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In Nepal, the “Star” status of a hotel is a formal regulatory classification granted by the Department of Tourism (DoT). When a hotel decides to cease operations, undergo a major renovation, or transition to a different business model (such as a non-star boutique or managed apartments), the Star Categorization Cancellation is a mandatory legal step. Closing a star-rated hotel without formal de-listing can result in ongoing compliance liabilities, including mandatory minimum service standards and tourism-related tax obligations.
₨ 125,000.00
Under the Hotel, Lodge, Restaurant, Bar and Tour Guide Regulation, 2038, and the updated Standards for Hotel Classification, a star rating is a licensed privilege that comes with specific operational and safety mandates. Whether a hotel is a “One Star” or a “Five Star Deluxe,” the formal closure process ensures that the entity is officially removed from the national tourism registry. This process is essential for operators to legally stop displaying the star insignia and to trigger the final settlement of tourism-specific administrative requirements.
To achieve a legally sound closure under Section 10 of the Tourism Act, 2035, and the associated Hotel Regulations, an operator must satisfy specific de-listing criteria to avoid administrative penalties. The primary requirement is the submission of a formal Board Resolution and a “Closure Plan” that addresses the settlement of all outstanding staff liabilities under the Labor Act, 2074. Additionally, the operator must provide a tax clearance certificate from the Inland Revenue Department (IRD) and physically return the Original Star Categorization Certificate to the Department of Tourism to officially terminate the entity’s classified status.
Neglecting the formal cancellation process keeps the hotel on the “Active Star List,” making it liable for annual monitoring fees and potential fines for failing to maintain the mandatory service standards associated with its rank. Furthermore, if the hotel continues to use “Star” branding after physical closure or unauthorized change in use, the directors may face blacklisting by the Ministry of Tourism, barring them from obtaining future tourism-related licenses or incentives.
