Supreme Court Bars Immediate Tax Exemption for Dolma Impact Fund

The Supreme Court has barred the government from granting immediate tax exemptions to Dolma Impact Fund, a Mauritius-registered private equity fund investing in Nepal.

The order follows a writ petition filed by Bhesraj Luintel challenging a government decision that allowed the fund to repatriate profits earned in Nepal without paying capital gains tax. The government decision earlier had cleared the way for Dolma Impact Fund to transfer earnings abroad after selling shares in Nepali companies.

A single bench of Justice Mahesh Sharma Paudel issued an interim order, directing the government not to implement any decision granting tax exemption to the fund until further hearings.

The court stated that it was appropriate to hear arguments from both sides before taking any decision. It also ordered that if any decision had already been made to grant tax exemptions to Dolma Impact Fund, such a decision should not be implemented until the interim order is reviewed.

The Supreme Court further instructed the Office of the Prime Minister and Council of Ministers, the Ministry of Finance, and the Inland Revenue Department to ensure that the company is not allowed to transfer funds abroad without paying applicable taxes.

“Pursuant to Rule 49(2)(b) of the Supreme Court Rules, 2017, an interim order has been issued to prevent the company from remitting funds abroad without tax payment,” the order states, directing authorities to inform the respondents accordingly and present the matter as per procedure.

Senior advocates Surendra Bhandari and Roshan Kumar Yadav, representing the petitioner, argued that allowing a company to earn profits in Nepal and repatriate them without paying taxes is unlawful and that the government must ensure tax recovery.

The court has asked the respondents—through the Office of the Attorney General—to submit written replies within 15 days of receiving the notice, excluding travel time, explaining why the petitioner’s demands should not be upheld.

In mid-September 2025, the government decided to exempt Dolma Impact Fund from capital gains tax on proceeds from share sales transferred abroad. The decision, proposed by Finance Minister Rameshore Khanal and endorsed by the Cabinet, drew widespread criticism.

Following the backlash, the government decided to revoke the Double Taxation Avoidance Agreement (DTAA) with Mauritius and formally notified the country. The government has also said it plans to study the costs and benefits of similar agreements with other countries. Nepal currently has such agreements with 11 countries.

Officials at the Inland Revenue Department say the review aims to address concerns that companies registered in the so-called tax haven jurisdictions invest in Nepal and avoid paying taxes in both Nepal and their country of registration.