Kathmandu: The Government of Nepal has officially designated the Information Technology (IT) sector as the country’s new economic catalyst, introducing a suite of fiscal incentives to drive its growth.
In his budget presentation to the Federal Parliament on Friday, Finance Minister Dr Swarnim Waglé announced a 50 percent tax exemption on income earned from IT service exports. Furthermore, to attract and retain specialized talent, the government has declared that the value of “sweat equity” received by IT professionals will be completely exempt from taxable income calculations, marking a significant shift toward supporting the digital workforce.
In a major administrative restructuring, the government has decided to dissolve the Department of Revenue Investigation, shifting its responsibilities to various thematic agencies to ensure more specialized oversight. To modernize the tax regime, the budget introduces an “e-assessment” system powered by Artificial Intelligence (AI). This technology will be utilized for risk-based tax audits and investigations, aiming to create a “paperless, faceless, and contactless” revenue administration where tax filing, payments, and refunds are fully automated through a digital interface.
Significant changes have also been made to the taxation of electric vehicles, with customs duties now determined by the vehicle’s market price rather than its peak power capacity. Additionally, a new clean infrastructure investment fee will be levied at the import stage to fund domestic manufacturing, charging networks, and battery management systems. On the energy front, domestic consumers who use more than 50 units of electricity per month will now be subject to a concessional rate of Value Added Tax (VAT), a move intended to balance revenue needs with the promotion of clean energy.
To position Nepal as a premier global “wedding destination,” the government will automate the customs declaration and refund processes for goods imported specifically for wedding ceremonies. Furthermore, international tourists entering Nepal by land will soon be able to handle temporary vehicle import declarations and fee payments entirely through an online portal. This move is expected to simplify the entry process and make the country more accessible to regional travellers.
Fiscal discipline remains a priority, with the government increasing excise duties on cigarettes, liquor, and beer by 10 percent. To enhance financial transparency, any business with an annual turnover exceeding 100 million rupees is now required to integrate with the Central Billing Monitoring System. Small-scale entrepreneurs are also being encouraged to adopt electronic payment systems as part of the broader national digital tax policy.
In a move to boost regional entertainment and cultural infrastructure, new cinema halls established outside of metropolitan and sub-metropolitan areas will enjoy a full 10-year income tax holiday. To facilitate internal trade and reduce the cost of logistics, the government has abolished double taxation—such as scrap taxes—previously collected by multiple local governments during the transit of goods. The revenue department will also modernize its monitoring of consumer goods through digital excise stamps and a comprehensive electronic “track and trace” system.
The budget introduces a sweeping simplification of the customs regime, reducing the number of tariff tiers from eleven to seven. To protect the domestic industry, customs duties have been lowered on 273 types of industrial raw materials, ensuring they are taxed at a lower rate than finished products.
Additionally, excise duties have been abolished on 360 different items to reduce the tax burden on various sectors. Fragmented levies, including the infrastructure development tax and road maintenance fees, have been consolidated into a single, unified “Green Tax” collected at the border. Finally, to boost productivity and morale within the civil service, the Minister introduced performance-based incentive allowances for revenue administration staff, tied to the successful control of leakages through international information sharing.
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