1. Introduction
International Non-Governmental Organizations (INGOs) play a crucial role in executing welfare projects that uplift marginalized communities in Nepal. This guide outlines the regulatory framework, operational methods, and taxation rules that govern the activities of INGOs working in collaboration with local NGOs and the Social Welfare Council (SWC) in Nepal.
To learn more about the detailed procedures and obligations, download the full document at the top of the page.
2. Social Welfare Activities Defined
Social welfare activities are actions aimed at the social and economic upliftment of vulnerable sections of society. These activities are non-profit-oriented and focus on sectors like child protection, women empowerment, education, healthcare, and community development.
3. INGOs and NGOs: Roles and Differences
- Non-Governmental Organizations (NGOs) operate primarily at a local level, while INGOs function internationally.
- INGOs cannot initiate projects independently in Nepal and must collaborate with local NGOs or the SWC.
4. Regulatory Framework for INGO Engagement in Nepal
Key laws governing INGO operations in Nepal include:
- Social Welfare Act, 2049
- Social Welfare Council-Foreign Aid Acceptance Directives, 2071
- Income Tax Act, 2058
These laws ensure transparency and accountability while preventing misuse of resources and protecting national interests.
5. Operational Modalities for INGOs
There are two primary methods for INGOs to execute welfare projects in Nepal:
I. Aid Local NGOs:
INGOs can provide financial or material support to local NGOs registered with the SWC.
II. Direct Collaboration with SWC:
INGOs can sign agreements with the SWC to carry out projects through local partners. A General Agreement with the SWC is mandatory, and projects must follow strict reporting, auditing, and renewal requirements.
6. Funding and Project Execution
- INGOs must commit a minimum financial amount of USD 200,000 annually.
- Funds are maintained in a Nepali bank account.
- 80% of the project budget must be allocated for project implementation, with 20% reserved for administrative costs.
7. Taxation Rules for INGOs
Donations and material assistance provided by INGOs to local NGOs are generally tax-exempt. However, NGOs must secure a tax exemption certificate by submitting necessary documentation to the SWC and the Inland Revenue Department.
8. Reporting and Auditing
INGOs must submit:
- Quarterly Reports: Details of project activities.
- Annual Reports: Financial statements. Additionally, annual audits by a registered chartered accountant in Nepal are mandatory.
9. Conclusion
INGOs play a pivotal role in uplifting Nepal’s marginalized communities. By adhering to Nepal’s legal framework and collaborating with local NGOs and SWC, INGOs can ensure the successful execution of welfare projects. Compliance with regulations on taxation, reporting, and financial management fosters transparency and accountability.
For further details on the regulations and processes, download the full document from the link provided above.
