Nepal starts loving startups. SMEs and Startups in Budget 2078/79; promising yet unclear.

Investopedia defines a startup as a company in the first stages of operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand. These companies generally start with high costs and limited revenue, which is why they look for capital from a variety of sources such as venture capitalists.

Nepal’s budget 2078/79 has been prepared with a special focus on increasing the number of startups in Nepal. These initiatives shall definitely encourage more entrepreneurs in terms of the ease of doing business in Nepal. The government has adopted a policy of income tax exemption for startup business promotion. The budget announcement of the annual year 2078 was done on Jestha 15 by Finance Minister Bishnu Poudel and made the announcement

Poudel has announced a 100 percent rebate on income tax for startups for up to five years from the start of business. He also decided to provide a one percent interest rate soft loan to startup businesses to motivate the youth in entrepreneurship.

Presenting the budget for the coming fiscal year, Finance Minister announced loans of up to Rs 25 Lakhs at 1 percent interest to startups (new ventures) for seed capital.

Here are few highlights related to SMES and Startups in Budget of Nepal

  • Free company registration, renewal and other taxes for startups (Point 68)
  • Full discount on the income tax for the initial five years for Startups (Point 483)
  • Startup loans up to Rs 25 lakhs at a 1% interest rate for startups. To qualify for startup financing, entrepreneurs must provide a detailed business plan (Point 68)
  • If Private companies provide up to 1 lakh seed investment to 5 startups then the seed amount will be deductible while calculating the taxable income (Point 483)
  • Expansion on the area and limit for no collateral loan for Small, Medium and Small Scale Industries, Commercial Agriculture, Youth, Women entrepreneurs and foreign returnees. Planning for 13 billion loans with a 5% interest subsidy. (Point 65)
  • The government will set up a challenge fund of Rs 1 billion to help new entrepreneurs (Point 68)

With the government endorsing this campaign, it can be a good marketing strategy for businesses to promote their products and services around the same tagline or theme. Let’s start exploring what part of our business is Made in Nepal and Make in Nepal.

However, the interesting part is implementation. The lack of coordination (or we don’t know what) between the Ministry and the relevant authorities; in this case, OCR and IRD make it unclear on how these will be implemented. The definition of startups and criteria, the other hidden/unclear clauses makes the officials and service takers scratch their head. None of whom we contacted at OCR has any clue about how these will be implemented. The only answer we could get (until 2076/03/16) was “we are waiting for the circular from the ministry”

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