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Foreign Direct Investment Approval Process in Nepal
01
Feb
Steps for Foreign Direct Investment Approval Process in Nepal
- Step 1: Determine investment sector and eligibility
- Step 2: Register company at Office of Company Registrar
- Step 3: Obtain Department of Industry approval
- Step 4: Complete foreign investment registration
- Step 5: Obtain necessary sector-specific licenses
- Step 6: Complete post-approval compliance requirements
What Is Foreign Direct Investment Approval Process in Nepal?
The foreign direct investment approval process in Nepal refers to the legal and administrative procedure that foreign investors must follow to establish business operations in Nepal. This process involves obtaining necessary approvals from government authorities, registering the investment, and complying with regulatory requirements under Nepali law. The foreign direct investment approval process in Nepal is governed by the Foreign Investment and Technology Transfer Act, 2019 and related regulations.
Foreign direct investment in Nepal allows foreign nationals and entities to invest capital, technology, and expertise in various sectors of the Nepali economy. The foreign direct investment approval process in Nepal ensures that investments align with national priorities, comply with legal requirements, and contribute to economic development. The process involves multiple government agencies including the Department of Industry, Office of Company Registrar, and Nepal Rastra Bank.
The foreign direct investment approval process in Nepal has been streamlined in recent years to attract more foreign capital and technology. The government has established a one-window policy to facilitate foreign investors through the Department of Industry. Understanding the foreign direct investment approval process in Nepal is essential for foreign investors planning to establish business operations, as non-compliance can result in legal complications, penalties, and potential cancellation of investment approvals.
Where to Apply for Foreign Direct Investment Approval in Nepal?
Foreign investors must apply for foreign direct investment approval at the Department of Industry, which serves as the primary regulatory authority for foreign investment in Nepal. The Department of Industry is located in Kathmandu and operates as the single-window facility for processing foreign investment applications. The foreign direct investment approval process in Nepal begins with submission of application at this department along with required documents and information.
The Office of Company Registrar is another crucial authority where foreign investors must register their company before obtaining foreign investment approval. Located in Tripureshwor, Kathmandu, this office handles company registration under the Companies Act, 2006. After company registration, investors return to the Department of Industry for foreign investment approval. Sector-specific approvals may require applications to other regulatory bodies such as Nepal Rastra Bank for financial services or relevant ministries for restricted sectors.
For online information and preliminary guidance, foreign investors can visit the official website of the Department of Industry at https://www.doind.gov.np. This portal provides information about investment policies, procedures, required documents, and downloadable application forms. The foreign direct investment approval process in Nepal increasingly incorporates digital systems, though physical submission of documents remains necessary for most procedures.
What Laws Govern Foreign Direct Investment Approval Process in Nepal?
The foreign direct investment approval process in Nepal is governed by comprehensive legal framework designed to regulate, facilitate, and protect foreign investments while safeguarding national interests.
- Foreign Investment and Technology Transfer Act, 2019 (FITTA)
- Foreign Investment and Technology Transfer Rules, 2020
- Companies Act, 2006
- Companies Regulations, 2008
- Industrial Enterprises Act, 2020
- Industrial Enterprises Rules, 2021
- Nepal Rastra Bank Act, 2002
- Foreign Exchange (Regulation) Act, 1962
- Special Economic Zone Act, 2016
- Public Private Partnership and Investment Act, 2019
- Income Tax Act, 2002
- Labor Act, 2017
- Immigration Act, 1992
- Immigration Regulations, 1994
- Sector-specific laws and regulations
How to Complete Foreign Direct Investment Approval Process in Nepal?
Step 1: Determine Investment Sector and Eligibility
Foreign investors must first identify the business sector for investment and verify eligibility under Nepali law. The Foreign Investment and Technology Transfer Act, 2019 specifies sectors open to foreign investment and those requiring special approval. Investors should review the negative list of restricted sectors and minimum investment requirements applicable to their chosen sector.
