As an extension of our endeavor of knowledge sharing with the legal fraternity and concerned stakeholders, Pioneer Law Associates (“PLA”) shares resources pertaining to various issues concerning arbitration in Nepal. The following brief is prepared in relation to ‘Power of the arbitrator(s) to determine its own jurisdiction’.
The power of the arbitral tribunal to rule on the question of whether it has jurisdiction before any intervention by national courts is known as the principle of kompetenz-kompetenz. It is a well-established principle in international arbitration and is also accepted in many national laws. The principle involves two types of effects: (a) the positive effect: arbitral tribunal has the power to consider and decide jurisdictional objections and (b) the negative effect: national courts lack authority to determine jurisdictional objections at least until the arbitral tribunal renders an award on jurisdictional issue. The negative effects of the principle may be wholly or partially rejected by: (a) having contrary agreement between the parties to limit the power of arbitral tribunal to rules on its own jurisdiction and (b) permitting national courts to hear jurisdictional issues on an interlocutory basis.
The Arbitration Act, 1999 (2055) (“Arbitration Act”) of Nepal recognizes the principle of kompetenz-kompetenz. Under Section 16 of the Arbitration Act, the arbitral tribunal/arbitrator is competent to rule on its own jurisdiction, including with regards to the validity or effectiveness of the contract before the commencement of the proceedings. Any unsatisfied party may file an appeal with the High Court within 30 days from the date of decision/award of arbitral tribunal, and such decision rendered by the High Court shall be final.
As per Arbitration Act, jurisdictional objections are time barred in case brought after the expiry of time limit for submitting objections i.e., within 30 days from the date of receipt of claim (unless provided otherwise in the agreement). The party cannot be deprived of its right to claim jurisdictional challenges merely due to the reasons of having appointed an arbitrator on its behalf or participated in or agreed for the appointment of arbitrator. Importantly, an appeal made to High Court will not prejudice the power of arbitrator to continue the proceedings and render the award before the petition is disposed off by the court.
Please click here to read the full article by our Consultant Nida Doon Malla published in Business 3600
Though the arbitral tribunal is generally selected based on their experience or expertise in a field relevant to the subject matter of the dispute, oftentimes the arbitral tribunal may not be fully equipped to assess all the facets of the issue. This is especially true in disputes involving complex issues or technical factors.
In such instances, expert witnesses are appointed by either parties to the dispute or by the arbitral tribunal. Expert witnesses are individuals with specialized training and expertise in particular issues relevant to the dispute. Their expert opinion provides assistance the arbitral tribunal during their decision making process. In international construction arbitrations for example, one or several expert witnesses may be appointed to give testimony on topics such as delay, quantum, geotechnics, defects or forensic accounting.
Although the expert opinion has persuasive value, the decision making power ultimately rests with the arbitral tribunal. The expert opinion is simply a means of evidence which is not intended to favor any single party and is expected to be based on factual evidence and technical expertise. Even if the expert witness has been appointed by the parties, they are expected to perform an independent assessment of the case and their ultimate duty is towards the arbitral tribunal. The more objective and independent the expert appears, the more credible she or he is and the more weight their expert opinion would have.
If it is felt that expert witnesses would be required in an arbitration, it may be wise to identify and appoint an expert as soon as possible. This would allow the us to identify and understand the key technical issues in the dispute, assess the client’s chances of success and plead the client’s case from the start in the knowledge that the expert’s evidence will be fully supportive.
Compendium of Landmark Arbitration Case Laws in Nepal
Pioneer Law Associates has created this compendium of case law
|S.N.||CASE DETAIL AND CITATION||RELEVANT LAWS||PRINCIPLE(S) ESTABLISHED
(inter alia, as applicable)
|1.||Department of Roads, Babarmahal v. Arbitral Tribunal comprising of Mr. Sureshman Shrestha, Ms. Kamala Upreti and Mr. Narendra Kumar Shrestha & ors., 2077
Decision No. 10586
Arbitration Act, 2055
Evidence Act, 2031
|The Hon’ble Supreme Court held that the Hon’ble Appellate Court has the authority to invalidate an arbitral award and revert the matter back to arbitration only under the circumstances given under Section 30(2) of the Arbitration Act, 2055.
[Para 6, and 7]
|2.||Yakshyadhoj Karki v. High Court Patan and others, 2076
Decision No. 10369
|Arbitration Act, 2055
Public Procurement Act, 2063
Contract Act, 2056
|The Hon’ble Supreme Court held that:
1. When an arbitration clause is included in a contract, the same is severable from the main contract and remains enforceable until disputes pertaining to the contract or performance of the contract have been resolved.
2. Behavior of one party, general communications or one-sided offer cannot be deemed to have amended the contract.
3. Where the parties have not agreed to resolve disputes through arbitration, Section 3 of the Arbitration Act, 2055 in relation to resolution of disputes through arbitration would not be applicable.
[Para 12, and16]
|3.||Adv. Devendra Pradhan (on behalf of Hanil Engeeneering & Construction Co. Ltd.) v. Appellate Court, Patan, 2075
Decision No. 10138
|Sections 34(2)(a) and (b); and Section 16(3)
Arbitration Act, 2055
Article V.1.b and Article V.1.d of United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), 1958
|The Hon’ble Supreme Court held that:
1. A dispute resolution clause is considered to be a separate contractual agreement in terms of the doctrine of severability, and the arbitration clause is not affected by the status of the main contract.
2. The parties are free to choose separate substantive and procedural laws for the purpose of the arbitration clause. If the parties choose the law of one country for substantive part of a contract, it shall not be understood that the parties have chosen the law of the same country for procedural and appointment related matters.
2. Where the contract provides that disputes shall be settled through amicable settlement, the parties must attempt to amicably resolve the dispute as envisioned by the contract.
3. Initiating arbitration proceeding or giving of an award overlooking the provision requiring the parties to first attempt dispute resolution through amicable settlement is contrary to the intention of the contract in terms of which the parties were to first attempt amicable settlement. (Note: This is in relation to multi-tiered dispute resolution clauses i.e. dispute resolution clauses that stipulate recourse to one or more alternative dispute resolution methods before arbitration can be initiated)
4. Separate notices should be served for separate matters as prescribed by the law. The arbitral award shall lose its validity if the notice requirements have not been adequately fulfilled. If one of the parties has not been given sufficient opportunity to be heard, the same is contrary to the principles of natural justice and the resultant arbitral award is not enforceable.
[Para 3, 4, 5, 10, 11, 12, 13, 14, and 17]
|4.||Yashasvi Shamsher JBR v. Vaiwers Developers Pvt. Ltd., 2074
Decision No. 9847
|Section 3, Arbitration Act
|The Court stated that an Arbitration Agreement is deemed to be constituted in the following situations:
1. agreement between the parties to resolve dispute through arbitration as per Section 3(a) of the Arbitration Act, 2055 within the contract, or;
2. through a separate agreement, or;
3. when parties exchange written communications deciding to submit the dispute to arbitration, or;
4. when Respondent submits its Statement of Defense in response to Statement of Claim submitted by Claimant without protesting arbitration as the dispute settlement mechanism.
The Hon’ble Supreme Court also held that in the absence of the above-mentioned conditions, an agreement between parties to resolve any dispute themselves cannot be construed to mean that the parties had an intention to resolve the dispute through arbitration.
|5.||Raju K.C. on behalf of Nepal Air Service Corporation v. Appellate Court Patan, 2067
Decision No. 8523
|Sections 7(3), 29(1), 30(1), and 42((2) and (3)) Arbitration Act, 2055
Chapter on Court Management, No. 193, 208
Muluki Ain, 2020
|The Hon’ble Supreme Court held that if any party refuses to participate in the arbitration proceeding despite receiving notice of the same, such party cannot approach the Hon’ble Appellate Court in order to invalidate the arbitral award on the ground of non-issuance of notice.
|6.|| Bhanu Prasad Acharya on behalf of Nepal
Government, Ministry of Finance V.
Damodar Ropeways and Construction
Company et al., 2067
Decision No. 8368
|Sections 19, and 21(2)
Arbitration Act, 2038
|The Hon’ble Supreme Court, inter alia, held the following:
1. Validity of an arbitral award cannot be determined in the same manner as other cases. In terms of factual interpretation, the arbitral tribunal is to be considered well informed and knowledgeable.
2. The Hon’ble Supreme Court needs to conduct judicial examination of the arbitral award and decision of the Hon’ble Appellate Court to ascertain if the conditions under Section 21(2) of the Arbitration Act, 2038 have been met.
3. When both parties have clearly established and agreed on certain aspects, the decision maker should not create a dispute out of such matters.
4. The process of dispute resolution through arbitration is an informal and alternate process within the larger judicial process. An arbitral award must be supported by established facts, corroborating evidence and the written language of the contract. Interpretation based on prevalent laws and established principles should only be done when the contract is unclear or silent.
[Para 1, 7, 15, and 18]
|7.||Bikram Pandey on behalf of Kalika, Kanchanjangha JV. V. Ministry of Physical Planning and Construction, Department of Road et al., 2067
Decision No. 8437
|Sections 5, 6(4), 7, and 7(1), 7(2)
Arbitration Act, 2055
|The Hon’ble Supreme Court held the following:
1. The UNCITRAL Rules become applicable in a manner similar to provisions of a contract when parties have opted to resolve disputes through arbitration in accordance with the UNCITRAL Rules, and these Rules are only applicable to the arbitration proceeding.
2. The UNCITRAL Rules do not apply in a manner similar to laws and the scope of the same can be restricted by the parties through mutual consent.
3. The provision of the UNCITRAL Rules whereby a party may request the secretary general of the Permanent Court of Arbitration to designate the appointing authority is not a restrictive provision. The parties are free to approach the national Hon’ble Appellate Court pursuant to the national law for appointment of arbitrators.
[Para 2, 3, and 5]
|8.||Department of Road et al. V. Waiba Construction Co. Pvt. Ltd., Samakhusi, Kathmandu et al., 2067
Decision No. 8479
|Sections 30(1)(c) and(d), and 32 of the
Arbitration Act, 2055
|The Hon’ble Supreme Court held that where the dispute is to be resolved through arbitration, the court cannot enter into factual questions, consider evidence and provide a decision in a manner similar to a normal case. Further, the Hon’ble Supreme Court also held that where there has not been any grave error in law, the court cannot invalidate an arbitral award.
|9.||Manjit Singh on behalf of Bakhtawar Singh V. Kankai Irrigation Project, Irrigation Department et al., 2067
Decision No. 8397
|Section 11(2), and 21(2)
Arbitration Act, 2038
Arbitration Act, 2055
No. 192, Chapter on Court Management.
