Franchise of Foreign Brand (Foreign Trademark) in Nepal

16 September 2019

This Article explains about the procedure for the franchise of international brand ( Foreign Trademark)  in Nepal.

1. Can a foreign brand operate franchise business in Nepal?

The Foreign Investment and Technology Act 2019 (2075),(“FITTA”) andPatent, Design and Trademark Act, 1965 (2022) (“PDTA”) allows foreign brand to do franchise in Nepal. Both the foreign and national brand can operate franchise business in Nepal.

2. What are the laws that governs the foreign franchise in Nepal?

The FITTA and PDTAForeign Exchange (Regulation) Act,1962 (2019)(“FERA”) are the governing law which regulate the franchising process in Nepal.

3. What is the procedure of Franchising of the international Brand?

The Procedure of franchising the international brand includes the following:

Please Note:

  1. It will require 9 to 13 months for the trademark registration in Nepal. 
  2. Without trademark registration of foreign brand, one cannot get approval of franchise agreement from DOI. Foreign brand does not get validity and protection unless the trademark is registered in Nepal.
  3. There should be the exact registration of foreign trademark without any alteration in the original trademark which has been registered in foreign jurisdiction.

4. What are the permissible sector where the franchise of foreign brand is allowed?

Franchise is permissible not only on sector where foreign investment is allowed. It is also permissible on sector where foreign investment is restricted in Nepal.

5. What are the required document for franchising process?

The required documents required for franchise of foreign brand in Nepal are as follows:

6. What is the rate of Royalty for Franchise of foreign Brand?

There is no any specific law governing the rate of licensing fee or royalty fee for licensing of foreign trademark in Nepal. In practice, DOI provides 1% to 5% of royalty or licensing fee on gross sale or net profit.

Regarding royalty or licensing fee relating to the production of liquor and beer, using foreign or domestic trademarksis required to be maintained under the ceiling of and not exceeding 10 % of net profit or 6 % of selling price (excluding government tax).

7. What is the term period of licensing of Foreign Trademark?

There is no specific law governing the term of licensing of foreign trademark in Nepal.  In general practice, DOI approves the licensing of trademark for a 5-year term and can be renewed upon application.

8. What is the fee required to be paid during repatriation of licensing fee?

Section 10(5) of the FERA permits the licensor of foreign trademark to repatriate licensing or royalty fees abroad. Approval has to be taken from Nepal Rastra Bank for the repatriation licensing or royalty fees.

Franchise Agreement, the document showing calculation of the amount due to the foreign technology supplier certified by the auditor and certificate of payment of income tax on royalty are the primary documents required for the approval of licensing of foreign trademark.

 

Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The firm shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.

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THAHAR BAHADUR BHANDARI
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SURENDRA TIWARI
FOUNDING PARTNER

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