Step 2: Register Company at Office of Company Registrar
Investors must register a company at the Office of Company Registrar under the Companies Act, 2006. This involves submitting company registration application, memorandum and articles of association, and prescribed fees. The company must be registered as a private limited company, public limited company, or other permitted corporate structure before proceeding with foreign investment approval.
Step 3: Obtain Department of Industry Approval
After company registration, investors submit foreign investment approval application to the Department of Industry with required documents. The application must include details of investment amount, technology transfer agreements if applicable, business plan, and source of funds. The Department reviews the application and issues approval certificate if all requirements are met.
Step 4: Complete Foreign Investment Registration
Upon receiving approval from the Department of Industry, investors must complete foreign investment registration by submitting the approval certificate and additional documents. This registration formally records the foreign investment in government records and enables the investor to proceed with bringing capital into Nepal. The registration certificate serves as proof of authorized foreign investment.
Step 5: Obtain Necessary Sector-Specific Licenses
Depending on the business sector, investors must obtain sector-specific licenses from relevant regulatory authorities. Manufacturing industries require industrial enterprise registration, financial services need Nepal Rastra Bank approval, and other sectors have specific licensing requirements. These licenses must be obtained before commencing business operations to ensure legal compliance.
Step 6: Complete Post-Approval Compliance Requirements
After obtaining all approvals and licenses, investors must fulfill post-approval obligations including bringing investment capital through banking channels, maintaining proper accounting records, and submitting periodic reports to the Department of Industry. Compliance with tax registration, labor laws, and other regulatory requirements is mandatory for continued operation of the foreign investment enterprise.
What Documents Are Required for Foreign Direct Investment Approval Process in Nepal?
- Company registration certificate from Office of Company Registrar
- Memorandum and articles of association of the company
- Board resolution authorizing foreign investment application
- Passport copies of foreign investors and directors
- Proof of source of funds and financial capacity
- Detailed business plan and project proposal
- Technology transfer agreement (if applicable)
- Joint venture agreement (if applicable)
- Tax clearance certificate from home country
- Bank recommendation letter from foreign investor's bank
- Citizenship certificate or registration documents of Nepali partners
- Land ownership or lease documents for business premises
- Environmental impact assessment (for certain industries)
- Sector-specific clearances and no-objection certificates
- Power of attorney if application submitted through representative
What Are the Investment Thresholds and Equity Requirements?
Before presenting the detailed requirements, it is important to understand that Nepal has specific minimum investment amounts and equity participation rules for foreign investors depending on the sector and type of investment structure chosen.
| Investment Type | Minimum Investment (NPR) | Foreign Equity Allowed | Remarks |
|---|---|---|---|
| General Industries | 50 Million | Up to 100% | Most manufacturing and service sectors |
| Consulting Services | 5 Million | Up to 100% | Professional and technical consulting |
| Tourism Industry | 50 Million | Up to 100% | Hotels, resorts, travel agencies |
| Export-Oriented Industries | 20 Million | Up to 100% | Industries exporting 75% or more production |
| Technology-Based Industries | 20 Million | Up to 100% | IT, software, technology services |
| Energy Sector | 50 Million | Up to 100% | Renewable energy projects |
| Agriculture and Livestock | 50 Million | Up to 100% | Commercial farming, processing |
| Education Sector | 50 Million | Up to 80% | Schools, colleges, training institutes |
| Health Services | 50 Million | Up to 70% | Hospitals, clinics, diagnostic centers |
| Financial Services | As per NRB | As per NRB regulations | Banks, insurance, financial institutions |
| Special Economic Zones | 50 Million | Up to 100% | Investments within designated SEZs |
| Public-Private Partnership | Project-specific | As per agreement | Infrastructure and public service projects |
How Long Does the Foreign Direct Investment Approval Process Take?