Muluki Ain, 2020
|The Hon’ble Supreme Court held that laws of Nepal are not substituted by applicable rules in relation to international commercial disputes and that the provisions of Arbitration Act, 2038 would remain applicable. Further, it was held that the Hon’ble Appellate Court, in arbitration matters derives its authority from Section 21(2).
[Para 4, and 5]
|10.||Umakant Jha V. Appellate Court, Patan, 2066
Decision No. 8156
|Sections 3, 3(2), 30(1), and 30(3)
Arbitration Act, 2055
|The Hon’ble Supreme Court held that the Hon’ble Appellate Court only has a correctional jurisdiction pursuant to Section 30 of the Arbitration Act, 2055.
The Hon’ble Supreme Court also held that the question of limitation period is purely a legal question and can arise at any stage.
[Para 12, and13]
|11.||Anil Goyal on behalf of Varun Beverage Pvt. Ltd. V. National Marketing and Sales Pvt. Ltd. et al., 2066
Decision No. 8097
|Section 3, and 21(2)
Arbitration Act, 2038
|The Hon’ble Supreme Court held that the decision of the arbitral tribunal in relation to an agreement which is connected to and cannot exist without the main contract, does not exceed the jurisdiction of the tribunal.
Further, the Hon’ble Supreme Court also held that when a party has already implemented the arbitral award and the decision of the Hon’ble Appellate Court upholding such award, then the same cannot be challenged through writ jurisdiction of the Hon’ble Supreme Court.
[Para 4, 5, and 6]
|12.|| Krishna Chandra Jha V. Dinesh Bhakta
Shrestha on behalf of Sumit Prakash
Asia Pvt. Ltd., 2066
Decision No. 8128
|Section 9, and 21
Arbitration Act, 2038
|The Hon’ble Supreme Court held that the arbitral tribunal cannot decide on matters outside the conditions and provisions of the contract and that the tribunal does not have any discretionary powers.
|13.|| Krishi Samagri Co. Ltd., Head Office, Kathmandu V. Appellate Court, Patan, 2064
Decision No. 7905
|Section 21(2) and (3) of the
Arbitration Act, 2038
|The Hon’ble Supreme Court held that the intention of the parties at the time of the contract should be interpreted through the contract itself. The contract cannot be interpreted outside the conditions mentioned in the contract.
However, if the dispute pertains to any condition not specifically mentioned in the contract, the contract and intention of the parties may be interpreted in the context of the contract document, previous correspondences, general principles of contract law, international practice and previous practice of the court.
[Para 15, and 20]
|14.||National Construction Company, Nepal V. Appellate Court, Patan, 2065
Decision No. 7933
|Section 6(1), 7(1), 7(3), and 16 Arbitration Act, 2055
|The Hon’ble Supreme Court held the following:
1. When an arbitration clause is included, the contract may also provide for the procedure for appointment of arbitrators, number of arbitrators and other similar conditions. However, when the contract is silent on these issues, or if the parties are not able to appoint arbitrator/s as per the procedure provided for by the parties in the contract, the same may be done by the Hon’ble Appellate Court pursuant to Section 7 of the Arbitration Act, 2055
2. When the parties have agreed to resolve disputes through arbitration, one party cannot refuse to appoint arbitrators and prevent arbitrators from being appointed by the other party.
3. When the contract contains a multi-tiered dispute resolution clause, the Hon’ble Appellate Court, in the role of appointing authority pursuant to Section 7 of the Arbitration Act, 2055, must confirm whether the dispute resolution mechanisms prior to arbitration have been invoked.
4. Even when an agreement has been terminated, the provision to resolve disputes arising from such an agreement through arbitration still survives. The provision to resolve disputes through arbitration may not be frustrated by any party for any reason.
[Para 3, 4, 8, 11, 13]
|15.||Rajendraman Sherchan on behalf of Vijay Construction Pvt. Ltd. V. Appellate Court, Patan, 2064
Decision No. 7823
|Sections 6(1) & 7(1)
Arbitration Act, 2055
|The Hon’ble Supreme Court held that when a party has not complied with Section 6(1) of the Arbitration Act, 2055, which requires the parties to initiate appointment of arbitrators within three months of reason to commence arbitration arising, unless otherwise provided by the contract, the procedure for appointment of arbitrators through the court pursuant to Section 7(1) of the Arbitration Act, 2055 cannot be initiated.
The Hon’ble Supreme Court also held that the question of limitation period is a legal question and there is no legal provision which restricts the Hon’ble Appellate Court from examining the same.
[Para 9, 10]
|16.||Anil Kumar Pokhrel on behalf of Sunsari Morang Irrigation Development Planning/Project V. District Court, Kathmandu, 2064
Decision No. 7836
|Sections 30, 31 & 32
Arbitration Act, 2055
|The Hon’ble Supreme Court held that when an arbitral award is sought to be invalidated at the court, the limitation period for implementation of arbitral award pursuant to Section 32 of the Arbitration Act, 2055 only begins after the final judgment on the invalidation petition has been rendered.
[Para 17, 18]
|17.||Suman Prasad Sharma on behalf of Melamchi Khane Pani Bikash Samiti V. Lasunaula Khimti Construction, 2063
Decision No. 7699
2055; Rule 14(3),
Regulation, 2059; Chapter on
Muluki Ain, 2020
|The Hon’ble Supreme Court held that when the Petitioner is within the limitation period prescribed by law, the Petitioner cannot be denied justice based on the fact that an incorrect law was cited by the petitioner.
|18.||Rakesh Kumar on behalf of The Oriental Insurance Company Ltd. V. Ramkrishna Rawal, 2066
Decision No. 8078
Arbitration Act, 2038
|The Hon’ble Supreme Court held that where parties have agreed to resolve disputes through arbitration and oust the jurisdiction of the court, the court does not have the jurisdiction to hear such disputes. Under such circumstances, if a petition is filed at the court, then the same is contrary to provisions of the contract, and the court does not have jurisdiction to hear the same.
[Para 7, 9]
|19.||Aamodanand Mishra V. Appellate Court, Patan, 2062
Decision No. 7546
Arbitration Act, 2055
|The Hon’ble Supreme Court held that if a contract requires disputes to be resolved through adjudication prior to arbitration and if an adjudicator cannot be appointed by the parties as per the contract, it cannot be deemed that the Arbitration Act, 2055 is silent on such matters and the right of the parties to resolve the dispute through arbitration cannot be deemed frustrated.
|20.|| Yadav Prasad Pokhrel on behalf of The Bridgeline Corporation V. Appellate Court, Patan, 2062
Decision No. 7508
Arbitration Act, 2038
Administration of Justice Act, 2048
The Constitution of Kingdom of Nepal, 2047
|The Hon’ble Supreme Court held the following:
1. Judicial review is a constitutionally guaranteed remedy and that the Hon’ble Supreme Court has a duty to review decisions which are contrary to the principles of law and established precedents.
2. Pursuant to Article 88(2) of the Constitution of Nepal, 2047 (B.S.), if there is no effective alternate remedy, disputes may be submitted to the writ jurisdiction of the Hon’ble Supreme Court.
3. Pursuant to the authority granted by Section 21 of the Arbitration Act, 2038 (B.S.), when an arbitral award is invalidated by the Hon’ble Appellate Court, the Hon’ble Appellate Court may either revert the dispute back to the same arbitral tribunal or to a different arbitral tribunal and direct that the dispute be resolved through arbitration. Other than this, the Hon’ble Appellate Court may not give any final decision on the matter.
[Para 37, 45, 48]
|21.||Chandra Kumar Golchha V. Patan Hon’ble Appellate Court, 2062
Decision No. 7516
|Sections 6, 7 and 16, Arbitration Act;
2055, Section 74,
2056 and Article 84, Constitution of
|The Hon’ble Supreme Court held that the Hon’ble Appellate Court must limit itself within the subject matter of appointment of arbitrators in petitions submitted to the Hon’ble Appellate Court pursuant to Section 7 of the Arbitration Act, 2055 which provides the mechanism for appointment of arbitrators by the Hon’ble Appellate Court.
|22.||Krishna Chandra Jha on behalf of Krishi Samagri Corporation V. Dinesh Bhakta Shrestha on behalf of Sumit Prakash Asia, 2059
Decision No. 7089
|Section 9, 21(2)
Arbitration Act, 2038
Section 8, 9, 12
Administration of Justice Act, 2048
|The Hon’ble Supreme Court held the following:
1. The decision to resolve disputes through alternate dispute resolution practices is based on party autonomy and the arbitral award is final and binding on the parties. Even if the arbitral award is erroneous, the same can only be invalidated if the exceptions provided by law are applicable.
2. The Hon’ble Appellate Court may at the most invalidate the arbitral award and revert the dispute to arbitration if any of the conditions pursuant to Section 21(2) of the Arbitration Act, 2038 are satisfied.
3. There is no legal provision enabling the Hon’ble Supreme Court to hear appeal or revision petitions regarding decisions of the Hon’ble Appellate Court made pursuant to Section 21(2) of the Arbitration Act, 2038.
4. Previous rulings of the joint bench of the Hon’ble Supreme Court whereby such appellate and revision petitions were allowed (Decision No. 6110 and Writ No. 3302 of 2056 B.S.) were overruled.
5. If no alternate remedies are available in relation to challenging the decisions of Hon’ble Appellate Court in relation to Section 21 of the Arbitration Act, 2038 (B.S.), writ jurisdiction of the Hon’ble Supreme Court may be exercised.
[Para 16, 17, 18, 20, 21]
|23.|| Governor Harishankhar Tripathi et al. V. Rajendraman Sherchan on behalf of Vijay
Construction Pvt. Ltd., 2052
Decision No. 6110
|Section 5(2), 21 (2)
Arbitration Act, 2038
|The Hon’ble Supreme Court held the following:
1. The jurisdiction of the Hon’ble Appellate Court is restricted by Section 21(2) of the Arbitration Act, 2038. The Hon’ble Appellate Court cannot go beyond this limited jurisdiction and decide on factual matters considered by the arbitral tribunal.
2. The Arbitration Act, 2038 is silent in terms of how parties to arbitration should present their claim and response before the tribunal. In such a situation the parties may themselves decide on a specific procedure through mutual agreement. When the parties do not decide on such a procedure, the Arbitration Act, 2038 does not bar the tribunal from deciding upon such procedure.
3. Where the parties have contractually agreed to resolve disputes through arbitration, refusal of one of the parties to do the same is a violation of the contractual agreement.
4. Arbitral tribunals are barred from deciding on issues other than those for which the tribunal is appointed, unless parties to the arbitration provide their mutual consent.
