In the wake of recent social upheaval which reflected dissatisfaction of the start-up community against the Government of Nepal and its tax policies, we were intrigued to discover more on provisions made to support start-ups and SMEs of Nepal. In our recent podcast episode we had a chance to discuss how our Law is doing to address issues of Nepali start-ups and SMEs with Advocate Abesh Adhikari. Advocate Adhikari is a chief legal officer at MeroAdda.com- a program by smart law incubator pvt ltd. He is an expert with extensive knowledge in the field of International trade and business, and he has been working to provide legal consultations to SMEs and entrepreneurs of Nepal.
Read the article below to find out some legal rights, tax rebates and provisions you – as a founder, must be aware of.
- To support local businesses overcome the effects of COVID-19, the Government of Nepal has made certain tax exemptions in this year’s fiscal budget.
- Provisions for Tax exemption is made on the basis of turnover: 75% tax exemption is awarded to businesses with turnover of less than 2million NRS. 50% tax exemption is made to businesses that have turnover in the neighborhood of 2million-50million NRS.
- Tax exemption for new micro-enterprise is another provision made by the Government , where micro-enterprises between the age range of 5-10 years get certain exemptions.
- Similarly, there is provision for 10 years of tax exemptions for businesses run by women or women led enterprises. Special, 5 years, 50% tax exemptions are also made for businesses that are established in industrial villages of Nepal.
- Moreover, the Government has also curtailed custom duty on raw materials that are imported by micro enterprises, or raw materials imported to manufacture masks in Nepal.
Policies to support SMEs
- Via the Enterprise Development Act 2020, the Government of Nepal has made some progressive policies to support our SMEs and foster economic development of our country. Through new regulations, which encompases the philosophy of federalism and decentralisation, this act seeks to resolve challenges faced by local SMES. For example decentralization of the registration process is one such example. Where start-ups can now register and renew their business from provincial level. Similarly, the time frame to register a business had been reduced from 15 days to 5 days. This reduction is going to have a positive impact on incentive to legally register the business
At training with Trailblazer Advocate Abesh, get training on legally registering your business. Register here
Moreover, the act has defined one window policy that serves in reducing unseen burden on start-ups who can now receive one point service.
Legal rights for start-ups
First of all, if your Start-ups has contributed to social security funds then you may exercise your rights to use funds in this security fund as an unemployment scheme. Start-ups can also use Government enabled, organisation level welfare funds to pass on benefit to their employees.
Similarly, if your business has been in loss for five consecutive years, then your enterprise qualifies as a sick industry and you are emancipated from legal obligations of paying fee, tax and fines of any kind.
Moreover, an economic rehabilitation fund, created in times of Earthquake, can also be used by start-ups in these times for refinancing purposes.
Business founders also have Right to Free Market Competition, that they can exercise to practice free market policy. Speaking in this context, during covid-19 lockdown small scale businesses have as much right to operate as big scale businesses.
Last but not the least, if your business is facing issues to sustainability then you may also practise your business’s right to go for Merger and Acquisition.
For more information check out Blincventures.com’s podcast episode on Legal Talk for Start-ups