Nepal’s government has announced a special package to help businesses recover from the devastating floods in the Bhotekoshi river basin, offering customs and tax exemptions, loan restructuring and cheaper credit.

The Cabinet decided on Thursday to provide relief and concessions to industries, businesses and other commercial establishments affected by the floods, which caused widespread damage to property and economic activity. The government described the measures as the first phase of its recovery package.

Under the package, businesses whose commercial vehicles or transport equipment were destroyed beyond repair or swept away by the floods will be allowed to deregister the damaged vehicles and import replacements without paying customs duties.

Businesses whose plants, machinery, tools, or equipment were destroyed beyond repair will also be allowed to import replacements, up to the quantity lost, without paying customs duties, according to the Cabinet decision.

The government will also waive customs duties on replacement goods in cases where an importer had already paid customs duties, but the floods destroyed the goods before reaching their destination. The replacement goods must be imported through any customs office within six months.

Tax relief

The Inland Revenue Department has been instructed to provide a range of tax concessions to businesses in flood-affected areas.

Taxpayers affected by the floods will be given until November 11, 2026, to file tax returns and pay taxes that would otherwise have been due in September and October under Nepal’s VAT, income tax, excise duty and annual finance laws.

The government has also ordered the tax authority to simplify the process for adjusting VAT claims on damaged commercial property. Businesses will be allowed to deduct the full value of commercial property that has been destroyed as an expense for tax purposes.

For partially damaged depreciable assets, businesses will be allowed to deduct repair and improvement costs without the usual statutory limit when calculating taxable income for the 2026-27 fiscal year.

Individuals directly affected by the floods who file estimated income statements will receive a full income tax exemption for the 2025-26 fiscal year, according to the decision.

The government will also amend relevant laws and regulations so that contributions made by companies from their corporate social responsibility funds to the Prime Minister’s Disaster Relief Fund during the 2026-27 fiscal year can be counted as CSR expenditure.

Provincial and local governments will be asked to provide temporary concessions on property taxes, business taxes, building permit fees and other local charges for businesses and property directly affected by the floods.

Loan restructuring and cheaper credit

The government has also directed Nepal Rastra Bank to introduce measures to ease loan repayments for flood-affected borrowers.

For goods imported through the Rasuwa customs point that were damaged or destroyed in the floods, banks and financial institutions will be required to provide loan restructuring or rescheduling, as well as extensions for principal and interest payments, based on the nature of the business and goods, the extent of the damage and insurance claims.

The central bank will formulate the necessary policy framework for the measure.

Flood-affected borrowers will also be allowed to restructure or reschedule their loans once, with banks and financial institutions instructed to provide extensions for principal and interest payments.

For businesses whose vehicles, transport equipment, machinery or other equipment were damaged, banks will be allowed to provide loans to purchase replacements, based on assessments of the damage and insurance compensation. Such loans will carry the bank’s base rate plus the prescribed minimum premium, while the applicable loan-to-value ratio will also be reviewed.

For all categories of flood-affected borrowers, the government has directed banks to charge, for one year, whichever is lower: the bank’s base rate plus a 0.5 percentage point premium, or the interest rate resulting from adding the borrower’s existing premium to the base rate.

Faster insurance payouts

The Insurance Authority will also introduce special arrangements to speed up insurance claims and compensation.

It will allow insurers to deploy surveyors through a simplified process to assess flood-related losses more quickly and efficiently.

Insurers will be required to provide policyholders making flood-related claims with an advance payment of up to 50 percent based on preliminary assessment reports. Reinsurers will similarly be required to provide insurers with advance claim payments of up to 50 percent.

The government has also instructed the Insurance Authority to require insurers to introduce simplified procedures for processing and settling flood-related insurance claims.