ICT Ordinance Nepal

01 Apr

What is the ICT Ordinance Nepal?

The ICT Ordinance Nepal refers to the Information and Communication Technology Ordinance issued on January 13, 2025 (Poush 29, 2081 BS) by the Government of Nepal. This landmark legislation amends multiple existing laws to create a comprehensive framework for the development, regulation, and promotion of Nepal's information technology sector. The ordinance was introduced as part of broader economic reform measures to position Nepal as a competitive destination for IT investment and digital transformation.

When the ICT Ordinance Nepal was enacted, it introduced sweeping changes to foreign investment rules, tax incentives, and operational flexibility for IT companies. The ordinance specifically targets the technology sector with provisions that allow Nepali IT firms to expand globally, attract foreign investment, and benefit from significant tax concessions. The Information Technology Ordinance Nepal 2025 represents one of the most progressive policy initiatives in South Asia for the digital economy.

Why Was the ICT Ordinance Nepal Introduced?

The ICT Ordinance Nepal was introduced to address longstanding regulatory barriers that constrained the growth of Nepal's IT sector. Prior to the ordinance, Nepali IT companies faced restrictions on establishing overseas branches, foreign investment was subject to high minimum capital requirements, and tax incentives were insufficient to compete with regional IT hubs.

The benefits of the ICT Ordinance Nepal include enabling Nepali IT firms to establish subsidiaries and branch offices abroad, allowing 100% foreign direct investment in the ICT sector without minimum capital requirements, providing significant tax incentives for IT exporters, facilitating foreign currency repatriation for IT earnings, and creating a legal framework for employee stock ownership plans (ESOPs). Additionally, the ordinance positions Nepal as an attractive destination for global tech companies seeking skilled, English-speaking talent at competitive costs.

Legal Framework of ICT Ordinance Nepal

The ICT Ordinance Nepal operates within a broader legal framework that governs information technology, foreign investment, and business operations in Nepal. Understanding these interconnected laws is essential for compliance and strategic planning.

Legal Framework	Purpose	Relevance to ICT Ordinance
Foreign Investment and Technology Transfer Act, 2075 (2019)	Primary FDI legislation	Amended by ICT Ordinance for IT sector
Industrial Enterprises Act, 2076 (2020)	Industrial regulation	Provides tax incentives for IT industries
Companies Act, 2063 (2006)	Company formation	Governs incorporation of IT companies
Income Tax Act, 2058 (2002)	Taxation	Implements IT sector tax waivers
Foreign Exchange Regulation Act, 1962	Currency regulation	Governs repatriation of IT earnings
Nepal Rastra Bank Act	Banking regulation	Regulates foreign currency transactions

The ICT Ordinance Nepal amends these existing laws to create specialized provisions for the technology sector. The Department of Industry, Nepal Rastra Bank, and Ministry of Communications and Information Technology are the primary regulatory authorities responsible for implementing the ordinance.

Key Provisions of ICT Ordinance Nepal

The ICT Ordinance Nepal introduces several groundbreaking provisions that transform the legal landscape for technology businesses in Nepal.

100% Foreign Direct Investment in ICT Sector

The ordinance explicitly permits up to 100% foreign direct investment in Nepal's ICT sector. This applies to all IT sub-sectors including software development, SaaS, BPO, data centers, telecommunications, cybersecurity, artificial intelligence, fintech, edtech, and healthtech. Foreign investors can establish fully-owned subsidiaries without local partnership requirements.

Removal of Minimum Investment Requirement

Previously, foreign investors were required to invest minimum capital of NPR 20 million (approximately USD 150,000). The ICT Ordinance Nepal completely removed this minimum investment threshold specifically for information technology-based industries. Foreign IT entrepreneurs can now start businesses in Nepal with any amount of capital, making it one of the most liberal IT FDI policies in South Asia.

Nepali IT Companies Can Invest Abroad

For the first time, the ICT Ordinance Nepal allows Nepali IT companies to establish branch offices, subsidiaries, and liaison offices abroad. This provision enables domestic tech firms to expand globally, access international markets, and build trust with foreign clients. Companies must obtain approval from the Ministry of Communications and Information Technology and Nepal Rastra Bank.

