Paragon Law Associates, provides assistance to foreign investors to make investment in Nepal. We assist foreign investors through government regulations and procedures for setting up their operations in Nepal. Our lawyers have in-depth knowledge of international markets on foreign investment and have comprehensive experience in cross-border transactions. Foreign investors and their authorized representative and their dependents will be granted a business visa for a period of one year at a time on the recommendation of DOI.

Laws governing foreign investment in Nepal

• Foreign Investment and Technology Transfer Act 2019 (“FITTA”);
• Public Private Partnership and Investment Act 2019 (“PIA”);
• Industrial Enterprise Act 2020 (“IEA”); and
• Foreign Exchange (Regulation) Act 1962 (“FERA”).

Minimum Capital requirement for foreign investment in Nepal

The minimum investment required for obtaining foreign investment approval has been fixed at NPR 20 million (approx. USD 1,50,000).

Negative List; Foreign Investment restricted sectors

The Negative List comprises of the businesses/industries in which foreign investment is restricted in Nepal,

1. Poultry farming, fisheries, bee-keeping, fruits, vegetables, oil seeds, pulse seeds, milk industry and other sectors of primary agro-production in which 75% of its production shall be exported.
2. Cottage and small industries;
3. Personal service business (hair cutting, tailoring, driving etc.);
4. 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;
5. Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service;
6. Travel agency, guide involved in tourism, trekking and mountaineering guide, rural tourism including homestay;
7. Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language;
8. Management, account, engineering, legal consultancy service and language training, music training, and computer training; and
9. Consultancy services having foreign investment of more than fifty-one percent.

Governing authorities for foreign investment?

The governing authorities that provide approval and regulate foreign investment are;

• Department of Industry (DoI) – Foreign Investment approval for investment up to NPR 6 Billion.
• Investment Board of Nepal – Foreign Investment approval for investments more than NPR 6 Billion or Hydropower projects with capacity of more than 200 MW.
• Nepal Rastra Bank (NRB) – Approval to bring in Foreign Investment into Nepal.

Document necessary for getting approval of Foreign Investment from Department of Industry

• Application
• Two copies of the Project Report
• If more than one investor, requires a Joint Venture Agreement
• Copy of MOA/AOA/Incorporation Certificate (With Notary Public) ( If the investor is a Foreign Company)
• Board Minute to establish a company in Nepal
• Copy of Power of Attorney
• Bio-Data of Investor with Photo
• Copy of Financial credibility Certificate
• Opinion of concerned government agency if necessary

It will take 6 weeks for getting a foreign investment approval letter. Foreign Investment and Technology Transfer Act (FITTA) 2019 allows foreigners to organize either a private limited company or a public limited company only. The registration of the company is done by the Company Registrar Office (OCR). The companies are incorporated and registered under the provisions of the company.

Procedures/Steps for establishment and Operation of Foreign Investment

Time frame for approval process

It generally takes 3-5 months for completion of the entire process.

Specific approvals from different sectors

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.

Branch Industry Registration

More often, foreign company has been established either as branch or contact office under Companies Act of Nepal. However, FITTA and FITTR provide the provision for establishment of branch industry. The concept of industry does not exist elsewhere like in Nepal, therefore the provision in relation to branch industry registration is not feasible option which has been incorporated under the existing foreign investment laws of Nepal.

Repatriation

Foreign investor can withdraw foreign investment from Nepal selling full or partial shares or industry of investment after clearing all outstanding taxes under prevailing laws of Nepal. Each time approval for foreign investment for repatriation shall be taken from the investment approval providing authority. The practice of providing blanket approval is very limited and reluctant. Repatriation of foreign investment made in different forms of investment is not allowed if the investment approving authority does not grant recommendation for investment repatriation and such investment is not recorded at the NRB.