The Nepali government has approved a decision allowing IT companies to invest and open branch offices abroad. The Cabinet approved the move on January 26, following amendments to the Foreign Regulation Act, 2019. This article will discuss the latest decision by the cabinet in more detail.
Foreign Investment for IT Companies Overview
Whats new?
The amendments to the law now enable Nepali companies to repatriate income earned from foreign markets. This legal change encourages global expansion for Nepali IT companies while supporting Nepal’s economic growth. The primary goal of this decision is to help Nepali IT companies compete internationally. In addition, it aims to generate foreign income, which is expected to strengthen Nepal’s economy.
Process for Foreign Investment
Companies looking to invest abroad will need to apply to the Ministry of Communication and Information Technology. The Ministry will assess the company’s capacity before granting approval. After approval, Nepal Rastra Bank will assist with the foreign currency exchange process.
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Industry Reactions
According to Kantipur, some industry experts welcomed the decision, seeing it as a positive step for the growth of the IT sector and a move towards achieving the $6 billion export target over the next decade. However, others raised concerns about the lack of clarity regarding earlier investment provisions and the potential for restrictions. There were calls for more flexible policies to manage investments and skilled manpower effectively.
Economic Impact
In 2022, IT exports contributed $515 million to Nepal’s economy. IT services accounted for 1.4% of GDP and 5.5% of the country’s foreign exchange reserves.
Additional Provisions
The government plans to offer tax benefits for IT companies operating in special economic zones, aiming to foster job creation and attract foreign contracts. This move is also expected to help maintain backend operations in Nepal.
