BIRDS-3 Satellite Project Update for Nepal: Payment Issues

The BIRDS-3 Satellite Project, which involves first satellites for Sri Lanka and Nepal with an additional satellite from Japan in the CubeSat standard is now going through the Breadboard Model stage at Kyutech Institute of Technology (Kyutech). The Preliminary Design Review (PDR) is scheduled on April 2018 and so forth, the team is working round the clock to complete a proof of concept of the mission designs before that. 

In case of Nepal, Nepal Academy of Science and Technology (NAST) under the leadership of former Institute of Engineering (IOE) Dean Prof. Dr. Jiba Raj Pokharel, is the stakeholder of the satellite and had signed an agreement with Kyutech on Nov 21, 2017. The Government of Nepal, through the Finance Ministry and now Ministry of Education, Science & Technology released the requested amount on March 16, 2018. This was done through the Central Accounting Division and is now at NAST's virtual bank account at Lalitpur's Government Accounting Branch. 

Kyutech/NAST CRA Exchange Ceremony at Kyutech, Japan

In order to complete the payment to Kyutech, Nepal Rastra Bank, the sole bank who has the authority to make payments abroad, required a couple of documents including tax clearance. The only problem was that the Tax office had no experience in dealing with such projects before. The Director General of the Internal Revenue Department along with the Director of the branch office at Lalitpur and other tax officials discussed and decided that the amount was taxable under the Republic of Nepal's law. This letter was issued yesterday, on March 23, 2018. 

The tax is not a small amount though.

With a usual 10% slapped on the payment, an additional 13% VAT has also been imposed meaning only about 75% of the required fee is going to be cleared for the satellite's hardware development, testing and launching cost. A stronger Yen compared to 2017, also means that the actual payment will hover around 70%. A new request from NAST should now go to the Ministries again for the rest of the 30%. The 70% is still critical though; if it doesn't go to Kyutech's bank account by April 10, 2018, the whole understanding between NAST and the institution collapses. Nepal will not have it's satellite.

One could argue why tax when Kyutech's BIRDS project pays no tax to Japanese government. Unfortunately, NAST does. Any services that the organization pays and the organization receives, to and from a public (Kyutech is public) or private entity abroad, it does not matter. The amount qualifies as taxable amount to government of Nepal. 

One better option would be to ask for tax rebates, or if possible, tax exemption. Unfortunately, with the former, now discharged, Director General of Internal Revenue Department under severe corruption charges, the government has made an unwritten policy to not provide any tax exemption to any project. The logic is that if one gets tax rebates, other's can use that to receive such favors too. 

To summarize, any proposal made forward to the government from NAST should now include:
1) Overhead for changing exchange rates
2) After tax amount

Both money and the author is stuck in Nepal for the time being.