[Para 12, 13, 14, 17]
|24.||Faruk Solan on behalf of National Project Construction Corporation V. Secretary of the Water Resource Ministry et al., 2052
Decision No. 5088
|Article 23, 88(2)
Constitution of Kingdom of Nepal, 2047
Arbitration Act, 2038
|The Hon’ble Supreme Court held that when parties have mutually agreed to include an arbitration clause in the contract, such parties are required to resolve any dispute arising pursuant to the contract through arbitration.
|25.||Bakhtawar Singh Dhan on behalf of B.S.Dhan And Company V. HMG Kankai
Development Board, 2048
Decision No. 4296
|Section 5, 21
Arbitration Act, 2038
No. 12, Chapter on Court Management
Muluki Ain, 2020
|The Hon’ble Supreme Court held that arbitration can be commenced even without written consent between the parties to appoint arbitrators as there is no legal provision to that effect.
|26.||Poshan Nath Nepal on behalf of Water Supply and Sewerage Committee V. Western Regional Court, 2044
Decision No. 3111
Arbitration Act, 2038
Administration of Justice Act, 2031
|The Hon’ble Supreme Court held that there is no provision for appeal with regard to an order for appointment of arbitrator pursuant to Section 5(2) of the Arbitration Act, 2038 and that such orders are final.
Foreign Investment and Transfer of Technology Act 2019 (the “FITTA” or “Act”) was passed by the Parliament and received assent by the President on 27 March 2019. The Act was published in the Nepal Gazette and has become effective from 27 March 2019. However, provision on venture capital fund and issuance of securities in foreign market would be effective after a notification has been published by Government of Nepal (the “GON”). The FITTA repealed the Foreign Investment and Transfer of Technology Act 1992 (the “Previous Act”) and aims to bring reform in the regime of foreign investment in Nepal. Moreover, this piece of legislation was passed together with Public Private Partnership and Investment Act 2019 (the “PPPI Act”). The FITTA has brought various changes in the foreign investment regime in Nepal. The major changes brought by the FITTA have been briefly set out below:
1. Applicability of the FITTA
1.1. The reading of the FITTA needs to be done together with PPPI Act, Industrial Enterprises Act, 2016 (the “IEA”) as well as Foreign Exchange Regulation Act 1962 (the “FERA”). For the full implementation of the FITTA, regulations need to be made for both the FITTA and the PPPI Act. Investment in the infrastructure project to be developed under public private partnership modality or with private investment as specified under the PPPI Act, will require approval from Investment Board of Nepal (the “IBN”). Investment in and development of such projects are regulated under the PPPI Act.
1.2. The FITTA will not be applicable in foreign investment in certain sectors regulated by separate legislations, for example, foreign investment in the banking sector, as it is regulated by Nepal Rastra Bank, the Central Bank of Nepal (the “NRB”).
1.3. The FITTA provides that the minimum cap for equity amount of foreign investment would be as prescribed. The GON has prescribed minimum investment of NPR 50 million by each foreign investor through Gazette Notification on May 29, 2019.
2. Foreign Investment and its forms
2.1. Foreign Investor: The definition of foreign investor has included Non-resident Nepali along with foreign person, firm, company, government as well as international institutions. Thus, investment made by a Non-resident Nepali will also be regarded as foreign investment under the current regime.
2.2. Forms of foreign investment: The Previous Act limited the form of foreign investment to (i) share investment in foreign currency, (ii) re-investment of dividends and (iii) investment made in the form of loan or loan facilities. In contrast, by listing the following investment as foreign investment, the FITTA has broaden the scope of foreign investment:
2.3. Positive List and Negative List: Foreign investment is only allowed in industrial activities and not in trading activities. Moreover, it is only permissible in sectors that are (i) classified as an industry under IEA (the “Positive List”) and (ii) sectors that are not included in the restricted sectors provided under Schedule of the FITTA (the “Negative List”). So, even if a sector is not included in the Negative List, if it is not classified as an industry under the Positive List then foreign investment in such sector is not allowed. Moreover, the FITTA provides for more restrictive regime than the Previous Act as business of mass communication, travel agency, primary sectors of agricultural productions and others have been added in the Negative List. Besides, the Negative List is applicable in the case of investment and loan, however, it is not applicable in the case of transfer of technology in industry set up with local investment.
2.4. Maximum limit of foreign investment: FITTA provides that the maximum limit of the amount and proportion of foreign investment is not be determined, except in the following two cases:
3. Foreign Loan Investment
3.1. Permissibility: The FITTA fails to define what amounts to foreign loan investment. An industry with foreign investment can take loan from foreign financial institution by way of project loan agreement or project financing agreement. This is a restrictive regime and there is lack of clarity as to whether foreign loan also covers shareholder loan. Also, it lacks clarity on whether industries without foreign investment can take foreign loan.
3.2. Foreign Loan: The FITTA permits- (a) public company, or (b) corporate body (which is allowed to issue securities) to obtain loan by issuing its debentures, bond or other securities in foreign stock exchange market.
3.3. Escrow Agreement: A foreign investor for the purpose of their foreign investment can enter into a tripartite escrow agreement between their partner investor or another foreign investor and any commercial bank certified by NRB or Infrastructure Development Bank. As per the separate circular issued by NRB, the bank as a party to the escrow agreement acts as an agent for the parties and will also have right of enforcement. However, it appears that the bank has been treated as a trustee rather than agent with wider enforcement power under the FITTA.
3.4. Self-help remedy: A foreign investor providing loan to an industry or company against mortgage or collateral of movable or immovable property can auction such property for non-payment of loan for recovering the amount. However, such action can be exercised against an industry or company and not against a person.
4. Technology Transfer
4.1. Coverage: The definition of technology transfer is same as provided under the Previous Act which includes Patent, Design, Trademark, Goodwill, Technical know-how, Formula, Process, User’s License, know-how sharing, etc.
4.2. Requirements and approval: A foreign investor can invest through technology transfer in any industry incorporated in Nepal. The terms of technology transfer are to be in accordance to agreement related Technology Transfer. Such agreement needs to be approved from the approving authority for foreign investment.
4.3. Cap on royalty: The amount exceeding royalty as affixed in technology transfer agreement cannot be repatriated. Unlike the Previous Act, the FITTA provides that amount of royalty or net profit for use of trademark cannot be more than prescribed percentage except for 100% export liquor industry.
5. Approval based regime for foreign investment
5.1. Automatic route: The FITTA has introduced automatic route in relation to foreign investment approval. Even though the FITTA provides automatic route, approval based regime will be followed till provision on automatic route is given effect by making regulation.
5.2. Monetary jurisdiction: The FITTA provides that foreign investment amount up to NPR 6 Billion is under the jurisdiction of Department of Industry (the “DOI”) and above NPR 6 Billion is under the jurisdiction of IBN. Projects that come under PPPI Act will be regulated under the PPPI Act.
5.3. Approving agencies: The table below provides for the type of foreign investment and approving authority for approval of foreign investment:
|Type of foreign investment||Approving Authority|
||Share investment||DOI, NRB|
||Lease finance||DOI, NRB|
||Venture capital fund||Securities Board of Nepal (the “SEBON”), DOI, NRB|
||Issuance of securities in foreign exchange||SEBON, NRB|
||Foreign loan from foreign financial institution||Ministry of Industry, Commerce and Supply (Recommendation), NRB|
||Technology Transfer||DOI, NRB|
Even though the FITTA provides that NRB has to be notified once the approving authority has approved, an approval of NRB is still a requirement under FERA and NRB Circular. Thus, there is no clarity on whether notification in itself would suffice until the provisions of FERA and NRB Circular are amended. The provision of the FERA and NRB circular will need to be amended in the spirit of the FITTA.
5.4. Change in ownership structure of company with foreign investment: If any change occurs in the ownership structure of any company having foreign investment due to transfer of its shares, assets or financial instruments within or outside Nepal, such transaction has to be recorded in the concerned authority approving foreign investment, i.e. DOI or IBN. The FITTA requires such authority to record the transaction only after payment of the applicable tax arising out of such transaction.
5.5. Information on change in ownership structure: If there occurs change in ownership structure of a company in Nepal due to change in ownership structure of a holding company outside then such needs to be notified to the approving authority.
5.6. Timeline for bringing foreign investment: It is a requirement under FITTA that the foreign investment amount has to be brought in Nepal within the prescribed period or within the period of maximum 2 years. Failure to comply with such requirement without any specific reason can result into ineffectiveness of foreign investment approval.
6. Concession and facilities for industries with foreign investment
An industry with foreign investment is entitled to exemptions, facilities or concessions available under the IEA and other prevailing laws in additions to what has been provided under the FITTA. Moreover, industry with foreign investment is entitled to other facilities such as visa, repatriation, opening of a foreign currency account as well as national treatment, etc. Such provision was not provided under the Previous Act.
7. Prohibition on nationalization or acquisition
The FITTA prohibits nationalization of industry with foreign investment. Unless for public purpose, no industry can be acquired directly or indirectly. Constitution of Nepal permits nationalization only for public cause and by paying reasonable compensation.
8. National treatment
8.1. Stabilization provision: The FITTA provides that foreign investment is to be treated in same terms applicable on management, maintenance, utilization, transfer or sale of investment made by Nepalese person, until such investment is retained in Nepal. However, previous law is applicable for foreign investment approval obtained under the previous law and no change in law is to be made without the consent of foreign investor in a manner that is detrimental to any facilities enjoyed by the foreign investor under such law.
8.2. Non- applicability of national treatment: For certain matters, national treatment is not applicable such as compulsory licensing for intellectual property mentioned in agreement concluded under World Trade Organization (“WTO”), benefits enjoyed by domestic industry under public procurement law, government subsidy, on-commercial services provided by government, financial services adopted or managed by government for protection of investors, special treatment provided government as a party to any regional or multi-sectoral organization, terms prescribed by regulatory body under on repatriation of investment, payment of loan (including, principal, interest and fee) or payment of service fee outside Nepal as well as protection of public health, animals, plant or environment.
9. Provision on Visa
9.1. Types of visa: The FITTA clearly lays down eligibility for different types of visa such as non-tourist visa, business visa and residential visa for foreign citizens on foreign investment, which is consistent with the Immigration Laws.
9.2. Residential visa: Previously, only a foreign investor and family member of such person were eligible for residential visa. In contrast, under the FITTA, even the authorized representative of the foreign investor and his/her family members are eligible for residential visa.
9.3. Business visa: Under the Previous Act, a foreign investor and his/her dependent family or authorized representative of such investor and his/her dependent family were eligible for business visa. However, in terms of the number of authorized representatives, the FITTA has specifically restricted such privilege to the one authorized representative of the foreign investor. Nevertheless, FITTA provides such benefit to maximum two people in case the amount exceeds the prescribed investment amount.
9.4. Non- tourist visa: The FITTA also provides for non-tourist visa for foreign specialist, technician or managerial employee coming to work in an industry, which was not provided under Previous Act.