The foreign direct investment approval process in Nepal typically takes between 30 to 90 days depending on the complexity of the investment, completeness of documentation, and sector-specific requirements.
| Process Stage | Timeline | Authority | Remarks |
|---|---|---|---|
| Company Name Reservation | 1-2 days | Office of Company Registrar | Online system available |
| Company Registration | 7-15 days | Office of Company Registrar | Depends on document verification |
| Foreign Investment Approval | 15-30 days | Department of Industry | From complete application submission |
| Nepal Rastra Bank Approval | 30-45 days | Nepal Rastra Bank | For financial sector investments |
| Sector-Specific Licenses | 15-60 days | Relevant Ministry/Department | Varies by sector |
| Tax Registration | 3-7 days | Inland Revenue Department | PAN and VAT registration |
| Total Process Duration | 30-90 days | Multiple authorities | For straightforward investments |
What Are the Costs Involved in Foreign Direct Investment Approval Process?
The costs for completing the foreign direct investment approval process in Nepal vary based on investment amount, company type, and specific sector requirements. The following table outlines the major cost components.
| Fee Type | Amount | Payable To | Remarks |
|---|---|---|---|
| Company Registration Fee | NPR 1,000 - 100,000 | Office of Company Registrar | Based on authorized capital |
| Company Name Reservation | NPR 100 | Office of Company Registrar | Per name application |
| Foreign Investment Approval Fee | NPR 2,000 - 25,000 | Department of Industry | Based on investment amount |
| Technology Transfer Approval | NPR 5,000 - 50,000 | Department of Industry | If technology transfer involved |
| Industrial Enterprise Registration | NPR 1,000 - 10,000 | Department of Industry | For manufacturing industries |
| Tax Registration (PAN) | Free | Inland Revenue Department | No fee charged |
| VAT Registration | Free | Inland Revenue Department | If turnover exceeds threshold |
| Legal Documentation | NPR 50,000 - 200,000 | Law Firms | Professional fees vary |
| Translation and Notarization | NPR 10,000 - 50,000 | Service Providers | For foreign documents |
| Sector-Specific Licenses | Varies | Relevant Authorities | Depends on business sector |
What Are Post-Approval Requirements for Foreign Direct Investment?
After obtaining foreign direct investment approval, investors must comply with various ongoing obligations to maintain legal status and operational authorization in Nepal.
- Bring investment capital through authorized banking channels within specified timeframe
- Submit proof of capital inflow to Department of Industry and Nepal Rastra Bank
- Maintain separate bank accounts for foreign investment transactions
- File annual returns with Department of Industry regarding investment status
- Submit audited financial statements annually to relevant authorities
- Comply with tax filing and payment obligations under Income Tax Act
- Maintain proper accounting records as per Nepal Accounting Standards
- Renew industrial enterprise registration annually if applicable
- Obtain work permits and visas for foreign employees
- Comply with labor laws including employment contracts and social security
- Submit environmental compliance reports if required for the sector
- Renew sector-specific licenses before expiration
- Inform Department of Industry of any changes in shareholding or management
- Comply with foreign exchange regulations for profit repatriation
- Maintain minimum investment amount throughout operation period
What Types of Foreign Investment Structures Are Available?
Foreign investors can choose from various investment structures depending on their business objectives, sector requirements, and partnership arrangements with Nepali entities.
| Investment Structure | Description | Foreign Equity | Key Features |
|---|---|---|---|
| Wholly Foreign-Owned Company | 100% foreign ownership | 100% | Complete control, full liability |
| Joint Venture Company | Partnership with Nepali entity | 1% - 99% | Shared ownership and management |
| Branch Office | Extension of foreign company | 100% | Limited activities, parent company liable |
| Liaison Office | Representative office only | 100% | No commercial activities allowed |
| Project Office | For specific project implementation | 100% | Time-bound, project-specific |
| Technology Transfer Agreement | Technology licensing arrangement | Varies | Royalty-based, no equity required |
| Public Limited Company | Listed on stock exchange | Up to 100% | Public shareholding possible |
| Private Limited Company | Non-listed company | Up to 100% | Most common structure |
| Partnership Firm | General or limited partnership | As per agreement | Less common for FDI |
| Special Purpose Vehicle | For specific projects | Varies | PPP and infrastructure projects |
What Benefits Does Foreign Direct Investment Approval Provide?
Foreign direct investment approval in Nepal provides numerous legal rights, protections, and incentives designed to encourage foreign capital inflow and technology transfer.
