If the government persists with its controversial decision to grant tax exemption to the Dolma Impact Fund, which is registered in Mauritius and has invested in more than a dozen companies in Nepal, Nepal is set to lose at least Rs 830 million in revenue at current prices.

Although Prime Minister Sushila Karki expressed interest in the decision to grant tax exemption to Dolma, the Ministry of Finance and the Inland Revenue Department have not indicated any change.

Dolma has invested in Nepal in Sastodeal, Foodmandu, Cloud Factory Holdings, Fuse Machines, Upaya City Cargo, Worldlink, Century Masala, Setikhola Hydropower, Shwetaganga Hydropower, Makar Jitumaya Suri Hydropower, Solar Farm, National Pathlabs, Nidan Hospital, Chirayu Hospital and DOS Pharmaceuticals. Most of the 'startups' invested in by Dolma have incurred losses, while it has made significant income from hydropower projects. However, since Dolma has a double taxation agreement (treaty) with Mauritius, the government has decided that capital gains tax will not be levied on the sale of shares by Dolma.

Dolma's investments in Makar Jitumaya Suri Hydropower, Fuse Machines, Shwetaganga Hydropower and Construction, Upaya City Cargo, Worldlink, and Setikhola Hydropower have increased. After investing 25.15 million US dollars (3.57 billion 13 million rupees) in all these companies, the fair value (potential fair value) has now increased to 48.59 million US dollars (about 6.89 billion 97 million 80 thousand rupees). On this basis, it seems that 3 billion 328.48 million rupees will be gained from the 6 companies. According to the Income Tax Act of Nepal, 2058, Nepal will receive 832.22 million rupees in capital gains tax after 25 percent tax. Dolma is trying to sell the shares of Makar Jitumaya Suri Hydro Power immediately. By selling the shares purchased for about 260 million rupees now, Dolma will earn a profit of about 1.17 billion rupees. Accordingly, the company will be subject to capital gains tax of 294.466 thousand rupees. However, since the government has decided to provide tax exemption, now the company will get all the aforementioned amounts tax exemption. According to the agreement between Nepal and Mauritius, we are required to pay tax. Not applicable: Dolma Impact Fund

Dolma has also claimed that the provisions of the Income Tax Act 2058 are not applicable to them in Nepal as per the Double Taxation Avoidance Agreement (DTAA) 1999 between Nepal and Mauritius. Dolma claims that as per the said agreement (treaty), the profit received from the sale of shares is taxable only in the relevant country of residence (Mauritius) and not in the source country (Nepal).

Dolma also says that Mauritius has entered into Double Taxation Avoidance Agreement (DTAA) with developing countries like Nepal and such an agreement protects the interests of investors. ‘Since Dolma is a legal resident of Mauritius, the sale of shares cannot be taxed in Nepal, and Nepal cannot claim capital gains tax as per the agreement with Mauritius as provided in other treaties signed by Nepal in recent days,’ the statement issued on Thursday said. ‘Similarly, since the said agreement is older than Nepal’s Income Tax Act 2058, the provisions of the act cannot be attracted.’

Similarly, Section 1 of the Treaty Act, 2047 The company claims that it will comply with the provisions of the treaty signed by Nepal in case of conflict with domestic law, as it clearly states that the provisions of the treaty signed by Nepal will take precedence. Dolma has also thanked the Nepalese government for complying with this law. ‘We express our gratitude to the Nepalese government for complying with the terms of the double taxation avoidance agreement, we believe that proper compliance with the law will send a positive message to the international investment community,’ the statement said.