19.19. Special Provisions Regarding Special Economic Zones

19.1 "Special Economic Zone" means a special commercial zone whose main purpose is the production of exportable goods and services announced by the Government of Nepal in order to carry out industrial activities intensively. It refers to a specialized or integrated economic activity structure with industrial services, standardized industrial infrastructure and service facilities, flexible labor arrangements, special facilities and incentive arrangements with concessions for investment attraction, export processing areas, export promotion houses, and free trade areas.

19.2 In order to increase industrial activities including infrastructure and thereby help in investment promotion, production growth, export promotion and job creation, establishment of special economic zone, development, management and operation of infrastructure structure at full government level, in public private collaboration and Legal and institutional arrangements will be made so that even the private sector can do it.

19.3 Industries established in special economic zones will get the following facilities and concessions: 19.3.1 Income tax exemption:

(a) Investors who invest in infrastructure will get a 100% discount on income tax for the first seven years and a 50% discount for the next five years from the date the infrastructure is operated or the licensee starts trading in the product.
(b) Manufacturing industries established in special economic zones in Himalayan districts or mountainous districts designated by the Government of Nepal will receive a 100% discount on income tax for the first 10 years and a 50% discount for the next five years.
(c) Foreign investors will be given a fifty percent discount on income tax on income earned from foreign technology, intellectual property or management service fees and royalties.is.
(d) Special economic zone industries established in highly underdeveloped areas mentioned in schedule 9 will get 100% income tax exemption for ten years from the date of commencement of business. Also, there will be a fifty percent discount on the income tax payable by such industries for the next ten years. 19.3.2 Facilities relating to Value Added Tax:
(a) The licensee will get 100 percent tax deduction facility on the value added tax paid when importing up to three vehicles for an industry for the purpose of transporting machinery, equipment, machine parts, raw materials or goods required for the industry.
(b) Zero rate facility will be given in the trade of goods or services between industrialists within the special economic zone. 19.3.3 Exemption from customs duty:
(a) Customs duties will be exempted on the basis of bank guarantee for the raw materials, auxiliary raw materials, packaging materials and other materials used in the production of exported goods.
(b) Plant, machinery, equipment, tools and spare parts required for industry will be exempted from customs duty.
(c) The licensee shall be allowed to take such goods or services out of the special economic zone after paying the customs duties and other taxes applicable to the goods or services that can be sold in the domestic market of Nepal.
(d) If an importer sells any goods to an industry within a special economic zone, the customs office shall refund the customs duty on such goods to the relevant importer.
(e) When the licensee transfers the ownership of the goods imported under customs exemption, the Government of Nepal shall follow the prescribed procedure by publishing a notice in the Nepal Gazette. 19.3.4 Local Tax Exemption: Goods or services produced by the industry, imported machinery equipment, spare parts of machines, raw materials and other materials required for the establishment of the industry and for the purpose of distributing goods and goods for one industry up to a maximum of three depending on the level of such industry. In the vehicle QNo local tax will be levied as per the current law. 19.3.5 Obtaining export facility: If any firm, company or industry established in accordance with prevailing law sells its raw materials or any product to an industry established in a special economic zone, such sale shall be considered as export. Or the industry will also get that facility. 19.3.6 Wounded ware house facilities will be provided in a simpler manner to the industries established in the Special Economic Zones. Such facility will be made available within 45 days from the date of application.