Ease for IT companies to set up branch offices abroad, invest and repatriate the income earned from there
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The government has addressed the long-standing demand that entrepreneurs active in the information technology sector of Nepal should be allowed to open branch offices or invest abroad. The cabinet meeting held on January 26, through an ordinance, prepared a legal basis for information technology (IT) companies to establish branch offices abroad, invest and repatriate the income earned therefrom.
The government said that this decision was taken with the aim of making Nepali companies working in the IT sector competitive in the international market. Prime Minister KP Sharma Oli, through a social media post on Saturday, mentioned that he is trying to solve some of the legal problems faced by those working in the field of IT in Nepal.
'This is good news for those working in the IT sector,' Prime Minister Oli said, 'Now Nepali IT companies will be able to invest abroad, earn money by opening branch offices abroad and legally bring in the money earned. The Council of Ministers meeting has recommended to the President a law to make it easier to bring in the income earned in IT through an ordinance.'
Abhay Poudel, co-founder of Gokyo Labs and treasurer of Nepal Association for Software and IT Services Companies (NAS-IT) said that this decision of the government is important and positive for the development of Nepal's IT sector. "It will help greatly in building the future of the technology industry, the government and we are improving this sector together," he said. Announcing the IT decade through the budget this year was also an important step.'
This time, the cabinet meeting has approved an ordinance to amend some Nepal Acts and allowed IT companies to establish their presence in the foreign market. By amending the Foreign Regulation (Regulation) Act, 2019 under some Nepal Acts, the government is going to give opportunities to Nepali IT companies to invest abroad, compete and bring income into Nepal. IT companies can set up branch offices abroad and conduct business.
According to Hempal Shrestha, an expert in this field, this decision will help Nepali IT companies to increase their presence in the global market, expand the market and become competitive. "This is a demand from a long time ago, but it is a positive initiative even though it came late," he said. At that time, it was possible to invest abroad with the recommendation of the relevant body. But it was not clear who the relevant body is.' According to the provisions contained in the
ordinance, companies based on information technology can now receive foreign currency exchange facilities from Nepal Rastra Bank on the recommendation of the Ministry of Communication and Information Technology. For this, the concerned company will have to submit an application to the Ministry of Communications. After the ministry reviews the company's commercial capacity and grants approval, Nepal Rastra Bank will provide the same facility for one time.
Now we will be able to compete in big foreign contracts. By opening subsidiary companies in different countries, we can create jobs in Nepal by taking the business of those companies,' said Poudel of NAS-IT, 'even if we open a company abroad, the backend office is in Nepal. This will make it easier to meet our goal of bringing in $6 billion over 10 years. A main obstacle for the development of the IT sector has been broken.
The new ordinance also mentions encouraging the establishment of IT service industries within special economic zones. It is expected to help the development of IT companies as concessions like tax exemptions are available in special economic zones.
A report published last year by the Institute for Integrated Development Studies on the current state of Nepal's IT sector and its challenges, reported that in 2022, Nepal's IT service exports generated about 515 million US dollars, including more than 106 IT service export companies and 14,728 It was mentioned that freelancers involved in software development and technology are active.
IT service exports contributed 1.4 percent to Nepal's gross domestic product (GDP) and 5.5 percent to foreign exchange reserves, the report said. It was pointed out that the growth of the IT sector is positive for Nepal. In October, the report of the public Nepal Rastra Bank also showed that Nepal received 3 billion rupees in two months by exporting information technology services. Rashtra Bank's monthly report of last August showed that goods and services related to information technology worth 3.7 billion rupees were exported in July and August. Regarding the
ordinance, Prime Minister Oli has said that a law to facilitate repatriation of IT earnings has been recommended to President Ramchandra Paudel. "We believe this will develop IT as a foreign exchange earning industry," his post said. Vivek Rana, an expert in the field of information technology, said that although the issue of increasing the market access of Nepali companies abroad is welcome, he is interested in the terms of this Act.
'It is said to invest, but for that, it is not effective if conditions are set that one must have so much income, have so many employees or pay so many taxes to invest abroad,' he said, 'allowing investment abroad means investment from abroad It is also expected that it will come. But along with investment, the government should also bring in an easy system to bring in skilled manpower.' "It is difficult to keep an outsider for three months," he said, "It is difficult to give them money." Along with the easy access to resources, we also need to pay attention to the easy access to skilled manpower. He said that since legal systems such as information technology, cyber security, data security are also connected with the issue of allowing investment and foreign investment, it is important to advance these laws soon.
