Kathmandu: A special economic zone is a geographic area that has a diverse range of industries. It is governed by a special law intended to promote business and trade for industries inside SEZ. SEZs are developed with the goals of improving the country’s trade balance, attracting investment, and creating new jobs. Nepal Live Today has compiled all the information regarding SEZ from the Ministry of Information, Commerce and Supplies, and Special Economic Zone Authority, Nepal.
What is the procedure for setting up of unit in SEZ?
a) Call for application submission by SEZA
b) Submit of application as per SEZ Act 2073, Schedule 4.
c) Evaluation and selection of Industries.
d) Deposit NPR 25,000/- as License Fee.
e) Collect license to establish unit in SEZ.
f) Register for company, PAN, industry (obtain foreign investment approval for FDI from DOI/IBN)
g) Sign lease agreement with Government of Nepal
What are the basic criteria to set unit in SEZ?
Investment Threshold
• Domestic Investment: Minimum Fixed Capital > NPR 20 Million
• Foreign Investment: As per the prevailing law
Export Provision
• 0% export on 1st year of Commercial Operations Date (COD)
60% (minimum) export of production from the subsequent year.
Qualifying Industry
• Domestic Investment: Any industry except for negative list of the SEZ Act, 2016 (Annex 3)
• Foreign Investment: Any industry except for negative list of the SEZ Act, 2016 (Annex 3) and negative list of the Foreign Investment and Technology Transfer Act (FITTA) 2019 schedule
Lease Rate
• NPR 20 per square meter per month (Rebate on land lease rate 50%, 40% & 25% in 1st, 2nd & 3rd years respectively)
How much is the land lease rate and lease period for unit in SEZ?
Lease Rate
• NPR 20 per square meter per month (Rebate on land lease rate 50%, 40% & 25% in 1st, 2nd & 3rd years respectively)
Lease Period
• 30 years + 10 years
Can existing industry enter SEZ?
Existing industry cannot be relocated in SEZ (expect for some special industries through the decision of Cabinet).
How many SEZs are under operation and construction?
Bhairahawa SEZ and Simara SEZ Block A are under operation. Panchkhal SEZ is under construction.
How long does it take to start construction & operation after getting letter of approval to establish unit?
Construction work can be initiated after signing an agreement with Government of Nepal, that is within 15 days of industry registration and operation, and within one year of signing the lease agreement.
How many SEZs are there in Nepal?
As per the 15th periodic plan, Government of Nepal has announced program of One Province One SEZ, under which there are 7 SEZ locations identified, Bhairahawa, Simara, Panchkhal, Biratnagar, Jumla, Dhagadi and Gorkha. Along with that other locations which have been identified for SEZ are Nuwakot, Siraha, Jhapa, Dhanusa, Rautahat, Kapilvastu, Nepalganj and Kailali.
What are the exemptions given by the Government to the SEZs?
Income Tax Exemption:
• General: 100% tax exemption for first 5 years after Commercial Operations Date (COD) and thereafter 50% tax exemption for the remaining period of contract.
• Hilly or Mountain District: 100% tax exemption for first 10 years after Commercial Operations Date (COD) and thereafter 50% tax exemption for the remaining period of contract.
Dividend:
• 100% exemption first 5 years after Commercial Operations Date (COD) 50% exemption for the subsequent 3 years.
Value Added Tax Exemption:
• 0% VAT on export of products and services produced by industry inside SEZ
• 0% VAT on raw material, and products sold to industry in SEZ.
Customs Duty
• 1% customs duty on import of 1 vehicle to be used for transport of employees and also for 1 vehicle to transport good and services.
• Import of plant and machinery, tools & spare parts, packaging, raw materials and auxiliary parts, on bank guarantee. Such bank guarantee will be released on recommendation from SEZA after verification of the use in the industry.
• Duty refund on sells of goods/ raw materials to industry inside SEZ
Rebate on Land Lease Rate
• Rebate on land lease rate 50%, 40% & 25% in 1st, 2nd & 3rd years respectively. Note: For more information contact Special Economic Zone Authority (SEZA)
What are the fiscal incentive for industries established in SEZ?
Income Tax Exemption
General: 100% tax exemption for first 5 years after Commercial Operations Date (COD) and thereafter 50% tax exemption for the remaining period of contract.
Hilly or Mountain District: 100% tax exemption for first 10 years after Commercial Operations Date (COD) and thereafter 50% tax exemption for the remaining period of contract.
Dividend: 100% exemption for first 5 years after Commercial Operations Date (COD) 50% exemption for the subsequent 3 years.
Value Added Tax Exemption
•0% VAT on export of products and services that are produced by industry inside SEZ
•0% VAT on raw material and products sold to industry in SEZ
Customs Duty:
•1% customs duty on import of 1 vehicle to be used for transport of employees and also for vehicles to transport good and services.
•Import of plant and machinery, tools & spare parts, packaging, raw materials and auxiliary parts, on bank guarantee.
•Duty refund on sells of goods/ raw materials to industry inside SEZ
Rebate on Lease Rate
• Rebate on rent and or lease of house, land as 50%, 40% & 25% in 1st, 2nd & 3rd years respectively
What are the non-fiscal incentives?
Visa Facilitation:
Non-Tourist Visa:
•For 6 months to the investor to conduct a feasibility study.
•For 5 years (maximum) to foreign employees.
•For 7 years to highly (special) skilled employee upon logical justification.
•Additional number of years for Foreign employee critically important for the business and related to the use of State-ofthe-Art technology.
Business Visa:
•Foreign investors and their family members till the period of foreign investment.
OR
•Representative of the company and their family members till the period of foreign investment.
Residential Visa:
•Investors who invests USD 10 million or equivalent in convertible currency at once will get the visa for their family members as well till the period of foreign investment.
What about the aggrement?
Agreement will be signed with SEZA on behalf of the government for infrastructure development, operations and management as well as establishment of industries.
Repatriation
Employee: 75% of the income in convertible currency allowed (as per NRB).
Investor:
Amount received from the sale of some or all shares of foreign investment,
Amount received in lieu of profit or dividends from such foreign investment,
Amount in lieu of payment of foreign capital loan or interest,
The investor shall take the amount in the currency prescribed in the agreement.
Source: Special Economic Zone Authority
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