Law Governing INGOs in Nepal

International Non-Governmental Organizations (INGOs) play a significant role in Nepal’s development sector. The Nepali government has established a comprehensive legal framework to regulate INGO operations within the country. This framework aims to ensure that INGOs contribute effectively to Nepal’s development while adhering to national laws and policies.

The primary legislation governing INGOs in Nepal is the Social Welfare Act, 2049 (1992). This act, along with subsequent regulations and directives, outlines the rules and procedures for INGO registration, operation, and monitoring. The Social Welfare Council (SWC), established under this act, serves as the central regulatory body for INGOs in Nepal.

INGOs operating in Nepal must navigate a complex regulatory environment that encompasses various aspects of their work, including registration, project approval, financial management, and reporting. Understanding these regulations is essential for INGOs to operate effectively and in compliance with Nepali law.

Legal Framework for INGO Operations in Nepal

The legal framework for INGO operations in Nepal consists of several key laws and regulations:

1. Social Welfare Act, 2049 (1992): This act provides the foundation for INGO regulation in Nepal. It establishes the Social Welfare Council and outlines the basic requirements for INGO registration and operation.
2. Association Registration Act, 2034 (1977): This act governs the registration of domestic non-governmental organizations and applies to INGOs in certain aspects.
3. Social Welfare Rules, 2049 (1992): These rules provide detailed procedures for implementing the Social Welfare Act, including specific requirements for INGO registration and project approval.
4. Foreign Aid Policy, 2076 (2019): This policy outlines the government’s approach to foreign aid, including guidelines for INGO operations and project implementation.
5. Development Cooperation Policy, 2076 (2019): This policy sets out the framework for development cooperation in Nepal, including the role of INGOs in development projects.
6. Labor Act, 2074 (2017): This act governs employment relationships and applies to INGOs in their capacity as employers in Nepal.
7. Income Tax Act, 2058 (2002): This act outlines the taxation regime applicable to INGOs operating in Nepal.

These laws and policies collectively form the regulatory framework within which INGOs must operate in Nepal. Compliance with this framework is essential for INGOs to maintain their legal status and continue their operations in the country.

Registration Process for INGOs in Nepal

The registration process for INGOs in Nepal involves several steps and requires interaction with multiple government agencies. The primary agency responsible for INGO registration is the Social Welfare Council (SWC).

Steps for INGO registration in Nepal:

1. Submit a letter of intent to the Ministry of Foreign Affairs (MoFA)
2. Obtain a recommendation letter from MoFA
3. Apply for registration with the Social Welfare Council
4. Submit required documents to SWC
5. Undergo review and evaluation by SWC
6. Receive approval and registration certificate from SWC
7. Sign a General Agreement with SWC

Required documents for INGO registration:

• Constitution or Memorandum of Association of the INGO
• Registration certificate from the country of origin
• Latest audited financial report
• Recommendation letter from MoFA
• Proposed program details and budget
• CV of the proposed Country Director
• Letter of commitment to abide by Nepali laws and regulations

The registration process can be time-consuming and may take several months to complete. INGOs must be prepared to provide detailed information about their organization, proposed activities, and funding sources.

Visa and Work Permit Requirements for INGO Staff

Foreign staff working for INGOs in Nepal require appropriate visas and work permits. The process involves coordination between the INGO, the Social Welfare Council, and the Department of Immigration.

Steps for obtaining visas and work permits for INGO staff:

1. INGO submits a request to SWC for visa recommendation
2. SWC reviews the request and issues a recommendation letter
3. INGO applies for a non-tourist visa at the Department of Immigration
4. Department of Immigration issues a non-tourist visa
5. INGO applies for a work permit at the Department of Labor
6. Department of Labor issues a work permit

Required documents for visa and work permit applications:

• Passport copy of the foreign staff member
• CV and educational certificates
• Job description and contract
• Recommendation letter from SWC
• Letter from the INGO explaining the need for foreign staff
• Police clearance certificate from the country of origin

INGOs should note that there are restrictions on the number of foreign staff they can employ, and preference should be given to hiring local staff whenever possible.

Financial Regulations and Reporting for INGOs

INGOs operating in Nepal are subject to strict financial regulations and reporting requirements. These regulations aim to ensure transparency and accountability in INGO operations.

