitted by the service provider in connection with rendering of the services (such as project report, etc.) which may contain confidential or commercially sensitive information, would also have to be submitted. Further, since the requirement is to submit documents evidencing fulfillment of services, it is not clear how payment of advance or payment in installments over the course of the term of the service agreement, would be dealt with.
[1] http://www.nrb.org.np/fxm/circulars/List_of_Circular–578.pdf
[2] http://www.nrb.org.np/fxm/circulars/List_of_Circular–620.pdf
[3] http://www.nrb.org.np/fxm/circulars/List_of_Circular–645.pdf
[4] This requirement under the Circular is not clear.
1.General Information
2.Software Information
Nepal Rastra Bank, Central Bank of Nepal (NRB) has issued a notice in the national daily on November 12, 2014 regarding the valuation methodology of the sale proceeds of a non-listed company (the “NRB Notice”). The NRB Notice is applicable to the repatriation of the sale proceeds by the foreign investor.
NRB Notice provides that the share price of the non-listed company should be determined on the basis of the fair value amount of the assets and liabilities pursuant to the Nepal Financial Reporting Standard 3: Business Considerations.
The notice can be found in http://www.nrb.org.np/fxm/notices/investment_in_nepal.pdf. The notice is in Nepali language.
The Unofficial English translation of the said NRB Notice is as follows:
NEPAL RASTRA BANK
Foreign Exchange Management Department
Baluwatar, Kathmandu
NOTICE
This notice has been published for the information of all the concerned relating to repatriation of the proceeds arising out of sale of shares or investments of the unlisted companies where such investments have been made after receiving approval from the concerned body of the Government of Nepal and this Bank. It is hereby notified for the purpose of Sub-section (1), (2) and (3) of Section 10C of Foreign Exchange (Regulation) Act 1962 (2019) that this Bank will provide foreign exchange facility for the repatriation of such proceeds to the foreign investors as derived from the assets of the organization and based on the financial statements audited and certified by the recognized auditor as follows:
Nepal has taken a step further in the area of making its judicial outreach to cross-broader issues by promulgating the Mutual Legal Assistance Act, 2014 (2070) (“MULA”). The MULA deals with the process and requirements of providing and obtaining legal assistance between Nepal and any other foreign country on certain legal matters. Section 5 of the MULA outlines the scope of legal assistance that the government of Nepal can seek from any foreign country or the foreign country can seek such assistance from the government of Nepal. Pursuant to the Section 5 of the MULA the Nepal government and the foreign country can request to each other inter alia for the legal assistance to (a) examine evidences, (b) serve notice, (c) carry out investigation, (d) attach the title of any property, (e) presenting a person, (f) enforcement of judgment.
Section 3 of MULA imposes bilateral treaty and reciprocity requirement for enforcement of judgment and providing of legal assistance. Section 3 provides a general rule that legal assistance can be provided to a foreign country on the basis of a bilateral treaty or on the basis of reciprocity commitment from the foreign country. Section 3, however, requires bilateral treaty as a condition for enforcement of foreign judgment in Nepal.
Section 4 of the MULA also excludes certain matters from the scope of mutual legal assistance. Pursuant to the Section 4 of the MULA (a) the civil case the total claim amount of which is below Rupees one hundred thousand, (b) the criminal offence the punishment for which is less than one year in terms of imprisonment or Rupees fifty thousand in terms of fine are not subject to the mutual legal assistance.
We are not aware of any treaty or bilateral arrangement entered by Nepal under MULA so far.
1. By using the power conferred by Section 58 of the Labor Act, 2017 (2074), the Ministry of Labor, Employment, and Social Security has published a notice in Nepal Gazette on October 05, 2018 (Asoj 19, 2075) providing the list of works subject to outsourcing.
2. The list of work for which the employees can be availed from outsourcing companies.
S. No. | Category of Services | List of Works |
1. | Security Services |
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2. | Facilitating Services |
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3. | Business Support Services |
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4. | Domestic Help Services |
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3. Conditions to be complied with for engaging outsources employees:
3.1. The employer cannot avail employees from Outsourcing Companies for the main work specified while establishing business or the work directly related to the main work.
