RegulatoryProvisions

Policies Regarding Investments in Tourism Sector

RELEVANT ACTS

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Investment in Tourism Sector Tourism

Foreign Direct Investment (FDI)

Industrial Enterprises Act 2020

An industry related to tourism established with an investment of more than NPR 2 billion is entitled to 100% income tax exemption for the first five years after the date of commencement of the transaction, and to 50% income tax exemption for the next three years (pg. 31)

Tourism Act 1998

Foreign Investment and Technology Transfer Act 2021 (FITTA)

Industrial Enterprise Act 2020 (IEA) Foreign Exchange (Regulation) Act 1962 (FERA)

The tourism sector has got the approval for refinancing of NPR 6 79 billion

Foreign investment is open almost in all sectors of the economy, except for in sectors that are listed in a negative list FITTA, where FDI is restricted

Provisions for the Hospitality Industry

-Hotels charge a 10% service charge for all bills including rooms, restaurants, and recreation centre charges. At the end of the month, employees get 72% of the total service charge, the management gets 23% of it, and unions and HAN get the remaining 5%.

-There is a VAT charge of 13% for all bills

-Previously, hotels got tax exemptions on their vehicles that had a tourist number plate There was a tax exemption of 50% for vehicles above 16 seaters. However, the government has stopped that Hence, currently, there is no tax exemption on hotel vehicles even with the tourist number plate. Further, there is no tax exemption for private cars for hotel use.

-Tax at the rate of only 1% will be applicable on taxable income for FY 2020/21 of hotels having annual turnover above NPR 10 million Also, a taxable loss incurred by hotels in FY 2019-20 and 2020-21, if any, shall be carried forward for 10 years (instead of 7 years of the normal carry-forward period)

-Due to COVID-19, the government has given more time for loan repayment for hotels.

-A provision will be made for extending the grace period to those industries or projects under construction that have not been able to complete/operate due to COVID-19. Under this scheme, the grace period can be extended by two years for tourist-standard hotels .

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