Kathmandu, May 29: The government has unveiled a wide range of revenue-sector reform plans and programmes through the budget for fiscal year 2083/84 (2026/27), focusing on tax policy, customs reform, digitalisation and investment promotion.
Presenting the government’s annual income and expenditure estimates before the Federal Parliament on Friday, Finance Minister Dr Swarnim Wagle announced sweeping policy changes centred on taxation, revenue administration, customs reforms, investment facilitation and the expansion of the digital economy.
The budget aims to stimulate economic activity through business-friendly tax policies, simpler and clearer tax laws, voluntary tax compliance and technology-driven tax administration, with expectations of major reforms in Nepal’s revenue system.
During the budget speech, the Finance Minister said the government would promote the formal economy by integrating all economic activities into digital systems.
Accordingly, the government plans to boost revenue collection through an automated, IT-friendly and incentive-based tax administration system that encourages voluntary tax participation. It has also introduced a policy to mobilise non-tax revenue based on cost recovery and taxpayers’ ability to pay.
The government has declared the IT sector as the “nation’s new economic engine” and announced a 50 percent tax exemption on income earned from exports of IT-related services.
Similarly, the budget has introduced a provision granting 100 percent tax exemption on “sweat equity” income received by human resources working in the IT sector while calculating taxable income. The measure is expected to encourage startups, innovation and technology-based enterprises.
To promote domestic production, the government announced the implementation of a “domestic product promotion fee” on selected goods produced within the country.
Likewise, interest income earned from loans invested in Nepal by non-profit development finance organisations wholly owned by neighbouring countries will be exempted from income tax.
The government also announced a review of the sensitive list under the South Asian Free Trade Area (SAFTA), signalling a possible shift in Nepal’s trade policy.
A minimum equity fee will be imposed on private education and health services, with the aim of encouraging infrastructure development and service expansion in rural areas.
In the energy sector, the budget introduced a concessional Value Added Tax (VAT) rate on electricity consumption exceeding 50 units per month sold to end consumers.
Customs duties on electric vehicles, which are currently based on peak power capacity, will now be determined on a value basis. In addition, a “clean infrastructure investment fee” will be imposed to support domestic EV production, charging stations and battery management systems.
To promote exports of Nepali-brand alcohol, the government will encourage “good spirit” production and maturation processes in the liquor industry. Microbreweries will also be registered as liquor industries and brought under the excise duty system from the next fiscal year.
Taxes on tobacco products have been increased by around 10 percent, while excise duties on alcohol and beer have also been raised.
The government has also announced major structural reforms in revenue administration. The Revenue Investigation Department will be scrapped, while all businesses with annual turnover exceeding Rs 100 million and issuing e-invoices will be integrated into the Central Invoice Monitoring System. Small business owners will be encouraged to adopt digital payment systems.
Announcing a “paperless, faceless and contactless” revenue administration system, Finance Minister Dr Wagle said services including tax filing, payment and refunds would be fully automated.
To control the multiple taxation system imposed at the local level, the budget has proposed eliminating various local taxes, including export duties and customs charges levied during the transportation of goods between local units. Permanent Account Number (PAN) registration will also be made mandatory for tax payments at provincial and local levels.
The government will introduce the concept of an “Authorized Business Person” for trade facilitation, under which qualified businesses will receive fast-track customs clearance through a “Blue Lane” system.
For tourism facilitation, tourists entering Nepal by land will now be able to declare temporary vehicle entry and pay fees online at all major customs points. The budget also proposes automating the deposit system for goods brought for weddings to promote matrimonial tourism and ease rules on bringing foreign currency within legal limits.
Additionally, agro-processing industries will receive full income tax exemption for their first 10 years of operation, while VAT exemptions will be provided on imports of cold storage facilities, packaging equipment and testing laboratory machinery. #Nepal