10.1. Eligibility: The FITTA provides that a foreign investor can repatriate all forms of investment in accordance to prevailing laws and after paying all the taxes. Moreover, residual amount after payment of all liabilities in case of dissolution or liquidation and amount of compensation or damages from final settlement of disputes. Foreign investor can repatriate the amount in the same currency of investment or in other convertible foreign currency with approval of NRB.
10.2. Repatriation process: Steps for repatriation of foreign investment is provided in the table below:
||Application for repatriation||DOI/IBN|
||Inquiry on fulfillment of terms and liabilities under the law||DOI/IBN|
||Application for facility of foreign currency exchange||NRB|
||Approval for repatriation||NRB|
11. One-Stop Service Mechanism
11.1. Establishment of one-stop mechanism: The FITTA has introduced One-Stop Service Mechanism, which is to be established as per the prevailing law on Industrial Enterprise. Such One-Stop Service Mechanism has already been set up under the IEA and such One-Stop Service Mechanism for the time being has been established within premises of DOI.
11.2. Services of one-stop mechanism: Government of Nepal can provide exemptions, facilities, concession or services to foreign investors through One-Stop Service Mechanism. Such services are registration of Industries, various approvals, labor permit, visa service, quality check and control of products produced by industries and others.
12. Complaint mechanism
Any complaint against actions of officials looking after matters of industry or One-point Center can be filed before DOI. Similarly, any complaint in relation to DOI or One-point Center can be filed to the Ministry of Industry, Commerce and Supply.
13. Use of Electronic medium
FITTA provides that an approving authority can use electronic medium for approval and other necessary activities. However, in practice, even though electronic medium is used, submission of physical copies is still required.
14. Sub- contract
Any industry can except for main activity of the industry, sub-contract other activities. However, FITTA fails to state what amounts to main activity of the industry.
15. Dispute Settlement Mechanism
15.1. Freedom on dispute settlement mechanism: The FITTA provides the freedom to parties to enter into an agreement for settlement of dispute. This means that investment agreement can be governed by foreign law and any dispute under such agreement can be submitted to the foreign courts or arbitration.
15.2. Two major concerns on dispute settlement: Even though the FITTA provides freedom to parties to enter into an agreement for dispute settlement, there two important concerns that needs to be kept in mind.
15.3. Notification to approving authority on settlement of dispute: The FITTA does provide for requirement of providing information of settlement of dispute to the approving authority with 15 days of settlement of dispute as per the agreement between the parties, even though the parties are not obliged to provide information of terms agreed.
ANNEXURE- I Negative List (Sectors restricted for foreign investment)
Negative list under FITTA
||Sectors of primary agricultural production as well as poultry farming, fisheries and bee-keeping, fruits, vegetable, oil seeds, pulse seeds, milk industry and priority production in agricultural sector|
||Cottage and Small industry|
||Personal Service Business (Business such as Hair Cutting, Beauty Parlor, Tailoring, Driving Training etc.)|
||Industry producing arms and ammunitions, bullets and shell, gunpower, explosive materials, nuclear, biological and chemical (N.B.C.) weapon, atomic energy, radio-active materials|
||Real estate business (Excluding Construction Industries.)|
||Moneychanger and Remittance service|
||Internal Courier Service|
||Local Catering Service|
||Rural Tourism and Travel Agency|
||Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language;|
||Management, account, engineering, legal consultancy service and language training, music training, computer training; and|
||Consultancy service having foreign investment of more than 51 percent|
Social Security Schemes Operational Directives, 2075 (the “Directive”) which was approved by the Ministry of Labor, Employment and Social Security on November 22, 2018 (2075/08/06), has been amended on July 14, 2019 (2076/03/29).
The changes that have been brought by the new directives have been incorporated in the following comparison table.
|S.N.||Section/Issue||Previous Provision||Key Amended Provision|
||Grace Period for coverage of Medical Treatment, Health and Motherhood Protection Scheme (Sec. 4)
||The time period for contribution has been reduced to 3 months from 6 months and the contributor will be eligible for both Medical and Maternity Schemes.
This coverage is extended till 3 months after the contributor stops making contribution in SSF.
||Permissibility to obtain similar benefits from other Schemes. (Sec. 6(6))||No provision.||Contributors receiving health benefits under Social Security Scheme are not prevented from obtaining any other health related benefits from Nepal Government or under any other insurance schemes.|
||Coverage of Employment related accidents and occupational diseases (Sec. 10(2), 10(3)||
|Coverage of Non Employment related accidents (Section 10(1), 11(2)||
||Scope of entitlement (Section 15(1) and 15(2)
||Funeral Expenses (Sec. 18)||Contributor who dies or dies after being permanently disabled was entitled to this benefit.||Contributor who dies or dies after being both temporarily or permanently disable are entitled to this benefit.|
||Provident Fund and Gratuity of the past period (Sec. 19(3), 19(4))||
(a) get it paid out or
(b) continue to maintain the amount in the retirement fund where it has been deposited.
||Participation in Pension Scheme (Sec. 20(b))||Employees hired after July 17, 2019.
Existing employees if they agree on participation under Collective Bargaining Agreement
|The employees hired after July 17, 2019
Existing employees if they apply in writing for the participation (NO CBA REQUIRED)
||Payment in the case of total length of contribution is less than the required months. (Sec. 22(2))||No Provision.||Contributor reaching the age of sixty (60) years before making 180 months of contribution has two options
(a) receive lump sum amount consisting of principal with the accrued income or
(b) receive pension for lifetime calculated by multiplying the sum (contribution + accrued income) by 180.
||Retirement Benefit (Sec. 23(1))||Existing employees are entitled to the Retirement Benefit.||Employees who do not elect to participate in the Pension Scheme are entitled to Retirement Benefit.|
||Foreign employees allowed to withdraw the amount under Old Age Protection Scheme (Sec. 24A)||No Provision.||
||Benefit under Pension Scheme to the spouses (Sec. 24C)
|No Provision.||In case of death of the contributor before completion of 180 months from the of date of beginning of receiving the pension, his/her spouse would be entitled to receive 50% of total monthy pension received by the contributor if:
(a) the spouse has no alternative employment or (b) has not receiving pension in any other sources.
If the marital relation ends with such contributor, the spouse shall not be entitled to the pension.
||Other pension allowed (Sec. 24D)||No Provision.||A person receiving pension from Nepal government or other sources may obtain pension from SSF, if he/she has made contribution to SSF and is eligible for pension.|
||Voluntary participation after 60 years (Sec. 24E)||No Provision.||A person, who has completed the age of 60 but is still maintaining employment relationship, can voluntarily participate in SSS.|
||Contribution for the continuity of benefits
|No Provision.||A person who has not attained eligible age for pension may continue to make contribution on SSF even after leaving a job or in between two jobs. Such contribution shall entitle the employee to receive the benefits.|
Date of publication in Nepal Gazette
2075/11/13 (25 February 2019)
First Amendment on 2076/12/03 (16 March 2020)
Note: The changes made through first amendment have been underlined.
The Government of Nepal in accordance with the rights provided by section 22 of Foreign Exchange (Regulation) Act, 2019, has formulated the following rules.
1. Short Title and Commencement:
1. The name the Regulation shall be “Hedging Related Regulation, 2075”.
2. This Regulation shall come into force immediately.
2. Definition: Unless the subject and the context otherwise requires, in this Regulation:
3. Availability of Hedging Facilities: Bank may provide the facility of hedging to the following projects with foreign loan investment:
4. Approval is required: The projects intending to obtain hedging facility under Rule 3 shall obtain approval for foreign investment and bringing in foreign loan in foreign currency, in accordance with prevailing federal laws.
5. Application to be made :
6. Examination of the application:
7. Granting Approval: After examination of the application pursuant to Rule 6, if it appears to be reasonable to provide hedging facility as requested, the Bank shall provide approval for providing the hedging facility to the applicant, on the conditions prescribed below:
8. Depositing foreign currency:
9. Locking of foreign exchange rate:
10. Hedging Charge:
11. Period of hedging facility: The period of hedging facility provided under this Regulation period shall be provided for a maximum of 5 (five) years, depending on the nature of project.
13. Currency for Hedging facility: The hedging facility under this Regulation shall be provided for only those foreign currencies which have been specified by the Bank by publishing public notice.
14. Establishing a hedging fund:
15. Coordination and Consultation: In relation to providing hedging facility under this Regulation, the Bank shall coordinate and consult with Ministry of Finance, concerned ministry for the project, concerned authority of Government of Nepal and the investor.
16. Maintenance of Foreign Exchange: The bank shall maintain the foreign currency provided for hedging facility pursuant to Rule 9 as if the foreign currency was maintained for activities prescribed under Sub-section (2) of Section 6 of the Act. .
17. Accounts of hedging: The bank shall maintain details of accounts related to hedging as per the Nepalese accounting standards.
18. Report to be submitted: The bank shall prepare report regarding activities related hedging facility each year and shall be submitted it to Ministry of Finance within 3 months from the end of each fiscal year.
1. Introduction of the act
The Advertisement (Regulation) Act 2019 (the “Act”) was published in the Nepal Gazette on 25 October 2019. The Act is the primary legislation that regulates advertisement and marketing of goods, services, program or event in Nepal. The Act is the first of its kind, and aims to bring reform in the regime of advertisement in Nepal.
A brief summary of the provisions on Advertisement Act have been briefly set out below:
2. Scope of the Act
The scope of the Act ensures the regulation of Advertisement sector. As the pioneer of the Advertisement related laws, this Act extends to ensure (a) regulation of different forms of Advertisement (b) authenticity and responsibility of Advertising Agency and Advertisement Provider (c) restrictions on content that may or may not be advertised.
However, the Advertisement through social media/internet has not been addressed in detail.
3. Provisions related to Advertisement
“Advertisement” means any word, sentence, drawing, image, symbol, poster, pamphlet, publication, sign, structure or any other audio, visual or audio-visual publication or prepared for publication in public regarding any product, service, event or occasion through the means including print, electronic media, online, social networks, hoarding board, balloon.
3.1. Permitted Advertisement
The Act provides person to advertise for the following purposes:
a. Promote a product or service,
b. Make aware and inform the consumers about a product or service,
c. Provide information about a program or event, or
d. Provide information with regards to public information, such goods, amongst others.
3.2. Advertisement that is not permitted
Advertisement activity such as the following are restricted
The Act provides person to advertise for the following purposes:
In addition to that, the Act also prohibits advertisements of the following nature:
3.3. Advertisement Prohibited Area
The Act provides authority to the local level to declare the restricted areas for advertisement. The areas that can be restricted are (a) Religious (b) Cultural Site (c) Archaeological Site (d) Educational institution (e) Health Institution and, (f) any place within distance from such site or institution. The information regarding such prohibited area must be made public.
