Procedure of Foreign Direct Investment (FDI) in Nepal
This questionnaire provides a general overview of establishing company through foreign investment in Nepal.
1) What are the laws that govern foreign investment in Nepal?
The matters related to foreign investment is mainly dealt by the following laws:
Foreign Investment and Technology Transfer Act, 2019
This Act has laid the fundamental Foundation for Foreign Investment in Nepal. It has covered various areas related to Foreign Investment such as Technology Transfer, Joint Ventures and much more.
Industrial Enterprises Act, 2020
This Act is generally focused on promoting and regulating Industrial Enterprises in Nepal. It also provides both domestic and foreign Investors by offering Incentives and simplifying procedures.
Company Act, 2006
The Company Act of 2006 A.D. is primarily concerned with the establishment and operation of companies existing in Nepal. It also specifies requirements for registering a company in Nepal.
Foreign Investment and Technology Transfer Regulation, 2021
This Regulation was brought to additionally complement the Foreign Investment and Technology Transfer Act.
Public Private Partnership and Investment Act, 2019
This Act promotes the investment by Foreign Private Sector in Infrastructure, Construction and Service Sectors of Nepal. It also objectivizes to manage the projects to be conducted in Public Service Partnership.
2) What are the governing authorities for foreign investment?
The governing authorities that provide approval and regulate foreign investment are set out as follows:
|1||Department of Industry||For Foreign Investments less than NPR 6 Billion Rupees, the Department of Industry shall approve it.|
|2||Investment Board of Nepal||For Foreign Investments of more than NPR 6 Billion or Hydropower projects of capacity more than 200 MW, the Investment Board of Nepal shall approve it.|
|3||Nepal Rastra Bank||After the Approval, Nepal Rastra Bank shall give the final approval to bring in the Foreign Investment to Nepal.|
Approval for Foreign Investment Approval
- Obtaining Investment Approval: This step requires obtaining approval from the Department of Industry or the Investment Board of Nepal, depending on the investment scale.
- Company and Industry Registration: After gaining investment approval, registering the company and the industry according to the foreign investment approval is crucial.
- Nepal Rastra Bank Approval: Obtaining Nepal Rastra Bank’s permission to remit foreign currency in line with the approved investment is a key step.
- Currency Remittance and Recording: Foreign currency is remitted through proper banking channels and recorded by Nepal Rastra Bank.
3) What are the permissibility requirements?
The proposed business activity must fulfill following two conditions to obtain foreign investment approval:
4) What are the businesses that fall under the Negative List?
The Negative List comprises of the businesses/industries in which foreign investment is prohibited. Foreign investment is not allowed in the following:
- Poultry farming, fisheries, bee-keeping, fruits, vegetables, oil seeds, pulse seeds, milk industry and other sectors of primary agro-production;
- Cottage and small industries;
- Personal service business (hair cutting, tailoring, driving etc.);
- Industries manufacturing arms, ammunition, bullets and shell, gunpowder or explosives, and nuclear, biological and chemical (N.B.C.) weapons; industries producing atomic energy and radio-active materials;
- Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service;
- Travel agency, guide involved in tourism, trekking and mountaineering guide, rural tourism including homestay;
- Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language;
- Management, account, engineering, legal consultancy service and language training, music training, and computer training; and
- Consultancy services having foreign investment of more than fifty-one percent.
5) What is the procedure for establishment and operation of FDI in Nepal?
The basic corporate and regulatory procedure for establishment and operation is outlined as below.
Obtaining Foreign Investment Approval from DOI/IBN
Incorporation of Company at the Office of the Company Registrar
Tax Registration at Inland Revenue Office
Business Registration at Local Ward Office
Obtaining Recommendation Letter from Local Level Ward Office and Municipality Office for Industry Registration
Registration of Industry at DOI
Obtaining Non-Blacklisted Certificate in the Name of the Company from Credit Information Bureau
Obtaining NRB Approval to bring in Foreign Investment Amount.
6) Is there a minimum capital requirement?
The minimum investment required for obtaining foreign investment approval has been fixed at NPR 50 million (approx. USD 450,000).
7) What are the application and documentary requirements for approval?
The documents required for obtaining foreign investment approval are set out as follows:
1. Project Report outlining the Project Background, market aspect, technical aspect, financial aspect, details of such funds etc.
2. Bio-Data/ Company Profile of the Foreign Investor
3. Copy of Certificate of Registration and other Registration Documents (Memorandum of Association, Articles of Association, etc.) of the Foreign Investor.
4. Corporate Resolution of the Foreign Investor to Invest in Nepal.
5. Financial Credibility Certificate issued by any bank of the country of the Residence/Registration of the Foreign Investor.
6. Documents stating the Source of Investment and Time Schedule of Investment
7. Power of Attorney authorizing an Individual to complete the approval and Registration Process at the relevant entities.
8. Passport of Foreign Investor in case of Foreign Investor is a person and passport of directors of foreign investor in case of Entities.
9. Commitment Letter By Investor stating that Foreign Investor shall not repatriate investment till one year.
10. Joint Venture Agreement (this will not be required if the Local Company will be a fully owned subsidiary or if the foreign Investor is an Individual)
8) What is the time for completion of the approval process?
It generally takes around 3 to 5 months for the completion of the entire process.
9) Are there any sector specific approvals?
After incorporation, the company may further need to obtain approval or licenses from regulatory authorities depending upon the nature of the industry or business such as :
- Approval from the Insurance Board for insurance business,
- NRB Approval for bank and financial institutions
- Department of Electricity Development for electricity projects
- Department of Tourism for tourism related business
- Department of Food Technology and Quality Control for food industry and so on.
Charges and Fees of Procedure of FDI in Nepal
1. Approval of Foreign Investment: The approval process is free, with a refundable deposit.
2. Company Registration: Fees are as per the Company Act.
3. Industry Registration: Industry registration is free.
4. Capital Currency Exchange: No fees are charged for currency exchange against foreign investment.
5. Visa Fees: Visa fees are determined by the immigration Act.
Foreign Direct Investment in Nepal are generally approved by the Government of Nepal and takes 3 to 5 Months for the whole process of construct. They also require a certain minimum amount to be invested in Nepal.
Disclaimer:This questionnaire 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 any consequence arising out of actions undertaken by any person relying on the information provided herein.
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