Key financial regulations for INGOs:

1. All funds must be channeled through a single bank account approved by SWC
2. INGOs must maintain detailed financial records and submit regular financial reports
3. Annual audits must be conducted by a registered auditor in Nepal
4. INGOs must comply with Nepal’s foreign exchange regulations
5. Overhead costs are limited to a certain percentage of the total project budget

Reporting requirements for INGOs:

• Quarterly progress reports to SWC
• Annual progress reports to SWC
• Annual audited financial statements
• Project completion reports

INGOs must ensure strict compliance with these financial regulations and reporting requirements to maintain their legal status in Nepal.

Project Approval and Implementation Procedures

INGOs must obtain approval for their projects from the Social Welfare Council before implementation. The project approval process involves several steps and requires detailed documentation.

Steps for project approval:

1. Submit project proposal to SWC
2. SWC reviews the proposal and may request additional information
3. SWC consults with relevant line ministries
4. SWC grants approval or requests modifications
5. INGO signs a project agreement with SWC

Required documents for project approval:

• Detailed project proposal
• Logical framework
• Budget breakdown
• Implementation timeline
• Monitoring and evaluation plan
• Environmental impact assessment (if applicable)

Once approved, INGOs must implement projects in accordance with the approved proposal and agreement. Any significant changes to the project must be approved by SWC.

Taxation Laws Applicable to INGOs in Nepal

INGOs operating in Nepal are subject to various taxation laws, although they may be eligible for certain exemptions. The primary tax laws affecting INGOs are:

1. Income Tax Act, 2058 (2002)
2. Value Added Tax Act, 2052 (1996)
3. Customs Act, 2064 (2007)

Key taxation aspects for INGOs:

• INGOs are generally exempt from income tax on grants and donations received for approved projects
• INGOs must withhold and remit income tax on salaries paid to employees
• VAT exemptions may be available for goods and services directly related to approved projects
• Custom duty exemptions may be granted for imported goods used in approved projects

INGOs must register with the Inland Revenue Department and obtain a Permanent Account Number (PAN). They are required to file tax returns and comply with all applicable tax laws.

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Monitoring and Evaluation of INGO Activities

The Nepali government, primarily through the Social Welfare Council, conducts regular monitoring and evaluation of INGO activities. This process aims to ensure that INGOs are operating in compliance with their approved projects and Nepali laws.

Monitoring and evaluation procedures:

1. Regular field visits by SWC officials
2. Review of quarterly and annual progress reports
3. Financial audits and reviews
4. Project completion evaluations
5. Impact assessments of INGO activities

INGOs are expected to cooperate fully with monitoring and evaluation efforts. They should maintain detailed records of their activities and be prepared to provide information and access to project sites as requested by SWC or other government agencies.

Restrictions and Prohibited Activities for INGOs

INGOs operating in Nepal are subject to certain restrictions and prohibited activities. These limitations are designed to ensure that INGO activities align with national interests and do not interfere with sensitive areas.

Restricted and prohibited activities for INGOs:

• Engaging in political activities or supporting political parties
• Proselytizing or promoting religious conversion
• Undertaking activities that may harm national security or social harmony
• Implementing projects without proper approval from SWC
• Transferring project funds to unapproved organizations or individuals
• Engaging in commercial activities or profit-making ventures
• Implementing projects in restricted geographical areas without special permission

INGOs must carefully review their proposed activities to ensure compliance with these restrictions. Violation of these rules can lead to severe consequences, including termination of the INGO’s registration in Nepal.

Partnerships Between INGOs and Local Organizations

The Nepali government encourages partnerships between INGOs and local organizations to promote capacity building and sustainable development. These partnerships are subject to specific regulations and approval processes.

Key aspects of INGO-local organization partnerships:

1. Partnerships must be approved by SWC as part of the project approval process
2. Local partner organizations must be registered with the appropriate government agency
3. The roles and responsibilities of each partner must be clearly defined in a written agreement
4. INGOs are responsible for building the capacity of their local partners
5. Financial transactions between INGOs and local partners must be transparent and properly documented

INGOs should carefully select their local partners and ensure that the partnership aligns with their project objectives and complies with Nepali regulations.

Dispute Resolution Mechanisms for INGO-Related Issues

Disputes related to INGO operations in Nepal can arise between INGOs and government agencies, local partners, or beneficiaries. The Nepali legal system provides several mechanisms for resolving such disputes.

Dispute resolution options for INGOs:

1. Negotiation and mediation through SWC
2. Arbitration as per the Arbitration Act, 2055 (1999)
3. Litigation in Nepali courts

INGOs should prioritize amicable resolution of disputes through negotiation and mediation. If these methods fail, arbitration or litigation may be necessary. INGOs should be aware that dispute resolution processes in Nepal can be time-consuming and should factor this into their operational planning.

