9th October 2025, Kathmandu
In a decisive move to stabilize the post-unrest business environment and support economic recovery, the Government of Nepal has introduced a package of tax relief and financial facilities for industrialists and business owners impacted by the recent Gen-Z movement unrest.
Tax Relief and Insurance Guidance
This initiative, formalized through a Cabinet decision and a notice from the Department of Inland Revenue (DIR) on October 9, 2025 (Ashoj 23, 2082 BS), aims to provide crucial financial cushioning to businesses that sustained damages during the demonstrations, particularly those without adequate insurance coverage.
Context of the Gen-Z Movement and Economic Impact
The decision comes in the wake of the highly disruptive Gen-Z movement, which began primarily in early September 2025, sparked by a social media ban and fueled by deep-seated youth frustration over corruption, nepotism, and poor governance. The protests quickly escalated from peaceful demonstrations to violent clashes, resulting in significant destruction of both public and private property across major cities like Kathmandu, Pokhara, and others.
Preliminary assessments indicate the economic damage runs into billions of rupees, severely affecting sectors like tourism, retail, and manufacturing. High-profile businesses, including major retail chains and hotels, suffered substantial losses from arson, vandalism, and looting, leading to the overnight unemployment of thousands of workers and a sharp decline in investor confidence. This tax relief package is the government’s direct response to mitigate this severe economic fallout, acknowledging the private sector’s role as a key contributor to the national economy and employment.
Mechanism of Tax Relief for Uninsured Losses
The most critical component of the newly announced package addresses businesses that lacked insurance coverage for damaged inventory or operational assets. Recognizing that many businesses in Nepal operate without comprehensive risk management, the government has provided an unprecedented avenue for financial relief:
Tax Deduction for Losses: Affected industries and commercial establishments can claim a direct tax deduction on their taxable income for the fiscal year 2082/83 based on the assessed value of the losses incurred due to the unrest.
Documentation Requirement: To qualify, business owners must submit a detailed valuation report of the damages, coupled with a notarized affidavit—referred to locally as Surjamina Muchulka—to their respective Inland Revenue Offices. This requirement, which necessitates a sworn statement confirmed before a Notary Public, aims to formalize the loss assessment, ensure transparency, and comply with the stringent documentation standards outlined in the Income Tax Act, 2058 BS, and the Value Added Tax Act, 2052 BS.
Adjustment of Tax Obligations: By successfully claiming this deduction, eligible businesses can adjust their taxable profits and corresponding Value Added Tax (VAT) obligations, thereby substantially reducing their financial burden during the recovery phase.
Incentivizing National Recovery Contributions
In a further measure to promote collective national effort in recovery, the government has also made a key provision regarding contributions to the National Reconstruction Fund:
Tax-Deductible Contributions: Businesses and industrial units contributing financially to the National Reconstruction Fund (a fund recently established to rebuild public and government infrastructure damaged during the unrest) in the fiscal year 2082/83 can deduct this entire contributed amount from their taxable income.
Purpose of the Fund: This fund is part of a broader national campaign for rapid recovery and long-term economic revival. The government has formed a high-level committee to oversee the fund’s operation, with a mandate to restore vandalized public properties, support economic revival, and provide relief and rehabilitation. The tax incentive encourages the private sector to actively participate in repairing the nation’s damaged infrastructure, creating a powerful synergy between public and private efforts.
Eligibility and Compliance Mandates
The relief measures are strictly defined to target those most affected and to ensure proper statutory compliance. Eligibility is restricted to:
- Industrialists, entrepreneurs, and business owners whose commercial establishments were demonstrably impacted by the Gen-Z movement unrest.
- Businesses lacking insurance for the specific inventory, property, or operational assets that were damaged.
- Taxpayers providing the mandatory notarized documentation (valuation report and affidavit) to the Inland Revenue Offices.
The Department of Inland Revenue (DIR) has underscored the importance of full cooperation from taxpayers. The documentation requirements—including a detailed assessment of losses, the notarized affidavit, and supporting documents related to business ownership and operational status—are non-negotiable and designed to integrate the relief process seamlessly with existing tax legislation.
Broader Policy Implications and Future Outlook
This tax relief package serves a dual purpose beyond immediate financial aid. It acts as a critical step toward improving the overall resilience of the Nepali business ecosystem. By creating a temporary relief mechanism for uninsured losses, the government implicitly highlights the necessity of prudent risk management. Officials have explicitly used this opportunity to urge entrepreneurs to plan for contingencies and adopt robust insurance coverage for future risks, signaling a shift toward encouraging a more mature and risk-aware business culture.
The swift and structured implementation of these temporary measures reflects the government’s realization that rapid stabilization of the business sector is crucial to avert a deeper economic crisis. As Nepal grapples with the potential for negative economic growth and continued political uncertainty, the concerted effort to provide tangible support to businesses is vital for protecting employment, restoring investor confidence, and ensuring the long-term sustainable growth of the industrial and commercial sectors.
For More: Tax Relief and Insurance Guidance