3.2. The Outsourcing Companies that are currently in operation should obtain license from the Department of Labor and Occupational Safety or related Office of Labor and Employment pursuant to Chapter 11 of Labor Act, 2017 (2074) and Chapter 6 of Labor Rules, 2018 (2075) within Poush 7, 2075 (December 22, 2018).
3.3. While inviting or submitting any proposal or bids or entering into agreement for availing employees through outsourcing agencies pursuant to Public Procurement Act, 2063 the employer cannot enter into an agreement with any organization that has not obtained a license for outsourcing under the Labor Act.
3.4. The following matters should be covered while inviting or submitting any proposal or bids or entering into agreement for availing employees through outsourcing agencies pursuant to Public Procurement Act, 2063: (i) minimum remuneration prescribed by Government of Nepal (ii) Provident Fund (iii) Gratuity (iv) Social Security Schemes or Medical and Accidental Insurance until the Social Security Scheme in place (v) Festival Allowance (vi) Home Leave and Sick Leave (vii) Overtime, Sick Leave, Maternity Leave, Maternity Care Leave, Mourning Leave (viii) Other liabilities as per the prevailing laws.
4. The employer is required to conduct labor audit and submit a report of the same to the Department of Labor and Occupational Safety or related Office of Labor and Employment at the end of the month of Poush every year.
5. Other provisions shall be as provided by Labor Act, 2017 (2074) and Labor Regulations, 2018 (2075) and other prevailing laws.
**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.
1. The Ministry of Labor, Employment, and Social Security (Ministry) has published a notice in Nepal Gazette on Nov.12, 2018 (2075-07-26) (“Gazette Notice“) under Section 19 of the Social Security Act, 2017 (2074) (Social Security Act).
2. Section 19 of the Social Security Act requires the Ministry to specify the employer operating industries, service, business or transaction of specified nature and sector to be enrolled with the Social Security Fund (“SSF“). The timeline should also be specified in such gazette notice as provided in Section 20 of the Social Security Act.
3. The Gazette Notice however, does not specify the sector or nature of industry, business, service or transaction subject to the enrollment with SSF. It seems that all the employers are required to be registered with the SSF as per the Gazette Notice (However, this will be reconfirmed under the Social Security Regulations, 2018 (2075) which has recently been approved by the Government of Nepal and yet to be made public).
4. The Gazette Notice has simply provided the timeline for the employer to be enrolled with SSF. The timeline varies depending upon the geographical location. Main obligations of employers under the Gazette Notice is (a) to be enrolled with SSF within the timeline specified below, and (b) enlist their employees within 3 months from the date of their enrollment with SSF.
Timeline for Employer to be Enrolled with SSF
S.N | Employers by Region (Location) | Timeline (within 3 months from the given date) |
1 | Employers and Outsourcing Companies within Kathmandu Valley | Nov 22, 2018 (Mangshir 6, 2075) |
2 | Employers of Province Number 3 (except Kathmandu Valley) | Dec 1, 2018 (Mangshir 15, 2075) |
3 | Employers of Province Number 1 | Dec 16, 2018 (Poush 1, 2075) |
4 | Employers of Gandaki Province and Province Number 5 | Dec 30, 2018 (Poush 15, 2075) |
5 | Employers of Karnali and Far western Province | Jan 29, 2019 (Magh 15, 2075) |
5. SSF provides online system for submission of application for the enrollment.
**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.
The revised Minimum remuneration/wages of the employees prescribed by the Government is as below:
The Government of Nepal, Ministry of Labor, Employment and Social Security has revised the minimum remuneration/wages of the employees other than those working in the tea estate under Section 106 Sub Section 3 of the Labor Act, 2017 (2074) by publishing a Nepal Gazette on May 03, 2021 (2078-01-20)