Termination and Exit Procedures for INGOs

INGOs may choose to terminate their operations in Nepal or may be required to do so by the government. The termination and exit process involves several steps to ensure proper closure of activities and compliance with legal requirements.

Steps for INGO termination and exit:

1. Notify SWC of the decision to terminate operations
2. Submit a detailed exit plan to SWC
3. Complete all ongoing projects or transfer them to approved organizations
4. Settle all financial obligations, including taxes and employee benefits
5. Conduct a final audit and submit financial reports to SWC
6. Return the original registration certificate to SWC
7. Obtain a clearance certificate from SWC

INGOs must ensure that they follow these procedures carefully to avoid legal complications and to maintain good standing for potential future operations in Nepal.

Social Welfare Council’s Role in INGO Governance

The Social Welfare Council plays a central role in the governance of INGOs in Nepal. Established under the Social Welfare Act, 2049 (1992), SWC is responsible for regulating, facilitating, and monitoring INGO activities in the country.

Key functions of SWC in INGO governance:

1. Registering INGOs and approving their projects
2. Coordinating between INGOs and government agencies
3. Monitoring and evaluating INGO activities
4. Providing policy recommendations to the government
5. Facilitating capacity building of local NGOs
6. Maintaining a database of INGO activities in Nepal

INGOs must maintain regular communication with SWC and comply with its directives to ensure smooth operations in Nepal.

Recent Policy Changes Affecting INGOs in Nepal

The regulatory environment for INGOs in Nepal is dynamic, with periodic policy changes affecting their operations. Recent policy changes include:

1. Foreign Aid Policy, 2076 (2019): This policy emphasizes aligning foreign aid, including INGO activities, with national priorities and strengthening government oversight.
2. Development Cooperation Policy, 2076 (2019): This policy focuses on enhancing aid effectiveness and promoting transparency in development cooperation.
3. Increased scrutiny of INGO activities: The government has intensified monitoring of INGO operations, particularly in sensitive areas.
4. Emphasis on localization: There is a growing push for INGOs to transfer more responsibilities to local partners and staff.

INGOs must stay informed about these policy changes and adapt their operations accordingly to ensure compliance with evolving regulations.

Challenges and Opportunities for INGOs in Nepal

INGOs operating in Nepal face various challenges but also have significant opportunities to contribute to the country’s development.

Challenges for INGOs:

1. Complex and sometimes ambiguous regulatory environment
2. Lengthy bureaucratic processes for approvals and renewals
3. Restrictions on certain activities and geographical areas
4. Increasing government scrutiny and reporting requirements
5. Political instability and frequent policy changes

Opportunities for INGOs:

1. Significant development needs in various sectors
2. Government openness to foreign assistance in priority areas
3. Potential for partnerships with local organizations
4. Opportunities to contribute to Nepal’s sustainable development goals
5. Scope for innovative approaches to development challenges

INGOs must navigate these challenges while leveraging opportunities to maximize their impact in Nepal.

FAQs:

1. What are the main steps to register an INGO in Nepal? The main steps include submitting a letter of intent to the Ministry of Foreign Affairs, obtaining a recommendation letter, applying for registration with the Social Welfare Council, submitting required documents, undergoing review and evaluation, receiving approval and registration certificate, and signing a General Agreement with SWC.
2. Are there restrictions on INGO funding sources? Yes, INGOs must disclose their funding sources to SWC. Funds from certain sources may be restricted, and all funds must be channeled through a single approved bank account.
3. How long does INGO registration typically take? The registration process can take several months, typically 3-6 months, depending on the completeness of the application and the workload of the relevant government agencies.
4. Can INGOs own property in Nepal? INGOs are generally not allowed to own property in Nepal. They may lease property for their operations with appropriate approvals.
5. What reporting requirements do INGOs have in Nepal? INGOs must submit quarterly and annual progress reports, annual audited financial statements, and project completion reports to the Social Welfare Council.
6. Are there sector-specific regulations for INGOs? Yes, INGOs working in specific sectors (e.g., health, education) may need to comply with additional regulations set by the relevant line ministries.
7. How are INGO staff visas and work permits handled? INGO staff visas and work permits are processed through the Social Welfare Council, Department of Immigration, and Department of Labor. INGOs must obtain recommendations from SWC and follow specific procedures for each staff member.