Repatriation Of FDI in Nepal

In accordance with the prevailing laws of Nepal, a foreign investor may repatriate its investment from the country by selling all or a portion of the shares or industry in which it has invested, provided that all taxes payable are leviable and in accordance with the prevailing laws of Nepal.

1. Repatriation of Foreign Direct Investment in Nepal

Repatriation of foreign direct investment (FDI) pertains to the procedure by which foreign entities returning to their country of origin transfer profits, dividends, or capital. Repatriation can take many different forms, including the sale of assets, royalties, dividends, and profits. In Nepal, the existing legal and regulatory framework governs the repatriation of FDI. In industries like tourism, hydropower, and manufacturing, Nepal has attracted foreign investment. The repatriation of investment returns, including profits and dividends, is generally permissible; however, prior to doing so, investors are required to obtain approval from the Nepal Rastra Bank.

2. Laws and Authorities Governing Repatriation of FDI in Nepal

Regarding the Repatriation of Investment, the Foreign Investment and Technology Transfer Act (FITTA) in Nepal serves as the principal legislative framework governing foreign investment and technology transfer. The FITTA framework delineates the protocols, stipulations, and motivations that are linked to said investments. Particularly significant are the provisions for repatriation of FDI in Nepal, which are outlined in Section 20.

The Nepal Rastra Bank, functioning as the Central Monetary Authority, collaborates with pertinent entities to oversee and control the movement of foreign currency inflows and outflows. The repatriation of profits and dividends by foreign investors is facilitated and monitored.

In addition, prior to receiving final monetary approval from Nepal Rastra Bank, the continuation of Repatriation of FDI necessitates the endorsement of the relevant regulatory authority, which is either the Department of Industry or the Relevant Apex Regulatory Authority established for each particular industry.

3. Permissible Repatriation of Money and Earnings

Subject to approval from the Nepal Rastra Bank and payment of tax obligations in accordance with applicable laws, a foreign investor may repatriate specific quantities in the same foreign currency used for the initial investment or another convertible foreign currency. The following items are eligible for repatriation: (a) The amount obtained through the sale of shares that involve foreign investment.

  1. b) Income from foreign investments in the form of profits or dividends.

(c) In the event of liquidation or winding up of an industry or company, the amount remaining after all outstanding liabilities have been settled.

(d) Royalties acquired in accordance with technology transfer agreements. It is important to note that in the case of royalties or fees for the use of a trademark related to technology transfer in a spirits industry, the said royalty cannot exceed five percent of the total selling price, exclusive of any applicable taxation.

  1. e) The lease rent quantities that are linked to lease investments.

(f) Compensation or damages, if any, obtained as a consequence of a final court ruling, arbitration, litigation, or other lawful proceeding conducted in Nepal.

(g) Amounts that can be repatriate in accordance with applicable laws.

4. Mechanism of Repatriation for Loans and Leases

When an industry or company in Nepal receives a loan from a foreign investor secured by the pledge or mortgage of movable or immovable property located in the country, and the property in question requires auctioning or forfeiture as a result of non-repayment of the principal or interest of the loan, the lending institution may repatriate both the principal and interest via the auction of the pledged or mortgaged property. The execution of this repatriation shall resemble that of a financial institution or bank operating within the jurisdiction of Nepal. Moreover, should a lease agreement be terminated for non-payment in violation of its provisions or for any other reason specified in the lease agreement, the foreign investor maintains the prerogative to repatriate both the leased property and its investment.

5. Procedure of Repatriation in Nepal

The subsequent section delineates the fundamental procedures that foreign investors must adhere to in order to repatriate their investment or the profits obtained from said investment:

Step 1: Application Submission to the Appropriate Regulatory Body

A formal application must be submitted to the foreign investment certifying body by a foreign investor who wishes to repatriate their foreign investment or the accrued amount. The application should conform to the format specified. The application should be directed to this centre for approval in cases where the Government of Nepal grants authority to the Single Stop Service Centre through a notification in the Nepal Gazette.

Step 2: Application for Approval and Examination by the Regulatory Body

It is the responsibility of the foreign investment approving body to perform a comprehensive examination. The approving body is obligated to grant approval for repatriation if it is determined that the foreign investor has complied with all regulatory obligations, contractual terms, and liabilities pertaining to the foreign investment. This approval is expected to be granted within fifteen days of the application’s receipt.

Step 3: Submit an application to Nepal Rastra Bank 

Once the approval has been obtained, the foreign investor is granted permission to submit an application for the foreign currency exchange facility to the Nepal Rastra Bank. The bank is obligated to provide the essential exchange facility to the foreign investor following the submission of the application to the Nepal Rastra Bank.

Step 4: Final Approval

A foreign investor retains the right to appeal any decision rendered during the repatriation procedure that they find unsatisfactory. The Ministry is obligated to make a decision within thirty working days after receiving an application, which can be submitted to it.

Note: The remaining amount can only be repatriated after all liabilities, including taxes, have been satisfied in cases where the investment is to be repatriated by selling an industry with a foreign ratio or due to the revocation of industry registration. There are also limitations on how much a foreign investor can repatriate investment or profit, which are proportional to the ratio of their investment in the company in question.

7. Conclusion

The foreign direct investment (FDI) repatriation procedure from Nepal is governed by the Foreign Investment and Technology Transfer Act (FITTA). At the outset, the investor proceeds by submitting a formal application in accordance with the prescribed form to the foreign investment approving body. The investor is granted approval for repatriation within fifteen days of the approving body receiving the application, provided that it is satisfied that the investor has complied with all legal obligations and agreements. 

The investor may then submit an application for a foreign currency exchange facility with the Nepal Rastra Bank, which is obligated to provide the required exchange service. The revocation of industry registration or the sale of an industry, however, can only result in repatriation after all liabilities, including taxes, have been settled. In addition, there are limitations on how much a foreign investor can repatriate their investment or profit, which are based on the ratio of their investment in the company in question.

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