Nepal IT Industry Seeks Long-Term Policy Support, Tax Incentives, and Export Growth

The Nepal Association for Software and IT Services Companies (NAS-IT) has submitted its pre-budget recommendations to the government, outlining the need to position the IT sector as a key driver of Nepal’s economic transformation through long-term and competitive policy frameworks.

The proposals emphasize tax reforms, investment incentives, human resource development, digital infrastructure expansion, and stronger institutional coordination to accelerate growth in the sector.

Tax Incentives and Export Promotion

NAS-IT has proposed a highly concessional tax regime for registered IT companies, recommending just 1 percent income tax on net profits for a period of 10 years. The association argues that this would encourage reinvestment in innovation, infrastructure development, workforce expansion, and research activities.

In addition, the organization has suggested an 8 percent export credit incentive for IT companies engaged in foreign currency earnings. According to NAS-IT, this would enhance global competitiveness, increase foreign exchange inflows, and generate employment opportunities.

VAT and Tax Policy Clarity

The association has also called for clearer and more practical Value Added Tax (VAT) provisions for IT services and exports. It has urged the government to simplify and ensure timely VAT refund mechanisms to improve cash flow and support business expansion.

To retain skilled professionals, NAS-IT has recommended reforms in personal income tax, proposing that the highest tax rate for IT professionals should not exceed 25 percent. This, it argues, would help reduce talent migration and improve Nepal’s competitiveness in the global technology market.

The organization has also suggested that “sweat equity” in startups should be taxed only at the time of sale rather than at issuance or vesting, in order to reduce financial pressure on early-stage companies.

International Trade and Double Taxation

NAS-IT has stressed the need to expand Double Taxation Avoidance Agreements (DTAA) with major economies including the United States, United Kingdom, and Australia. The association believes such agreements would facilitate foreign investment, expand outsourcing opportunities, and simplify international business operations for Nepali IT firms.

Domestic Procurement and Industry Protection

The association has urged the government to prioritize domestic IT companies in public procurement. It has proposed reserving IT contracts valued below NPR 10 crore for Nepali firms, while ensuring that at least 30 percent of larger projects are executed by local companies.

This policy, NAS-IT argues, would strengthen the domestic industry, create jobs, and improve long-term system maintenance and technological self-reliance.

Institutional and Global Promotion Measures

To position Nepal as an international IT destination, NAS-IT has recommended joint initiatives between the government and private sector, including global promotion campaigns through embassies and diplomatic missions.

The establishment of a National IT Promotion Board has also been proposed, with representation from both the public and private sectors. The board would be responsible for policy coordination, investment facilitation, digital transformation, and international market promotion.

Education, Skills, and Workforce Policy

In the education sector, NAS-IT has called for integrating IT and artificial intelligence (AI) into school-level curricula, allocating dedicated budgets for teacher training, and developing industry-aligned skill-based education systems.

It has also recommended making labor laws more flexible to suit project-based IT work and simplifying procedures for hiring foreign experts where necessary.

Digital Infrastructure and Innovation

The association has emphasized the need to develop secure domestic cloud infrastructure, promote Nepali-language AI models, and expand digital public services. It has also highlighted the importance of strengthening SaaS (Software-as-a-Service) companies and AI-driven product development.

Cybersecurity and Legal Reform

NAS-IT has called for modernization of cybersecurity and data protection laws. It has recommended revising the Electronic Transactions Act to establish a comprehensive legal framework covering cybersecurity, data privacy, and digital commerce.