Dangote Group forwards 30-point demand

KATHMANDU, MAY 03 -

Nigeria-based Dangote Group, which has planned to set up a big cement factory in Nepal, has put forward a 30-point demand as a precondition for investment.

The African multinational has sought waiver of income tax, value added tax, customs duty, capital gain tax and other types of taxes on capital goods imported to establish the factory and after the factory starts production for periods ranging from 12 years to lifetime.

While the tax waiver for goods imported for the establishment and operation of the factory has been sought for a certain period, the company has sought a lifetime VAT waiver on final goods.

In a letter sent to the Investment Board of Nepal (IBN) in January, the company has said tax exemption could normally be extended up to the loan repayment period or a maximum of 15 years for heavy investment projects.

Dangote, which has proposed $800 million investment, is the first company to receive investment approval from IBN. After sending the list of demands in January this year, it is also following up with the issue, according to IBN officials.

A senior IBN official said most of the demands put forth by Dangote could not be fulfilled based on the existing laws.

“Special decisions should be taken from the Cabinet or the budget or laws should be amended from the Parliament to fulfill Dangote’s demands,” said the official.

Chief at the Finance Ministry’s Revenue Department Rajan Khanal said there are no special tax exemption provisions for a cement industry in the Income Tax Act. “For infrastructure projects, income tax exemption is given for five years and half of the tax is waived for an additional three years, but a cement industry does not come under the category of infrastructure project,” he said, adding there is also no provision of VAT exemption and it is waived only when the product is exported.

The company has sought import duty exemption for a minimum of 15 years on capital goods, plant, machineries and equipment of cement plants. It has sought VAT waiver for capital goods imported and procured within the country.

Income tax exemption has been sought for 12 years from the date of commercial production of the cement. Exemption in export tax, VAT and duties has been sought on semi-finished and final products. The company has also asked for VAT waiver on services provided by its sub-contractors for as minimum period of 15 years.

After the establishment of the factory, a 15-year import duty exemption has been sought on raw materials, consumable goods like printed paper bags, lubricants, chemicals and other required for the treatment and operation, maintenance of the factory for 15 years. It has also sought exemption in tax and levy on repatriation of share capital, profit and retained earnings.

The company has also asked for a waiver of withholding tax for 15 years on the interest of the loan it repays to foreign companies in foreign currency; waiver of income tax on dividends for both local and foreign shareholders and investors for one and half decades; imposition of no import duty on pickups, trailers, mining machineries and equipments and motor vehicles required for the cement factory for 15 years.

Although the government has promised constructing access roads to cement factories, Dangote has sought reimbursement of the cost if it itself should build such roads. As the cement factory consumes massive power, the company has also asked electricity at subsidised rates.

Source: The Kathmandu Post