Foreign Exchange Facilities for IT and Service Exporting Businesses in Nepal

Industries or businessmen engaged in exporting information technology and other services are set to receive foreign exchange facilities, according to recent amendments made by the Foreign Exchange Management Department of Nepal Rastra Bank. These revisions to the integrated instructions pertaining to foreign regulations aim to support and incentivize businesses involved in service exports.

Under these new provisions, industries and businesses exporting services, including information technology, will be eligible for several foreign exchange benefits. They will now have the opportunity to establish contact offices abroad, transfer funds to their foreign bank accounts, and procure software, programs, and equipment in foreign currency.

Furthermore, these enterprises will be permitted to engage in transactions related to software, programs, and equipment with foreign entities. Nepal Rastra Bank has outlined that such businesses can access foreign currency facilities through commercial banks, provided they adhere to the conditions established by the central bank. This facility will be subject to a maximum limit of 10 percent of the foreign currency earnings recorded in the previous financial year.

The regulatory guidelines set forth by Nepal Rastra Bank mandate that companies exporting information technology and other services must submit audited financial statements showcasing their foreign currency earnings from the preceding financial year. Additionally, they are required to furnish bank account details illustrating the conversion of foreign currency.

For entities exporting to India and earning foreign currency, the submission of Nepali rupee account details and evidence of foreign exchange issued by the relevant bank is mandatory. The approval of the relevant body within the Nepal Government is essential to access the requested amount of foreign currency facility.

The Rastra Bank stipulates that a separate approval is necessary for businesses looking to open foreign accounts in connection with this facility. Additionally, petitioners are obligated to make a self-declaration attesting to their compliance with prevailing legal provisions.

While the enhanced foreign exchange facilities offer benefits of up to 10 percent of foreign exchange earnings, it's crucial to note that this benefit is capped at 20 percent of the taxable income indicated in the tax payment certificate of the previous financial year. These measures intend to bolster the growth of service-based industries in Nepal and foster a more conducive environment for business expansion and international collaboration.