3.4. Information of Advertisement Provider to be listed by Advertiser
There are certain details that are necessarily required while publishing or displaying an advertisement such as:
i. Name, Address of the Advertisement Provider. Under the Act, “Advertisement Provider” means individual or institution which publishes or broadcasts the Advertisment, including promotion and advertisement.
ii. Warning details of the effect after consumption of goods
In absence of mentioning the abovementioned details, the liability of the content will shift on the publishers and owners of media outlets; both print and electronic. The act done against this provision would be charged with fine NPR 5 lakh. Depending on who has advertised the advertisement, the liability may be on either Advertisement Agency and/ or Advertisement Provider.
4. Requirements and regulation of different kinds of advertisement
4.1. Hoarding Boards
“Hoarding Boards” means object used or kept to display advertisement or any kinds of external advertisement objects.
4.1.1. Approval for Hoarding Boards
The management of Hoarding Boards, banners, posters and wall paintings in public areas used to be handled by the concerned municipality. However, after the enactment of the Act, advertisements to be done through Hoarding Board that is in public display needs to get approval from the concerned Local Level Authority, which would be the relevant Ward Office or Village Development Committee.
The interested party should file an application to get permission in order to have the Hoarding Boards to Local Level Office. Such permission is given by the Local Level Office for a time period, and will contain terms and conditions to be abided by. The removal of advertisement materials (including Hoarding Boards) is mandatory once the approval expires.
However, Hoarding Boards that is kept within the premises of the home or office that is in relation to promoting such business, that does not disturb public road or land, will not be hampered.
4.1.2. Circumstances where Application may be rejected
An application for Hoarding Boards will rejected in the following circumstances:
In relation to advertisements in Television, the Act requires clean feed policy for foreign television channels in Nepal. This Act bars Television channels from broadcasting foreign advertisements, both in recorded and live feeds, so that the foreign channels are broadcasted without any advertisements in Nepal. For agreement(s) made with foreign channel in regards to broadcasting advertisement before the commencement of Act, such channels are to adopt a clean feed within a year after the commencement of the act. It is specifically provided that no Nepali media should dub the foreign advertisement and broadcast it.
4.3. Written Forms of Advertisement
Printing and Press is specifically dealt by Press and Publication Act, 1991 and Press and Publication Rules, 1992. However, the Advertisement through Press and Publication is regulated by Advertisement (Regulation) Act.
The Supreme Court had ordered to remove all types of business Hoarding Boards, advertising posters, pamphlets, flexes etc. After the commencement of the Act, Kathmandu Metropolitan has been steering work forces i.e. District Administration Office, Nepal Police, Nepal Electricity Authority and Nepal telecom in order to remove provided forms of Advertisement.
4.4. Social Media
Currently, there is no regulation prescribed particularly for advertisements in Social Media. The necessity of online advertisement regulation has also increased with the excess use of social media for advertising.Recently however, the Nepal Rastra Bank has published a directive mandating all payments for advertisements in Social Media to be made through the banking channel. Although the NRB has sought to bring all advertisement related transactions under the taxation regime, due to its evolving nature, advertisements in Social Media also needs to be covered under the ambit of laws and policies.
4.5. No email or SMS without consent for the purpose of advertisement
In relation to emails or messages, the Act provides that no one should circulate message to mobile phones or send an email without the consent of the concerned persons. The intention of the legislation appears to restrict sending unsolicited messages, thus, taking consent for text messages and push notifications is necessary. However, the Act is silent about the advertisement made through calls.
The Act allows federal government, provincial governments or local levels to circulate message of public service announcements or message of early warning through mobile phones or emails at the time of disaster. No consent is required for this matter.
5. Free or standard rate for advertisement
At the time of disaster, ministry, state government or local level can publish or broadcast notice or advertisement for the public service and information, for free or standard rate.
6. Advertisement Board
The Act provides for an eight member Advertisement Board which has the authoritative power to regulate the advertisement standard. The Advertisement Board checks the contents of advertisements and public service announcements. It also provides that the board will distribute government advertisements to media houses proportionally.
In addition, the Board also has power to determine the fixed time frame for publishing the notice that needs to be publish in public manner through radio, television or online or any similar electronic media.
6.1 Power, Function and Duty of Advertisement Board
The power, function and duty of the Advertisement Board as per the Act is as follows:
7. Regulation of Advertisement through State and Local Level
For those who have taken permission or approval from state or local level to advertise through print or electronic communication are regulated by the Information and Communication Ministry from state level. Under the chairmanship of Secretary, Monitoring and Regulatory Committee of six members is formed. The Committee has the power to inspect and decide on the appropriateness of the advertisements (including Hoarding Boards) based on the abovementioned criteria.
8. Advertisement Agency
“Advertising Agency” means firm, institute or company producing and/ or distributing advertisements, established under the prevailing law with intention to run business of advertisements.
Advertisement Agency must be enlisted in the Advertisement Board with prescribed details. The established agency operating before this Act should be enlisted within a year after the commencement of the Act.
9. Complaint Mechanism
Any complaint in relation to the Act or standard set by the Act can be filed to Advertisement Board or concerned Committee or Local Level Authority. If the Committee or Local Level Authority has the jurisdiction to take action then, they should proceed themselves or else should handover such complaints to the Advertisement Board, committee or local level who has jurisdiction to take further action. The action pursuant to the complaint filed should be informed to the complainant by Advertisement Board, committee or local level.
10. Jurisdiction of Court
The Act prescribes that the court procedure should take place as per the prevailing law. However, in absence of such law in the Act, one should file a case in District Court.
Anyone affected by the actions done contrary to the Act or rules made under this Act can file an application to Advertisement Board claiming compensation. Such application should be investigated to check whether the harm has been done or not. If such harm is found then, applicant should be compensated reasonable amount by Advertiser.
Any person being informed about the decision of the case, may file an appeal against the decision in the below mentioned Court within 35 days from the date of receiving of such decision;
13. Offences and Punishment
The Act provide that if anyone advertise against the Act, it should be considered as offences pursuant to the Act. Offences committed contrary to the Act will be punished. The punishment will be in accordance to the existing law, provided that if there is no punishment for the offense then imprisonment not exceeding 1 year of term and fine not exceeding ten thousand rupees will be charged.
The punishments have been categorized as follows:
The Act has provision of imposing fine ranging from NPR 1 Lakh to NPR 5 Lakh to anyone who publishes/broadcasts or causes to publish/broadcast advertisement in contravention of this law. No editor of media shall be punished for publication or broadcast of advertisement in breach of law simply by virtue of such reason. However, if the editor is also the owner of the media, nothing in this law will prevent the authorities concerned from punishing him or her.
1. The Safeguards, Anti-dumping and Countervailing Act, 2019 (“SACA”)
1.1. The Safeguards, Anti-dumping and Countervailing Act, 2019 (“SACA“) was passed by the Parliament and received assent by the President on 14 October 2019 (2076-06-27 BS) and published in the Nepal Gazette on the same date. The SACA is effective from January 13, 2020 i.e. from 91 days from the date of Presidential assent.
1.2. This is a new legislation enacted by Nepal which is based on the World Trade Organization’s ( “WTO”) Agreements namely, (a) Agreement on Safeguards (“Safeguards Agreement”) (b) Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade ( “GATT”) (“Anti-Dumping Agreement”) and (c) Agreement on Subsidies and Countervailing Duty (“Subsidies and Countervailing Agreement”).
1.3. The Safeguards, Anti-dumping and Countervailing Regulations, 2021 (“SACR”) was published in the Nepal Gazette on 18 January 2021 (2077-10-05 BS), by Government of Nepal (“GON”) pursuant to Section 47 of SACA.
1.4. The GON has prescribed that the definition of Department under SACA shall mean Department of Commerce, Supplies and Consumer Protection (“Department”) through Gazette Notification dated 10 February 2020 (2076-10-27). The Department shall carry out the function of an investigating authority and for that purpose it shall designate an investigating officer.
2. Provisions related to Safeguards measures
2.1. Safeguards measures to be imposed: The Act provides that safeguard measures may be imposed in case of serious injury/ threat of injury which is clearly imminent to the domestic industries producing similar/ identical / directly competitive goods, due to the unprecedented and unconventional increase in import of goods. The Ministry may either initiate suo moto investigation, or the domestic industries producing similar/ identical goods can also file a complaint to the Ministry.
2.2. While imposing of these Safeguard measures common/ different/ quantitative rate of duties can be imposed. To elaborate, following safeguard measures can be imposed: (a) additional customs duty exceeding the duty chargeable under the prevailing laws; (b) additional duty on the duty charged, in case of import of goods exceeding prescribed quota (c) full or partial quantitative restriction on import of such goods (d) other measures as prescribed.
2.3. Threshold for Safeguard Measures: The Safeguard measures is not imposed if the similar/ identical/ directly competitive goods being imported from the developing country the import from where is less than three percentage (3%) of the total import of such goods. However, this exception does not apply if the total import of the goods exceeds nine percentage (9%) of the identical/similar/directly competitive goods produced in Nepal. In such case, Safeguard measures can be imposed even if the import from a particular devel oping country represents less than 3% of the total import.
2.4. Term of Safeguards measures: Four (4) years from the date of imposition of Safeguards measures. The term may be extended for additional four (4) years upon recommendation of the investigating authority.
2.5. Interim Safeguards measures: Government of Nepal (“GON“) can impose interim Safeguards measures to prevent immediately the serious injury /threat of injury which is clearly imminent to domestic industries. Interim Safeguards measures can only be imposed in case of existence of any of the following situations if (a) the Initial Report from investigating authority finds that Safeguards should be immediately imposed, or (b) the evidence collected in the initial investigation finds that the goods has caused/ is likely to cause serious injury / threat of serious injury to the domestic industries. The maximum term of interim Safeguard measure may be two hundred (200) days.
2.6. Enforcement of decision imposing safeguard measures: SACR provides that the Department and the Department of Customs shall be the prescribed enforcement authorities to implement GON’s decision to impose safeguards measures on the import of any goods.
3. Provisions related to Anti-Dumping
3.1. Restriction in Dumping goods: No importer is permitted to import goods in import value lower than the normal value of goods (grounds for determination of common value is outlined in the following paragraph), which causes/ is likely to cause injury/ serious injury to the domestic industries producing similar/ identical goods.
3.2. Anti-Dumping Duty: GON can impose Anti-Dumping Duty in addition to the customs duty chargeable on goods if the goods are found to be dumped as per the report submitted by the investigating authority.
3.3. Threshold for Anti-Dumping– Anti-Dumping Duty is not imposed if (a) dumping margin is less than two percent (2%) of the dumped goods and (b) the import of the similar or identical goods from any country or separate customs territory is limited to three percent (3%) of the total import. However, this exception does not apply if the total import from more than a single country or separate customs territories exceeds seven percent (7%) of the total import of identical or similar goods. In such case the Anti-Dumping duty can be imposed even if the import from a particular country or separate customs territory represents less than three percent (3%) of the total import.