Foreign Currency Repatriation Facilities

The ordinance facilitates foreign currency exchange through Nepal Rastra Bank for IT companies earning foreign income. Nepali IT firms can now legally repatriate their overseas earnings to Nepal, addressing a major challenge faced by exporters. The Ministry of Communications and Information Technology assesses company operational capacity before granting approval.

Tax Incentives Under ICT Ordinance Nepal

The ICT Ordinance Nepal introduces unprecedented tax incentives to promote the IT sector and attract investment.

Tax Incentive	Benefit	Eligibility
75% Income Tax Waiver	Effective tax rate of only 5% on IT export revenue	Companies exporting IT services
100% Tax Exemption	Complete income tax waiver for first 5 years	Startups with turnover below NPR 100 million
50% Tax Rate	Reduced corporate tax rate of 12.5%	BPO, cloud computing, and IT services earning foreign currency
Dividend Tax Rebate	5% dividend tax waived if profits reinvested	All IT companies reinvesting earnings
Customs Duty Exemption	Zero duty on imported capital equipment	IT companies in Special Economic Zones
Company Registration Fee Waiver	Complete waiver of registration fees	New IT companies and capital increments

These tax incentives make Nepal highly competitive compared to other South Asian IT destinations. The effective tax rate of 5% for IT exporters is among the lowest in the region.

Investment Opportunities Under ICT Ordinance Nepal

The ICT Ordinance Nepal opens multiple investment avenues for both domestic and foreign investors in the technology sector.

Software Development and SaaS

Foreign investors can establish 100% owned software development companies, SaaS platforms, and product companies. The ordinance covers custom software development, enterprise applications, mobile applications, and cloud-based software platforms.

Business Process Outsourcing (BPO)

The BPO sector is fully open to foreign investment under the ICT Ordinance Nepal. Opportunities include customer service centers, data entry operations, back-office processing, technical support, and knowledge process outsourcing (KPO).

Data Centers and Cloud Computing

Investment in data center infrastructure, cloud computing services, colocation facilities, and managed hosting is permitted with 100% foreign ownership. The ordinance supports Nepal's ambition to become a regional data hub.

Telecommunications and Digital Services

The ordinance permits foreign investment in internet service providers, telecom equipment, value-added services, and digital infrastructure development.

Emerging Technologies

The ICT Ordinance Nepal explicitly covers emerging technology sectors including artificial intelligence, machine learning, blockchain, fintech, edtech, healthtech, and gaming development studios.

Timeline for Implementation of ICT Ordinance Nepal

The ICT Ordinance Nepal was issued on January 13, 2025, and implementation is ongoing across various government agencies.

Implementation Phase	Timeline	Status
Ordinance Issuance	January 13, 2025	Completed
Replacement Bills Presentation	February 2025	Completed
Parliamentary Endorsement	Within 60 days of House session	In Progress
NRB Regulatory Framework	Q1-Q2 2025	Under Development
MoCIT Operational Guidelines	Q1-Q2 2025	Under Development
Full Implementation	Throughout 2025	Ongoing

The ordinance must be superseded by replacement bills within 60 days of the commencement of the House session. During this period, the legislature may modify some provisions included in the ordinances.

Eligibility Criteria for ICT Ordinance Nepal Benefits

To avail benefits under the ICT Ordinance Nepal, businesses must meet specific eligibility criteria.

For Foreign Investors

Investment must be in eligible ICT sub-sectors
Company must be registered under Companies Act, 2063
Industrial registration must be obtained from Department of Industry
Tax registration (PAN) must be completed
Foreign investment approval must be obtained from DOI

For Nepali IT Companies Expanding Abroad

Company must be registered and operating in Nepal
Must demonstrate operational capacity and financial viability
Must obtain approval from Ministry of Communications and Information Technology
Must comply with Nepal Rastra Bank foreign exchange regulations
Must submit detailed project report for overseas expansion

For Tax Incentives

Must be registered as IT company under Industrial Enterprises Act
Must generate foreign currency earnings for export incentives
Must maintain proper accounting records and tax compliance
Startup exemption applies to companies with turnover below NPR 100 million
Must file tax returns and comply with audit requirements

Compliance Requirements Under ICT Ordinance Nepal

After benefiting from the ICT Ordinance Nepal, companies must fulfill ongoing compliance requirements.

