Ref: NEPAL_TAX_2025_001
Verified: September 30, 2026
Strategic Directive on Cross-Border Financing: Zero Withholding Tax on Interest Payments to Foreign Banks and Companies
Executive Liquidity Summary
"This Financial Strategic Directive evaluates Nepal’s new 0% withholding tax on interest paid to foreign banks and companies. It details how the exemption lowers cross-border financing costs, improves capital allocation, and aligns with global best practices. The directive provides a comprehensive implementation framework, risk assessment, and actionable recommendations for policymakers, financial institutions, and corporates to maximize the policy’s benefits while mitigating potential risks."
The Government of Nepal has enacted a pivotal tax reform exempting withholding tax (0%) on loan interest paid to foreign banks and companies. This directive is a strategic lever to reduce cross-border financing costs, enhance capital allocation efficiency, and position Nepal as a competitive destination for foreign capital. By eliminating a key cost barrier, the policy aims to attract international lenders, lower the effective cost of debt for domestic enterprises, and stimulate productive investment. This analysis outlines the rationale, implications, and implementation roadmap for stakeholders.