Foreign Investment in IT Sector in Nepal

This Article has covered the Approval Process and Additional Details of Foreign Investment in IT Sector in Nepal. For the purposes of Foreign Investment, Foreign Investment and Technology Transfer Act is the Umbrella Legislation which confers the approval for FDI in all Financial, Business and Technological Sectors of Nepal. 

1. What are the Laws governing Foreign Investment in IT Sector in Nepal? 

Foreign Investment and Technology Transfer Act 2019 and Foreign Investment and Technology Transfer Regulations 2077 are the Substantive and Procedural Instruments for Application, Injection and Repatriation of Foreign Investments in all sectors of Nepal encompassing the IT Sector. An Investor willing to invest into the Nepalese IT Sector must obtain approval from either Department of Industry or the Investment Board of Nepal based on the amount of Investment. 

2. Which governing bodies and regulations govern IT investment?

The legal frameworks and governmental authorities governing foreign investment in Nepal’s IT sector are as follows:

The oversight of foreign investment in Nepal and industrial development below NPR 6 billion is a primary responsibility of the Department of Industry (DOI), a prominent governmental authority. An additional regulatory entity, the Investment Board of Nepal, oversees investments in excess of NPR 6 billion.

Additionally, the Ministry of Finance and Nepal Rastra Bank are engaged in foreign investment. They supervise financial transactions, including repatriation. Additionally, they devise fiscal policies and subsequently execute them.

The Foreign Investment and Technology Transfer Regulations (FITTR) and the Foreign Investment and Technology Transfer Act, also referred to as FITTA, are the primary statutes governing foreign investment in Nepal.

3. How Does One Obtain Approval for Foreign Investment in the IT Sector?

A Comprehensive Outline of the Procedures Essential for the Authorization of Foreign Investment in the IT Sector is as follows:

3.1 Compliance with Criteria for Eligibility

Foreign Investment in Nepal is governed by the Foreign Investment and Technology Transfer Act, which establishes the investment’s substantive and procedural framework. The Amount for Minimum Investment, its nature, and whether it has been blacklisted must be verified prior to the investment.

3.2 Development of an Investment Proposal

The Basic Information about the Company, its nature, its investment, and other information pertinent to the IT Sector in Nepal, of which the Company intends to be a part, must then be drafted in a detailed Investment Proposal.

3.3 Acceptance by the Regulatory Authority

The regulatory authority overseeing foreign investment in Nepal’s IT sector is determined by the Investment Board of Nepal or the Department of Industry, contingent upon the magnitude of the investment. It is noteworthy that the establishment of a specialized regulatory body for IT investments has not yet taken place. An appropriate business structure must be determined prior to obtaining approval from the appropriate authority. In addition, legal counsel or a law firm or a legal representative is required to assist with compliance issues and the legal process.

3.4 Implementation of Application

The Investment Proposal, in addition to the documents specified below, must be submitted to the Department of Industry (DOI) or the appropriate government authority. Along with the investment method, Rastra Bank approval, and other information, the Application must be drafted in accordance with the regulatory authority.

3.5 Verification of International Investment

The government authority renders a decision regarding the investment proposal, either approving or rejecting it, subsequent to its review. Upon finalization of the approval process, a letter of approval is furnished, which delineates the stipulations and prerequisites for the investment. Upon investment approval, company registration at the Office of the Company Registrar becomes mandatory. Additionally, it is necessary to possess a PAN (Permanent Account Number) in order to file taxes with the Inland Revenue Department.

4. What are the prerequisites for foreign investment in Nepal’s IT sector?

It is feasible for foreign investment to reach a maximum of one hundred percent in the IT sector of Nepal, or in any other sector for that matter. Furthermore, the FITTA has established a minimum investment amount as a prerequisite for establishing investments in Nepal. The subject matter and procedures pertaining to the repatriation of investments have been the sole focus of regulation in Nepal. Anticipated timeframes for the finalization and comprehensive approval of foreign investment in Nepal’s IT sector are three to five months. Foreign investment authorization in Nepal requires a minimum investment capital of NPR 50 million.

5. Which Documents Are Necessary for FDI Approval in the IT Industry?

The following documents are necessary for the approval of foreign investment in Nepal’s IT sector:

  1. Investment Proposal Outlining the Type, Amount, Source of Funding, and Other Relevant Information of the IT Investment
  2. A foreign investment application in the format specified by the DOI, IBN, or other pertinent governing bodies.
  3. Documents pertaining to the registration of a company in Nepal, such as the Articles of Association (AOA) and Memorandum of Association (MOA).
  4. If applicable, a Certificate of Incorporation for the foreign company.
  5. Certificate of Financial Credibility issued by the bank of the investor’s country of domicile
  6. Power of Attorney for the Registration and Approval Process,
  7. A copy of the foreign investor’s passport accompanied by a letter of commitment
  8. Supplementary Records, including Compliance Checks, Agreement for Lease, or Joint Venture, if deemed essential.

6. What are the fees and charges associated with this?

The subsequent are the charges and fees associated with foreign investment:

  1. The approval of foreign investment does not require any fees because the government has established a refundable deposit.
  2. The fees pertaining to Company Registration are determined in compliance with the provisions of the Company Act.
  3. The Immigration Act establishes visa and passport fees

7. Conclusion

For Investors willing to Inject Investment into the IT Sector of Nepal, an Application must be submitted, either to the Department of Industry or the Investment Board of Nepal, after whose approval, a final assent is required from the Nepal Rastra Bank for bringing in such Investment. No Specific Guidelines or Regulations have been instituted for the purposes of FDI in IT Sector of Nepal. 

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