3.4. Fixation of rate of Anti-Dumping Duty: Rates shall be fixed by GON on the basis of inter alia, investigation report. Different rates can be imposed as per the nature of imported goods.
3.5. Term of Anti-Dumping Duty: The duty may be imposed for maximum five (5) years from the date of imposition. It can be extended for further term of five years upon recommendation of the investigating authority.
3.6. Interim Anti-Dumping Duty: GON can impose interim Anti-Dumping Duty in the following situations if (a) notice to initiate investigation in respect of the goods is published, (b) goods are found dumped on the basis of evidences collected thus far, (c) sufficient grounds exists that the import of such goods has caused/ is likely to cause injury/ serious injury/ threat of serious injury to the domestic industries, (d) at least sixty (60) days of the commencement of investigation is completed, (f) imposition of interim Anti-Dumping Duty is recommended in the initial investigation report submitted, (g) imposition of interim Anti-Dumping Duty to prevent injury/ threat of injury caused/ to be caused to the domestic industries seems necessary.
3.7. Term of Interim Anti-Dumping Duty: (a) on the request of domestic industries producing similar/ identical goods: – up to 6 months (b) in other situations: – maximum up to one hundred and twenty (120) days.
4. Provisions related to Countervailing Duty
4.1. Restriction on import of concessional or direct/ indirect subsidized goods: No importer shall import concessional or direct/ indirect subsidized goods which causes/ is likely to cause injury/ serious injury/ threat of serious injury to the domestic industries. Concessional or direct/ indirect subsidized goods shall be determined as provided in the SACA.
4.2. Imposition of Countervailing Duty: GON can impose countervailing duty in addition to the customs duty chargeable on goods if the goods are found to be concessional or direct/ indirect subsidized goods as per the report submitted by the investigating authority.
4.3. Exceptions to the Countervailing Duty: Countervailing duty is not imposed on goods in the following situations if (a) concession or direct or indirect subsidy is less than two percent (2%) of export value of the goods if it is imported from any developing country or less than one (1%) of the export value of the goods if it is exported from separate customs territory, or (b) import of the goods with concession or direct/ indirect subsidy goods from a developing country is less than four percent (4%) of the total import of similar / identical goods in Nepal (however, this exception does not apply if the import exceeds 9% of the total import of similar or identical goods even if import from particular developing country is below 4%) or (c) any goods received by GON in the form of kind or cash subsidy under Bilateral or Multilateral Agreement.
4.4. Fixation of rate of Countervailing Duty: Countervailing duty should not exceed the concession margin of goods. For clarification, concession margin refers to the difference in value of goods caused by the concession provided to that goods. Different rates of countervailing duty can be imposed for imported goods having similar nature of concession or direct/indirect subsidy and similar imported goods having different concessional margin.
4.5. Term of Countervailing Duty: The Countervailing Duty may be imposed for up to five (5) years. It may be extended for additional five years upon recommendation of the investigating authority.
4.6. Interim countervailing duty to be imposed: GON can impose interim countervailing duty on certain situations. The interim Countervailing duty may be imposed for up to one hundred and twenty (120) days from the date of submission of investigation report.
5. Complaint Procedure
5.1. Threshold for Complaint: Following conditions must be fulfilled while filing complaint: (a) complaint must be filed by the domestic industry or industries producing at least twenty five percent (25%) of similar / identical goods; or (b) complaint must be supported by domestic industry or industries producing at least fifty percent (50%) of similar/ identical goods.
5.2. Publication of Notice: If the investigating authority initiates examination on the complaint, the notice relating to such investigation must be published in the national daily newspaper. The notice must state the name, nature, quality, manufacturing company, manufacturing or exporting country’s name, details submitted and other documents submitted by the complainant.
5.3. Written Response (Defense): The concerned party can file written response along with relevant evidences to the investigating authority within fifteen (15) days from the date of publication of notice of investigation.
5.4. Timeline for Preliminary Investigation Report: Investigating authority should submit its preliminary investigation report within sixty (60) days from the date of start of investigation.
5.5. Timeline for Final Investigation Report: Investigating authority should submit final investigation report within one (1) year from the date of start of investigation. Actual details of injury/ serious injury/ threat of serious injury to the domestic industries from the import of goods under investigation. The details to be incorporated in the final investigation report has also been outline in the SACA.
6. Threshold of Serious Injury
6.1. The SACA provides the aspects to be considered while determining the material/serious injury to domestic industry. The investigation authority should consider those aspects while conducting investigation.
6.2. The aspects to be considered while determining material/serious injury for the purpose of SACA include (a) the volume and value of the goods imported in increased quantity subject to investigation; (b) market share of the goods under investigation; (c) impact on production or productivity of domestic industry producing similar/identical/directly competitive goods, (d) impact on the sale and distribution of such goods; (e) impact on consumption of such goods; (f) nature, degree and extent of loss on such goods, (g) impact on employment in domestic industry producing such good.
7. Determination of General Value of Goods
7.1. SACA also provides for the method of determining the General Value of the Goods for the purpose of Anti-Dumping Duty. The investigating authority is required to comply with the method provided in the SACA for the determination of General Value.
7.2. Pursuant to SACA the General Value of the goods should be determined on the basis of following grounds: (a) sale value of such goods in the domestic market of the country or separate customs territory of manufacture or produce or export, (b) in absence of (a) above, sale value of the export made to the third country, (c) if the General Value cannot be determined on the basis of (a) and (b), then on the basis of value determined taking into account the cost and reasonable profit, administrative, sale and other overhead costs of the goods; (d) if, again, the Value cannot be determined on the basis of cost (c) above, the value as determined by investigating authority on reasonable grounds.
8. Determination of Export Value
8.1. The Act also provides for the basis of determination of Export Value of the goods. The basis for the determination of Export Value should be followed while conducting the investigation.
8.2. As per the SACA the export value of goods subject to investigation can be determined on the basis of (a) invoice value (excluding freight, insurance and other costs) submitted to customs point or (b) purchase value of goods obtained from the first purchaser if the goods has already been exported to other country; (b) if the export value cannot be determined on the basis of above (a), then on the basis of re-sale value of similar/ identical goods to an independent purchaser, or (c) if export value cannot be determined on the basis of (a) and (b) above, the value determined by investigating authority on the basis of reasonable grounds.
9. Considering the Concession or Subsidy
9.1. The SACA also outlines the situation in which it is considered that the goods is subsidized goods. Any goods receiving any assistances from any government or agency being partially/ fully owned by the government of the country of export or separate customs territory is subject to of Countervailing Duty.
9.2. The assistance subject to Countervailing Duty includes (a) direct or indirect financial incentive, subsidy, exemption or contribution in production or export of the product, (b) grant, loan, equity infusion or actual or likely direct transfer of capital in the production or export of the product, (c) acceptance of existing or potential liability of the producer of the product or regular purchase of the product, (e) write off or waiver of outstanding tax or revenue obligation to the producer of such product, (f) except basic infrastructure facilities, other facilities or services received for the production of other goods.
9.3. The SACA also provides exception or the permissible assistance. Pursuant to SACA the following assistance is not considered as subsidy for the purpose of imposing Countervailing Duty (a) subsidy for research and investigative works; (b) concession provided by country targeting its under developed or marginalized areas; (c) subsidy limited to promote adaptation of existing facilities to comply with the new law or condition related to environmental protection.
10. Other Coverage of SACA and SACR
10.1. The SACA also covers notice requirements, the imposition of duties with retrospective effect, the authority of collecting of such duties.
10.2. The SACA and SACR also provides for the review of the duty, cancellation, appeal mechanism, refund of any excess duty charged along with the definition of certain important terminologies.
1. Social Security Regulation, 2018 (2075)
The Government of Nepal (“GoN”) has framed the Contribution Based Social Security Regulations, 2018 (2075) (“Social Security Regulations”) by exercising the power conferred to it under Section 69 of the Contribution based Social Security Act (“Social Security Act”). The Social Security Regulations has been published in Nepal Gazette on November 19, 2018 (Mangsir 03, 2075) with immediate effect.
The Social Security Regulations has prescribed certain matters as required by the Social Security Act. Such matters include (a) the procedure for participation in Social Security Schemes (b) registration of the employer and employee with Social Security Fund (c) operation of fund, etc.
2. Social Security Schemes Operation Directives, 2018 (2075)
The Social Security Fund (the “SSF”) has formulated the Social Security Schemes Operational Directives (“Directives”) to operate the Social Security Schemes pursuant to Section 10 of the Social Security Act. The Directive has been approved by the Ministry of Labor, Employment and Social Security on November 22, 2018 (2075/08/06) and has been effective thereof.
3. Laws dealing with Social Security Schemes
The Social Security Schemes are subject to the following laws, regulations, directives and notifications:
|Legal Sources||Effective Date|
|Labor Act, 2074 (“Labor Act”)||September 04, 2017|
|Labor Regulations, 2075 (“Labor Regulations”)||June 22, 2018|
|Contribution Based Social Security Act, 2074 (“Social Security Act”)||August 13, 2017|
|Contribution Based Social Security Regulations, 2075 (“Social Security Regulations”)||November 19, 2018|
|Social Security Schemes Operational Directives, 2075 (“Directives”)||November 22, 2018|
|Gazette Notice Requiring Enrollment of Employer to the Social Security Fund (“Enrollment Gazette Notice“)||November 12, 2018|
4. Requirement of Enrollment By Employer
4.1. The Enrollment Gazette Notice does not specify the sector or nature of industry, business, service or transaction subject to the enrollment with SSF. Therefore, all employers are required to be registered with the SSF.
4.2. The Enrollment Gazette Notice requires the Employers to enroll with the SSF within the timeline as below:
|Employers by Region (Location)||Timeline||Date|
|Employers and Outsourcing Companies within Kathmandu Valley||Within 3 months from Mangsir 06, 2075 (November 22, 2018)||Within Falgun 05, 2075 (February 17, 2019)|
|Employers of Province Number 3 (except Kathmandu Valley)||Within 3 months from Mangsir 15, 2075 (December 01, 2018)||Within Falgun 14, 2075 (February 26, 2019)|
|Employers of Province Number 1||Within 3 months from Poush 01, 2075 (December 16, 2018)||Within Falgun 30, 2075 (March 14, 2019)|
|Employers of Province Number 2||Within 3 months from Poush 15, 2075 (December 30, 2018)||Within Chaitra 14, 2075 (March 28, 2019)|
|Employers of Gandaki Province and Province Number 5||Within 3 months from Magh 01, 2075 (January 15, 2019)||Within Chaitra 30, 2075 (April 13, 2019|
4.3. Upon enrollment of employers within the aforementioned timeline, they are required to enroll their employees with the SSF within 3 months after registration of the employers.
