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With shutdown of businesses and industries following Covid-19 and closure of the only stock market, Nepal Stock Exchange since 22 March 2020, businesses face problems accessing loans, financing facilities and undertaking regular payment compliances leading insolvency threats. Consequently, Nepal Rastra Bank (‘’NRB’’) and Inland Revenue Department ("IRD") have issued several notices to provide relief to affedcted businesses. Further, Ministry of Finance has incorporated such reliefs in the recent budget promulgation for FY 2020-21. We consider them below.

A. Is my business qualified for availing loans/financing services from banks under Covid-19 scheme?

Borrowers of tourism and transportation sectors who were regular in repayment of loan and interest up to (mid-January 2020) can obtain new loans on requirement basis within 5 days of application. Further, NRB limits the fees for the facility to 0.25 percent. Notably, banks have been directed to not classify under ‘’watch list’’ the defaulted or non-renewed loans exceeding payment dates due to lockdown.

Covid-19 affected agriculture industry, small and medium industry, hotel and tourism industry are facilitated with refinancing at the rate of 5 percent subsidized interest rate through government fund of NPR 100 billion. Also, the banks are restricted to charge interest rate above 5 percent for the loans to its customers which was previously capped at 7 percent.

NRB has allowed banks to provide working capital loans for one year up to 10 percent of the approved limits to Covid-19 affected hotels, restaurants, resorts, travel, trekking, aviation, transportation, export industries, entertainment industries, and hospital, private health institutions, and poultry business, small and medium industries on priority basis.

NRB had directed banks and financial institutions to issue mandatory subsidized loans at the ratio of 1 bank branch: 10 projects and has directed development banks to issue such loans in the ratio of 1 bank branch: 5 projects. For medium and small businesses government has established fund of NPR 50 billion to enable loans at rate of 5 percent.

B. Has the government introduced any loan/interest payment relief to borrowers?

Interest rates on loans on payment of monthly or quarterly installment due during 15 March 2020 to 15 April 2020 for fourth quarter of FY 2019-2020 are reduced by 2 percent of the applicable rate. Borrower reliefs include extension of payment of monthly or quarterly installment on loans and advances due mid-April 2020 until mid-July 2020, without delay payment or penal interest. Similarly, the tenure of all type of short term loans extended for working capital to be repaid during mid-April 2020 is extended by 60 days.

C. Has government introduced measures for facilitating electronic transaction of funds?

Businesses can avail electronic transaction facilities free of cost up until 15 July 2020. Also, NRB has directed banks to waive fees for Real Time Gross Settlement services for fund transfers until further notice. Capping for mobile payment has been increased to NPR 100,000 per day from NPR 10,000. However, fund transfer from wallet to banks is limited to NPR 25,000 per transaction.

D. Has government relaxed the tax filing durations, introduced tax raise or exemptions?

Filing of VAT, advance income tax deduction, details of advanced tax collection, revised estimated income tax returns and payment of utility tax (education service tax, telephone ownership, and telecommunication) for period of 15 February-15 April 2020 has been extended until 21 June 2020 (initially to 7 June 2020).

The tax exemptions under Custom Tax 2007 are extended till June 2020. The exemptions are provided in import of medicines, medical equipment and devices including face masks, sanitizer, surgical gloves for prevention and treatment of COVID-19 as recommended by the MoHP. Also, VAT on the import of raw materials for pharmaceutical industries and excise duty on domestic ethanol are waived.

Industries in special economic zone are allowed to make payments of 25% of applicable income tax for next 5 years. Small enterprises with annual turnovers of less than NPR 2 million are eligible for a tax exemption of 75% while those whose turnover is between NPR 2 million and NPR 50 million will be eligible for 50% tax exemption. Enterprises with an annual turnover between NPR 5 million and Rs10 million will receive an exemption of 25%.

The affected industries under hotel, aviation, tourism, travel and trekking are provided with 20% tax relief for income of FY-2020-21. In regards to VAT for these industries, filings can be made every four months.

E. What are the exemption on utilities and applicable fees?

For manufacturing industries, demand charge is waived and 50% waive in the payment of low demand electricity. For industries under construction, transportation, communication and films, renewal fees of licenses equipment are waived. Parking fees, license renewal fees, certificate fees and tax levied in fuels for airlines companies are waived.

Fee exemption on monthly electricity consumption fees: No fees up to consumption of 10 unit, 25% waived up to 150 units consumption and 15% waived up to 250 units consumption. 

*Please note that the above information is for purposes of general usage and the readers are suggested a professional advice. Also, the information so provided are updated as per government decisions up to 31 May 2020 and does not reflect updates thereafter.