- Legal authorization to conduct business operations in Nepal
- Protection against nationalization and expropriation under FITTA
- Right to repatriate profits, dividends, and capital after tax payment
- Access to tax incentives and exemptions under Industrial Enterprises Act
- Eligibility for customs duty exemptions on imported machinery and equipment
- Right to employ foreign nationals in technical and managerial positions
- Access to land and property for industrial and commercial purposes
- Protection under bilateral investment treaties signed by Nepal
- Eligibility for special economic zone benefits and facilities
- Access to government incentives for priority sector investments
- Right to transfer technology and receive royalty payments
- Legal framework for dispute resolution and arbitration
- Eligibility for export promotion schemes and incentives
- Access to industrial infrastructure and support services
- Protection of intellectual property rights under Nepali law
FAQs
What is the minimum investment required for foreign direct investment in Nepal?
The minimum foreign direct investment in Nepal is NPR 50 million for most sectors. However, consulting services require only NPR 5 million minimum investment. Export-oriented and technology-based industries have NPR 20 million minimum investment requirement. Specific sectors may have different thresholds as prescribed by relevant authorities.
How can foreign investors repatriate profits from Nepal?
Foreign investors can repatriate profits after:
- Paying applicable taxes
- Obtaining tax clearance certificate
- Submitting audited financial statements
- Applying through authorized banks
- Complying with Nepal Rastra Bank regulations
Where is the Department of Industry located in Nepal?
The Department of Industry is located in Tripureshwor, Kathmandu, Nepal. It serves as the single-window facility for foreign investment approval. The department operates under the Ministry of Industry, Commerce and Supplies. Investors can visit the office during official working hours for application submission and inquiries.
Can foreign investors own 100% equity in Nepali companies?
Yes, foreign investors can own 100% equity in most sectors in Nepal. The Foreign Investment and Technology Transfer Act, 2019 allows full foreign ownership except in restricted sectors. Education sector allows maximum 80% foreign equity. Health services permit up to 70% foreign ownership. Financial sector follows Nepal Rastra Bank regulations.
What sectors are restricted for foreign direct investment in Nepal?
Restricted sectors include:
- Cottage industries
- Personal service businesses
- Arms and ammunition manufacturing
- Radioactive materials production
- Certain retail businesses
- Industries reserved for Nepali citizens
How long is foreign investment approval valid in Nepal?
Foreign investment approval remains valid as long as the company maintains active status and complies with legal requirements. There is no expiration date for the approval itself. However, industrial enterprise registration requires annual renewal. Companies must maintain minimum investment amount and submit annual returns to Department of Industry.
What is the role of Nepal Rastra Bank in foreign investment?
Nepal Rastra Bank regulates foreign exchange transactions, approves capital inflow and repatriation, monitors foreign investment compliance, issues guidelines for foreign investment, approves financial sector investments, and maintains foreign investment statistics. All foreign investment capital must flow through NRB-authorized banking channels for legal recognition.
Can foreign investors purchase land in Nepal?
No, foreign individuals and companies cannot purchase land in Nepal. However, foreign investors can lease land for up to 50 years for industrial purposes. Land can be leased from government or private owners. Industrial estates and special economic zones provide land on lease basis. Joint venture companies with Nepali partners can own land through the Nepali partner.
About Our Services
Our law firm stands as Nepal's premier legal service provider for foreign direct investment matters. We offer comprehensive assistance throughout the foreign direct investment approval process in Nepal, from initial consultation to post-approval compliance. Our experienced team of legal professionals has successfully facilitated hundreds of foreign investment approvals across diverse sectors. We provide end-to-end services including company registration, foreign investment approval, sector-specific licensing, tax registration, and ongoing compliance support. As the No.1 service provider in Nepal for foreign investment legal services, we ensure efficient processing, complete documentation, and full regulatory compliance. Our deep understanding of Nepal's investment laws, strong relationships with government authorities, and commitment to client success make us the trusted partner for foreign investors entering the Nepali market. Contact us for expert legal guidance on your foreign direct investment approval process in Nepal.