4.4. Submission of Application
The required list of the documents to be submitted along with the application for enrollment of the employers with the SSF and the detailed process for registration is provided in the link below: Registration
5. Social Security Schemes
The Social Security Fund has introduced the following Social Security Schemes:
(a) Medical Treatment, Health and Maternity Protection Scheme
(b) Accident and Disability Protection Scheme
(c) Dependent Family Protection Scheme and,
(d) Old Age Protection Scheme
The Employer and the Employees are required to contribute certain amount of the employee’s basic salary each month to the Social Security Fund. The rate of contribution is as follows:
7. Allocation of Contribution
The total amount of contribution made by the Employer and Employee will be allocated to the different schemes in the following manner:
|S.N.||Social Security Schemes||Allocation|
|1||Medical Treatment, Health and Maternity Protection Scheme||1%|
|2||Accident and Disability Protection Scheme||1.40%|
|3||Dependent Family Protection Scheme||0.27%|
|4||Old Age Protection Scheme||28.33%|
8. Schemes their Coverage and Exclusions
8.1. Medical Treatment, Health and Maternity Protection Scheme
The Medical Treatment, Health and Maternity Protection Scheme comprises of (a) Medical Treatment and Health Safety Schemes and (b) Safe Motherhood Schemes for the Contributor or Contributors Wife. The Contributor who have contributed in the Fund for a period of 3 (three) months are entitled to facilities under this scheme. However, Contributors should contribute for 12 (twelve) months within a period of 18 (eighteen) months in order to benefit from the Maternity Safety Schemes.
8.1.1. Coverage under Medical Treatment, Health and Maternity Protection Scheme
Pursuant to number 5 of the Directive, Contributors get the following benefits out of this Scheme:
8.1.2. Scope of Health Benefits
Contributors are entitled to following health benefits:
|S.N||Scopes of Benefits||Entitlement||Contributor’s Cost|
|1||Treatment at Hospital||Amount not exceeding NPR 100,000 p.a.||20% of the claim amount|
|2||Cost incurred for the regular pregnancy test of the Contributor or Contributors Wife, hospital admission, operation and treatment of child for 3 months||Amount not exceeding NPR 100,000 p.a.||20% of the claim amount|
|3||Treatment without admitting to hospital as per the prescription of doctor||Amount not exceeding NPR 25,000 p.a.||20% of the claim amount|
|4||Maternity Care/Miscarriage after 24 weeks of pregnancy/stillbirth||Amount equivalent to one month’s minimum remuneration per child.||Up to two children.|
Contributors are not entitled to following treatment under this Scheme:
8.2. Accident and Disability Protection Scheme
Accident and Disability Protection Scheme comprises of (a) Accidental Benefits and (b) Disability Benefit.
This scheme is applicable from the date of contribution to the Contributor who requires treatment for the employment related accident. However, the Contributors who have not contributed for a minimum period of 2 (two) years shall not be entitled to the benefit related to the treatment of occupational diseases and other benefit relating to the treatment of occupational health diseases.
8.2.1. Scope of Benefits
8.3. Dependent Family Protection Scheme
This benefit is provided in the event of death of the Contributor. Dependent Family Protection Scheme comprises of (a) pension benefits to husband or wife, (b) Scholarship to the children of the Contributor, (c) benefits provided to dependent family members and (d) funeral expenses
The Pension benefit is provided to husband or wife of the Contributor in the event of death of Contributor due to accident or occupational diseases. The husband or wife is entitled to lifetime pension benefit equivalent to 60% of last drawn basic remuneration of the Contributor.
This Scheme covers the children who have not completed 18 years of age in the event of death of the Contributor. The amount of such scholarship shall be 40% of the last drawn basic remuneration of the Contributor and it shall be entitled every month.
This benefit is provided to the dependent parents living joint with the Contributor in case the Contributor does not have husband or wife or children. The dependent parents will be entitled to 60% of the basic remuneration for life time.
In case of death of Contributor for any reason whatsoever the dependent family member or the nominee will be entitled to funeral expenses of NPR 25,000.
8.4. Old Age Protection Scheme
The Old Age Protection Scheme will be operated by the total amount of 28.33% of the employee’s basic salary (10+10% provident fund and 8.33% gratuity) deposited in the SSF. The contributing employees shall receive (i) pension, or (ii) retirement scheme benefits.
8.4.1. Participation in Pension Scheme
The Old Age Protection Scheme applies to the employees working with the employer prior to Shrawan 01, 2076 (July 17, 2019) if they accept the Scheme under the collective bargaining agreement.
8.4.2. Benefits under the Pension Scheme:
Upon completion of the retirement age, the total sum amount of contribution made by the employer and the employee and the amount of accrued from the investment made by the Fund will be divided by 180 months (15 years) and such amount will be provided as pension every month during the employee’s lifetime. Upon death of the Contributor prior to the retirement age, their heir shall receive the total lump sum amount of the contribution made by the employer and the employee and the accrued benefit received from the Fund.
8.4.3. Eligibility for Pension Entitlement:
The Contributor should have completed the age of 60 and should have contributed for at least 180 months or 15 years.
8.4.4. Retirement Benefits:
The Contributors working prior to Shrawan 01, 2076 (July 17, 2019) contributing 28.33% for provident fund and gratuity shall be entitled to receive a lump sum amount of the contribution and income accrued on such amount upon retirement.
9. Opt-In and Opt-Out
9.1. Pursuant to Section 6 of the Social Security Act, employees do not have the option to opt in or opt out of the Schemes and all employees are required to participate in all schemes (No option to participate in some schemes).
9.2. However, the following employees have the opt-in option for the following scheme (a) existing employees having employment relationship prior to Shrawan 01, 2076 (July 17, 2019), (b) under the Collective Bargaining Agreement, (c) to Old Age Protection Scheme. Until they exercise the opt-in option they are not included in the Old Age Protection Scheme and get the principal and accrued income of their provident fund and gratuity.
10. Transfer of PF and Gratuity
10.1 The Directives also deals with the PF and Gratuity for pre-enrollment and post-enrollment period. Pursuant to Directives, the existing employee (the employee whose provident fund and gratuity has been accumulated) are provided certain options in relation to the management of the provident and gratuity for pre-enrollment period (up to the date of starting of contribution to SSF). Such employee can choose to either (a) transfer the amount to SSF; or (b) get it paid out; or (c) continue to maintain the amount in the retirement fund where it has been deposited.
**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 Parliament enacted the Environment Protection Act, 2076 (2019) (the “Act”) on July 19th, 2019. As a result, the earlier Environment Protection Act, 2053 (1997) (the “1997, Act”) is now repealed.
1. Applicability and Scope
One of the main features of the Act in contrast to the 1997 Act, is that it mandates several compliances to Project Developers while developing a Proposal of a Project, to ensure that the implementation of the Project does not harm the environment.
The Act has also redefined certain terms so that the definitions are more comprehensive. For instance, “Pollution” has been redefined so as to include waste, chemical, heat, sound, electronic, electronic magnet or radioactive radiation that significantly degrade, damage the environment or harm the beneficial or useful purpose of the environment by changing the environment directly or indirectly.
Further, the Act explicitly authorizes the Government of Nepal to set standards to reduce and regulate emission, hazardous waste, Pollution emitted by vehicles, equipment, industries, hotels, restaurants and other institutions or activities. As opposed to the 1997, Act, the Act regulates manufacturing and distribution of harmful substances. “Harmful substances” is defined to include harmful waste transported through the borders, harmful substances as per the Basel Convention, 1989, explosives that harm the environment and human health, product that are flammable, perpetually lasting or corrosive in nature and leftover of the raw material that has been processed for the first time. The Act also addresses the concern of climate change and control of greenhouse gasses and other gasses which was not addressed under the 1997 Act. In addition to this, it envisages provisions pertaining to carbon trading, protection of national heritage sites, mountains and hills and waste management, there by widening the scope of regulatory regime in Nepal.
2. Regulating Authorities
The Regulating Authorities under the Act include the following authorities:
3. Compliance that Project Developer Needs to Adhere to
The 1997 Act, mandated a project developer to only comply with Initial Environment Examination and Environmental Impact Assessment. As per the present Act, a Project Developer needs to comply with the following compliances while developing a Project:
3.1. Environmental Study Report – is to be prepared prior to initiation of the Proposal, depending on the Proposal, and includes the following:
The Environment Protection Rules 2054 (the “Rules”), lays down the terms and conditions that needs to be entailed in the report. It mandates mentioning the budget, social and economic impact, cultural and physical impact, chemical and biological impact the project is likely to have.
If the Environmental Study Report does not confer with the criteria laid down in the Act, then the Project Developer will not be allowed to submit a report up till a maximum time period of 5 (five) years. If a Proposal is implemented without a Summary Environmental Study Report, or any act is done contrary to such an approved report, then a fine up to Rs. 5,00,000 (In words Nepalese Rupees Five Lakh Rupees )will be levied. If a Proposal is implemented without an Initial Environmental Report or any act is done contrary to such an approved report, then fine up to Rs.10,00,000 (In words Nepalese Rupees Ten Lakh Rupees) will be levied.
3.2. Environmental Management Plan – stating all probable solutions which will be adopted by the Project Developer to safeguard the environment and measures already undertaken by him has to be submitted. If a safeguard adopted by the Project Developer is appearing to be futile, the Project Developer will be asked to adopt a different safety measure.
3.3. Environmental Assessment Report- has to be submitted after two years of initiation of the Proposal. This report has to entailing the impact of the project on the environment and efforts undertaken to mitigate such impacts.
If a Proposal is implemented without an Environmental Impact Assessment then fine up to Rs. 50,00,000 (In words Nepalese Rupees Fifty Lakh Rupees) will be levied.
3.4. Supplementary Environmental Impact Assessment – is required to be done in some Proposals which have already done environmental impact assessment once and are involved in activities capacity building and modification of the Proposal.
4. Environmental Fund
The Act prescribes formation of an Environmental Fund in order to protect the environment, control Pollution, protect national heritage and maintain quality of air and water. Prior, permission from the Government of Nepal or the Ministry of Forests and Environment is required to make any payment in the environmental fund. Environmental Fund will constitute amounts received from the following authorities:
5. Carbon Trading
Unlike the 1997 Act, designed to combat carbon emissions, the Act empowers the Government of Nepal to engage in carbon trading with foreign government and institutions. The concept of carbon trading originated in Kyoto Protocol, 1997 (the “Kyoto Protocol”), according to which, each country has a cap on the amount of carbon they are allowed to release. Nepal ratified the Kyoto Protocol on December 14th, 2005. As per the Kyoto Protocol, countries that have a high carbon emission can purchase the right to release more carbon from the countries that have lower carbon emission.
