Government plans tax breaks for IT firms, incentives to attract multinational tech companies

KATHMANDU: The government has unveiled an ambitious plan to provide tax exemptions and policy incentives to information technology (IT) companies while attracting multinational technology firms to establish development and innovation hubs in Nepal.

The proposal has been included in the draft of the “National Commitment” framework introduced by the government led by Balen Shah, which consolidates key commitments from six major political parties represented in Parliament.

Tax Incentives and Policy Reforms

According to the draft, the government aims to position Nepal as a competitive destination for technology investment by offering tax concessions to domestic IT companies and facilitating entry for global tech firms.

“Multinational technology companies will be encouraged to establish development and innovation centers in Nepal. IT companies will be provided tax incentives,” the draft states.

The government has also proposed reforms in public procurement policies to ensure greater participation of domestic IT firms in government digital projects, promoting local industry growth and reducing dependency on foreign vendors.

IT Sector to Be Declared Strategic Industry

A major policy shift outlined in the draft is the plan to formally recognize the IT sector as a national strategic industry. To support this, the government intends to establish a dedicated IT Promotion Board to coordinate policy, investment, and industry development.

The broader goal is to develop Nepal’s digital economy as a key driver of economic growth, productivity, and high-quality employment.

Building Digital Infrastructure

The government has emphasized large-scale investment in digital infrastructure, including high-speed connectivity, data centers, cloud services, and cybersecurity systems.

It also plans to strengthen legal frameworks related to data privacy and security while encouraging the development of software and applications within Nepal for public sector use.

The draft highlights reforms in procurement policies to prioritize domestically developed digital solutions, aiming to build a self-reliant technology ecosystem.

Ambition to Export AI and Computing Power

One of the most ambitious targets outlined in the draft is to transform Nepal into a country capable of exporting artificial intelligence (AI) and computational power within the next five years.

The government envisions developing domestic industries around data centers, AI computing, and digital services to integrate Nepal into the global digital economy.

To support international competitiveness, programs such as “From Nepal to the World” will be launched to help Nepali IT companies expand into global markets.

Satellite and Connectivity Expansion

The policy also includes plans to establish Nepal’s own satellite system to ensure reliable digital connectivity, particularly in rural and remote areas.

This initiative aims to bridge the digital divide and expand access to basic telecommunications services across the country.

Focus on AI, Digital Skills, and Education

The government has placed strong emphasis on emerging technologies, particularly artificial intelligence and generative AI, identifying them as priority areas for innovation and investment.

In parallel, investment in digital skills development will be increased. The draft proposes making digital literacy—including AI and content moderation—mandatory up to Grade 12, aligning education policy with future workforce demands.

Digital Governance and Super App Vision

The government also plans to update the Digital Nepal Framework to reflect evolving technological trends and policy needs.

Additionally, the existing citizen service platform, Nagarik App, will be upgraded into a “super app” integrating multiple public services into a single digital interface.

Economic Implications

The policy direction signals a strategic pivot toward a knowledge-based economy, with the IT sector positioned as a central pillar of Nepal’s future growth.

If implemented effectively, analysts say the measures could attract foreign direct investment, boost exports of digital services, and generate high-skilled employment opportunities for Nepal’s growing youth population.

The draft is currently open for feedback from political parties and stakeholders, after which it is expected to be integrated into upcoming national policies, budget frameworks, and reform agendas.