Registration Compliance

Company registration at Office of Company Registrar
Industrial registration at Department of Industry
PAN registration at Inland Revenue Department
VAT registration if turnover exceeds thresholds
Local ward office registration

Foreign Exchange Compliance

Pre-investment notification to Nepal Rastra Bank
Foreign investment inflow reporting
Repatriation approval for dividends and profits
Foreign currency account maintenance
Annual foreign exchange compliance reporting

Tax Compliance

Quarterly advance tax payments
Annual income tax return filing
VAT return filing if registered
Transfer pricing documentation for related party transactions
Tax audit compliance

Employment Compliance

Social Security Fund contributions (20% employer, 11% employee)
Labor contract compliance
Employee stock ownership plan (ESOP) documentation
Work permit compliance for foreign employees
Workplace safety standards

Comparison: Before and After ICT Ordinance Nepal

The ICT Ordinance Nepal represents a fundamental transformation of Nepal's IT regulatory environment.

Aspect	Before Ordinance	After Ordinance
Foreign Ownership	Up to 100% in most sectors	Explicitly confirmed at 100% for all ICT
Minimum Investment	NPR 20 million (USD 150,000)	No minimum requirement
Overseas Expansion	Prohibited for Nepali companies	Permitted with approval
Tax on IT Exports	Standard 25% corporate tax	Effective 5% after 75% waiver
Startup Tax Holiday	Not available	100% exemption for 5 years
Repatriation Process	Complex, time-consuming	Streamlined, 7-day approval
ESOPs for Employees	Not clearly permitted	Explicitly allowed
SEZ Investment Caps	Applied	Removed for ICT sector

This comparison demonstrates how the ICT Ordinance Nepal positions Nepal as one of the most attractive IT investment destinations in South Asia.

Challenges and Concerns Regarding ICT Ordinance Nepal

Despite its progressive nature, the ICT Ordinance Nepal faces certain challenges and concerns that stakeholders should be aware of.

Implementation Clarity

Industry experts note that the ordinance requires more clarity on implementation procedures. Questions remain about whether benefits apply to new companies only or include established IT firms. The detailed regulatory framework from Nepal Rastra Bank and operational guidelines from the Ministry of Communications and Information Technology are still under development.

International Recognition

Nepali IT companies expanding abroad may face challenges regarding international recognition and acceptance. Foreign countries have their own policies for accepting foreign branch offices, and government-to-government lobbying may be crucial for successful expansion.

Competition from Established Players

Nepali IT companies venturing globally will face fierce competition from established international players with greater resources, brand recognition, and operational experience. Success will require government support in strengthening brands and ensuring alignment with global standards.

Bureaucratic Hurdles

While the ordinance introduces progressive policies, bureaucratic hurdles could impede implementation. Streamlined procedures and efficient government service delivery will be essential for realizing the ordinance's full potential.

Benefits of Professional Consultation for ICT Ordinance Nepal

Engaging professional services for understanding the ICT Ordinance Nepal offers several advantages.

Regulatory Interpretation

Professional consultants provide clarity on complex legal provisions and their practical implications. They help businesses understand eligibility criteria, compliance requirements, and procedural steps.

Application Assistance

Experts assist with preparing and submitting applications for foreign investment approval, overseas expansion permits, and tax incentive claims. This reduces the risk of rejection or delays.

Compliance Management

Professional services ensure ongoing compliance with registration, tax, foreign exchange, and employment regulations. This includes annual return filing, audit coordination, and regulatory reporting.

Strategic Planning

Consultants advise on optimal business structures, investment planning, and expansion strategies under the ICT Ordinance Nepal framework.

Frequently Asked Questions About ICT Ordinance Nepal

What is the ICT Ordinance Nepal 2025?