6. Responsibility of the Government
Among other things the Act attributes responsibility to the Government of Nepal to:
7. Prohibitions under the Act
Certain activities are prohibited under the Act including:
8. Complaint Mechanism
Unlike the 1997, Act, the Act envisages an elaborate complain mechanism. Anyone can make a complaint to the Regulating Authorities about someone who is in violation or may violate the provisions under the Act. Upon investigation if the concerned person is found to be guilty he will have to pay reasonable compensation to the aggrieved person.
Anyone aggrieved by the decision taken by the Regulating Authorities in context to the fine levied under the Act, can file an appeal within thirty five days to-
Anyone aggrieved by the decision taken by the Regulating Authority in context to compensation can file an appeal within thirty five days to the High Court.
9. Punishment under the Act
The maximum limit for fine under the 1997 Act was Rs. 100,000 (In words Nepalese Rupees One Lakh) but under the present Act, this threshold has increased. In addition to what has already been stated hereinabove, there are different punishments prescribed for different offences, such as:
New rules facilitating the Act is yet to be enacted. Since there are no new rules, the Rules, under the earlier Act, 1997 would be applicable.
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:
1.1. 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.
2.1. 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 has 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 previous Act, the Act has not classified “investment business” as any industry within the list. 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.
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:
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
The timeline of the industry registration is stated as 5 days in the Act. Previously, the timeline of registration was 15 (fifteen) days. In past instances, some cases of industry registration have 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.
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 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 (Ten Million) which are not required to obtain prior approval for industry registration. The 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.
5.1. 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.
6.1. 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 EA had the same provision extending to the scope of concessions, facilities or subsidies provided by, both, the then IEA and the then prevailing laws.
7.1. The industry which requires a land area more than the land ceiling prescribed as per the prevailing laws of Nepal should apply 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.
8.1. 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 amount allocated for CSR shall be spent in specific sectors including (a) Natural Calamities, (b) 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.
9.1. 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.
10.1. 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.
10.2. The Act provides offence specific punishment based on the nature and scale of the industry in more 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 Industry||Punishment (Amount in NPR)|
|1||Operation of Industry without registration||Micro industry||5,000/-|
|Small and Cottage||25,000/-|
|Immediate closure of an industry along with above mention fine.|
|2||Performance of activities against objectives of the industry||Micro industry||Up to 2,000/-|
|Small and Cottage||Up to 50,000/-|
|Medium||Up to 100,000/-|
|Large||Up to 500,000/-|
|3||Failure to notify about industry operation, commercial production, or commencement of transaction of an industry within given time-period as provided by the Act.||Micro industry||2,000/- for each 6 months period|
|Small and Cottage||10,000/- for each 6 months period|
|Medium and Large||25,000/- for each 6 months period|
|4||Transfer of an industry without obtaining prior approval and increment of capital, enhancement of capacity, add or alter objectives without obtaining prior approval||Micro industry||5,000/-
|Small and Cottage
|25,000/- to 50,000/- (Notes: Additional 100% fine for industry which are subject to receive approval for industry registration)|
|Medium and Large||100,000/- to 300,00/- (Notes: Additional 100% fine for industry which are subject to receive approval for industry registration)|
|5||Failure of submission of annual
detail within stipulated
timeframe as provided by the
|Small and Cottage||5,000/-|
|6||Misuse of incentives, exemptions, facilities and concessions as made available under the Act||For all types of industries||Confiscation of available incentives, exemptions, facilities, and concession (“Benefits”), recovery of amount equivalent to such benefits or levy fine equivalent to such Benefits.|
|7||Non- compliance of CSR responsibility||For all types of industries||Fine equivalent to 0.5% of gross profit.|
|8||Non-compliance of any conditions or directives provided by the Ministry||Micro industry||5,000/-|
|Small and Cottage||50,000/- to 100,000/-|
|Medium||150,000/- to 300,000/-|
|Large||250,000/- to 300,000/-|
|9||Any other non-compliances provided under the Act and Regulation framed pursuant to the Act||Micro industry||Up to 15,000/-|
|Small and Cottage||Up to 15,000/- to 30,000/-|
|Medium||Up to 30,000/- to 50,000/-|
|Large||Up to 50,000/- to 100,000/-|
|Industry||Fixed Capital (NRS)||
|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)
|Medium- scale||From more than 100,00,000 (One Hundred Million) to 250,000,000 (Two Fifty Million)||From 150,000,000 (One Fifty Million) to
500,000,000 (Five Hundred Million)
|Large-scale||From 150,000,000 (One Fifty Million) to
500,000,000 (Five Hundred Million)
|More than 500,000,000 (Five Hundred
|Schedule||New Sectors introduced by the Act||Remarks
|1. Approval requiring Industries||· Related to Microbrewery
· Related to LPG Refilling
· Related to manufacturing drone or providing services through drones
|2. Cottage Industries||There has been no change.|
|3. Energy-oriented industries||· Related to biogas energy
· Related to electricity energy to be produced as a co-production of sugar industry
· Related to energy potentiality study
|4. Agriculture and Forest Product based Industries||· Related
· to production and storage of food products
· Related to Challa Kadne business
· Related to milk production and processing of 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, plywood, composite, board
· Related to non-woodforest 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. Infrastructure Industry||· Related to polluted water purification
· Related to private warehouse
· Related to infrastructure construction, arrangement, and operation of installation of pipelines for fuel and gas supply
· Related to infrastructure construction, arrangement and operation of energy house and energy house and energy transmission line
|· The current Act has replaced ‘Construction Industry’ with ‘Instructure Industry’.
· The following industries have been removed from the Schedule 5.
a) Related to assembly and convention centers
b) Related to swage and sewage passage
|6. Tourism Industry||· Related to bar
· Related to trekking, zip flyer, ultra-light, sky walking, sky diving and other similar types of excursion activities
· Related to construction and operation of cable cars.
· Related to agriculture tourism
· Related to water park
|The Act has been removed industries related to operation of mountain flight from Schedule 6|
|7. Information technology, communication technology and information dissemination-based industry||Part (A)|
|· Related to Knowledge Process Outsourcing
· Related to data centers
· Digital signature certifying agency
· Related to web portal, web design service, web hosting
|· Internet Service Provider
· Related to satellite phone operator service
· Related to VSAT Service
· Related to social networking, online message, video call, conference
|In relation to VSAT,
the Previous Act
had not included the
VSAT as service,
but merely provided
‘VSAT’. This Act
has covered VSAT
|· Related to Digital Television Network
· Related to the production of ‘BrittaChittra’
|· Related to clinic, polyclinic, operation of rehabilitation centre, physiotherapy clinic, aayurved or other alternative hospitals.
· Related to physical training, operation of Yog-Dhyan or trainings centre
· Related to swimming pool
· Related to operation of Sheet Bhandar
· Related to transport and cargo business or service
· Related to Custom Agent (Bhansar Agent) service
· Related to news dissemination service
· Related to water purification service
· Related to Cinema Hall (including multiplex)
· Related theatre (including multiplex)
· Related to 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).
· Related to services providing machinery equipment in lease
· Related to service businesses such as purification or processing cut to length sheet, photo film slitting, photo, paper slitting, tissue paper slitting, ball wiring assembly and importing finished goods in bulk and repacking having uncountable processing and procedure
· Business related to clothing and Yarn dying, Yarn sizing and printing on clothes (except for weaving industry doing such for its own purpose)
· Related to Veterinary services
· Related to service apartment
· Related to food court, catering, and street food stalls
· Related to equipment repair and installation, ready mix concrete, export house, technology and innovation center and service of providing facilitated workspace
|· The current Act tries to cover operation of all kinds of Sheet Bhandar removing the previous limitation of only the non-agriculture Sheet Bhandar.
· The Previous Act had covered only the ‘cargo businesses’. The cargo as a service and transport business or service has also been covered under this Act.
· The industry related to mass communication service has been removed from the Schedule 8.
· The Previous Act only covered the ‘water transport and distribution service’. The new Act added ‘water purification’ also under the scope of Schedule 8.
· The Act has 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.
|9. Industries with National priority
|· Infrastructure industry
· Shoes sandals manufacturing industry, thread 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
|A. Income Tax Concession|
producing fruit-based cider,
brandy or wine established
in any Undeveloped Region
|Not Provided||25% exemption on the rate of income tax for up to 10 years from the date of commencement of business
|Local tea producing and
processing industries, dairy
industries and clothes
|Not Provided||50% exemption on the rate of the income tax levied on the income from the sale of such products|
|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 bn. (Nepalese Rupees One Billion) and provide direct employment to 500 (five hundred) 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 2 bn. (Nepalese Rupees Two Billion) and provide direct employment to 300 (thee hundred) individuals throughout the year.
|Industries conducting research and excavation of minerals (except white rock (Chundhunga)) petroleum, natural gas and fuel.||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.
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.).
|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.
The timeline of commencement of commercial transaction has been extended up to mid-April 2024 A.D. (Chaitra 2080 B.S.)
|Industries related to the operation of zoological, geological and bio-tech park, and software development, data processing, cybercafé and digital mapping established inside the technology 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
Industries related to the operation of zoological, geological park was not covered by the Previous Act.
|50% exemption on tax imposed on income of such industries|
|Manufacturing industry having interns equivalent to at least 10% of the total human resource||Not Provided||Such industries are entitled to deduct for the purpose of income tax any such cost incurred in providing subsistence expenses, internship expenses and expenses incurred in enhancing the production capacity of human resource working in the industry.|
|Industry registering the intellectual property in foreign country for its protection||Reimbursement of cost was available from the Government of Nepal||Such industries are entitled to deduct such cost for the purpose of income tax|
|Industries, other than tobacco and liquor industries and Casinos, 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||Not Provided.||100% exemption on dividend tax levied as a dividend distribution on such capitalization|
|Cottage and Small-Scale Industries with at least 10 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||Not provided||50% exemption on the income tax as applicable|
|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
Bonded Warehouse or
|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.||The Government of Nepal Ministry of Finance shall determine the rate of Duty Draw Back in export of goods by such industries and then, through the One Stop Service Centre, shall refund the amount of Duty Draw Back as per the determined rate.|
|For all industries||Custom duty is levied at 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.||Custom duty is levied at the minimum rate on import of machinery, generators or industrial equipment with 10 Kilowatt capacity imported by an industry for commercial purpose. [Import of Transformer has been removed from this category.]|
|Industries producing intermediate goods used in the industrial goods being imported||Not provided||Such industries are entitled to refund of the custom duty on the produced goods based on the quantity of export|
|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
ANNEX V: Industries falling under Schedule 5 of the Constitution of Nepal
|1.||Relating to defense and military (a) Protection of national unity and territorial integrity (b) Relating to national security|
|War and defense
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|
|22.||Citizenship, passport, visa, immigration|
|23.||Atomic energy, air space and astronomy|
|24.||Intellectual property (including patents, designs, trademarks and copyrights)|
|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|
|32.||Social security and poverty alleviation|
|33.||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. **