Indian tax policy could become a barrier to Nepal’s IT sector
Summary
Nepal's IT sector faces challenges due to ineffective implementation of tax relief policies and increasing competitive tax policies from India, risking the relocation of businesses. Nepal's IT exports show potential but require clearer promotion and support to thrive.
Key Points
- The Nepalese government introduced tax exemptions and incentives for the IT sector in its 2025/26 budget to boost growth and exports.
- Implementation of these policies has been ineffective, causing difficulties for IT companies such as delayed VAT refunds and tax disputes.
- India's 2026/27 budget introduced a clear safe harbor margin policy attracting foreign IT companies, posing competitive challenges to Nepal.
- The Cotiviti case in Nepal has led to uncertainty and staff reductions, with some companies shifting operations to India due to complex tax laws.
- Despite these challenges, Nepal’s IT exports surfaced strong in 2022, emphasizing the sector’s untapped potential if policy priorities improve.