The ICT Ordinance Nepal 2025 is a legislative measure issued on January 13, 2025, that amends existing laws to promote Nepal's information technology sector. It allows 100% foreign investment in ICT, removes minimum capital requirements, enables Nepali IT companies to expand abroad, and provides significant tax incentives for IT exporters.

What are the key benefits of ICT Ordinance Nepal for foreign investors?

Key benefits include 100% foreign ownership permitted in all ICT sub-sectors, no minimum investment requirement, 75% income tax waiver on IT export revenue (effective 5% tax rate), 100% tax exemption for startups for first 5 years, streamlined repatriation process, and customs duty exemptions on capital equipment.

Can Nepali IT companies now open offices abroad under ICT Ordinance Nepal?

Yes, for the first time, the ICT Ordinance Nepal allows Nepali IT companies to establish branch offices, subsidiaries, and liaison offices abroad. Companies must obtain approval from the Ministry of Communications and Information Technology and Nepal Rastra Bank. This enables domestic firms to access international markets and build global presence.

What tax incentives are available for IT companies under ICT Ordinance Nepal?

Tax incentives include 75% income tax waiver on revenue from export of IT services (effective 5% tax rate), 100% income tax exemption for first 5 years for startups with turnover below NPR 100 million, 50% of normal corporate tax rate (12.5%) for BPO and cloud computing services earning foreign currency, and 5% dividend tax rebate if profits are reinvested.

Is there any minimum investment required for foreign IT companies in Nepal?

No, the ICT Ordinance Nepal completely removed the minimum investment requirement for the IT sector. Previously, foreign investors were required to invest NPR 20 million (approximately USD 150,000). Now, foreign IT entrepreneurs can start businesses in Nepal with any amount of capital.

How long does it take to get approval under ICT Ordinance Nepal?

The standard approval process takes 7 to 15 days for foreign investment approval through the automatic route. Company registration takes 2 to 5 days, PAN registration takes 1 to 3 days, and NRB approval for foreign exchange takes 15 working days. The one-day approval service is available for qualifying investments.

What sectors are covered under ICT Ordinance Nepal?

The ordinance covers all ICT sub-sectors including software development, SaaS, BPO, KPO, data centers, telecommunications, cybersecurity, artificial intelligence, machine learning, fintech, edtech, healthtech, digital media, gaming, and cloud computing services.

Can foreign IT companies repatriate profits from Nepal?

Yes, the ICT Ordinance Nepal guarantees foreign investors the right to repatriate dividends, profits, and capital. The repatriation approval process has been streamlined to 7 days, with appeal resolution within 15 days. Foreign currency facilities are provided through Nepal Rastra Bank.

Are there any restrictions on foreign investment under ICT Ordinance Nepal?

While the ICT sector is fully open, certain activities remain restricted. Retail trading is prohibited for foreign investors. Companies must comply with general business regulations including company registration, tax compliance, and employment laws. Specific sectoral licenses may be required for certain activities.

How can I get professional help for ICT Ordinance Nepal compliance?

Many law firms and business consultants offer specialized services for ICT Ordinance Nepal compliance. These services include regulatory interpretation, application preparation, compliance management, and strategic planning. Corporate Np provides comprehensive consultation services for IT companies seeking to benefit from the ordinance.

Conclusion

The ICT Ordinance Nepal represents a transformative policy initiative that positions Nepal as a leading destination for information technology investment in South Asia. By removing minimum capital requirements, allowing 100% foreign ownership, enabling overseas expansion for domestic companies, and providing unprecedented tax incentives, the ordinance creates a highly competitive environment for IT businesses.

Entrepreneurs and investors are encouraged to seek professional guidance for navigating the ICT Ordinance Nepal framework and ensuring full compliance. With proper implementation and supportive regulatory environment, Nepal's IT sector is poised for significant growth and global integration.

References

For additional information on ICT Ordinance Nepal, consult these authoritative sources:

Service Provider: Corporate Np provides comprehensive consultation services for ICT Ordinance Nepal compliance. From foreign investment approval to tax planning and ongoing compliance, our team ensures seamless business establishment for IT companies in Nepal.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. ICT Ordinance provisions and regulations are subject to change. Consult qualified legal professionals for specific guidance on your IT business needs.