KATHMANDU, March 17: Ministry of Finance (MoF) has initiated steps to sign Double Taxation Avoidance Agreement (DTAA) with three major countries in a bid to lure investors by assuring them that they will not be required to pay taxes in their country if they pay it in Nepal.
“We have already entrusted concerned officials to come up with drafts of the DTAA within a month,” said Finance Secretary Krishna Hari Baskota. Once those are developed, he said the government will formally exchange them with the United States, Japan and Russia and start negotiations to give them final shape for signing.
The initiative is part of government efforts to create better investment environment and bilateral friendly tax regime.
DTAA is considered crucial to gain the confidence of foreign investors as it allows investors with businesses in Nepal to obtain tax credit in their country for tax they have paid here.
Japanese business delegating visiting Nepal in the past have suggested the Nepali private sector to convince the government to sign the DTAA if they wanted to lure more Japanese investment partners in Nepal. In the absence of such an agreement, they say interested Japanese investors were not putting in their money in Nepal, as they would have to pay taxes both in Nepal and Japan.
Similar demand had come from a delegation of the US investors, who visited Nepal last year.
“It is considering their demands that we have decided to move ahead with the DTAA with the US, Japan as well as Russia in the first phase,” said Baskota.
The initiative is in line with the Immediate Action Plan (IAP) for Economic Growth and Prosperity that Prime Minister Baburam Bhattarai announced in January this year. In the IAP, he said the government will sign DTAA along with Bilateral Investment Promotion and Protection Agreement (BIPPA) with China, SAARC countries and 5 other developed nations by the end of this fiscal year.
The PM had drawn up the plan in view of the Investment Year, when he said the government is hoping to bring in US$ 1 billion from the overseas investors. To realize the plan, the government has assigned the Investment Board to develop 50 bankable investment projects in areas such as infrastructure, hydropower, tourism and agriculture, so that it could be offered to foreign investors.
As clear identification of projects will not be enough, the government is hopeful that signing of DTAA and BIPA with potential investment generating countries will create further attractions for investors to put their money in Nepal.