Tax on purchases for foreign-aided projects waived

- POST REPORT, Kathmandu

Jun 28, 2014-

Contractors will not have to pay taxes for purchasing goods and services for carrying out foreign-aided development work, according to the new Development Cooperation Policy 2014.

The previous policy had not talked about providing such tax exemptions, but the government had been offering the facility through decision on one-to-one basis as per the agreements signed.

“There won’t be any confusion about whether taxes should be imposed henceforth as the new policy has clearly mentioned about it,” said Madhu Marasini, chief of the Finance Ministry’s International Cooperation Coordination Division.

The new policy, however, states those making profits using foreign aid have to pay = income tax. “As profits are not considered part of foreign aid, taxes will be imposed based on the existing tax system,” states the policy.

In order to maintain transparency in the tax exemption to foreign-aided projects, the policy has stated the government will arrange the necessary amount on its own. “We are holding talks on maintaining a separate bank account to put money equivalent to the tax exemption given to foreign-aided projects,” said Marasini.

The policy has also provisioned the government would provide free non-tourist visas to foreign employees, workers and their dependents working in development projects where foreign aid has been used. “Those receiving such visas based on bilateral agreements should not take work permits,” said Marasini.

He said the policy put in place such a provision to address donors’ concerns. “The work permit is applicable to workers and employees hired by private sector companies and industries, but not for the ones who work as per bilateral agreements,” said Marasini.

For the last two years, the Department of Labour has been issuing letters in the names of diplomatic missions, international and national non-government organisations and private companies, asking them to provide the details about their foreign employees and acquire work permits.

Many diplomatic offices, however, were hesitant to provide such details and acquire work permits, complaining about the government’s “assertive move”.

The new policy has also provisioned the government would issue free non-tourist visas to foreign volunteers.

Published: 29-06-2014 09:04

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