Foreign Direct Investment (FDI) in Nepal

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Foreign Direct Investment (FDI) in Nepal is governed by the Foreign Investment and Technology Transfer Act (FITTA) 2019. This page explains the procedures, requirements, regulations, and timeframes for obtaining FDI approval in Nepal.

Understanding Foreign Direct Investment (FDI) in Nepal: Key Laws and Procedures

1) Key Laws Governing Foreign Investment in Nepal

Foreign investment in Nepal is primarily regulated under the following laws:

Foreign Investment and Technology Transfer Act, 2019 (FITTA)

This is the foundational law for foreign investment in Nepal, governing aspects such as technology transfer and joint ventures.

Foreign Investment and Technology Transfer Regulations, 2021

The regulations under FITTA provide more detailed rules and guidelines to ensure the smooth implementation of FDI policies.

Industrial Enterprises Act, 2020

This law promotes industrial development and offers incentives for both domestic and foreign investors.

Companies Act, 2006

The Companies Act regulates the formation and operation of companies in Nepal, including foreign entities.

Public-Private Partnership and Investment Act, 2019 (PPPIA)

This act encourages private investment, particularly in infrastructure and construction sectors.

2) Key Authorities for Approvals and Regulation of FDI in Nepal

Various government authorities are involved in the approval and regulation of foreign investments:

Department of Industries (DOI)

Handles foreign investments below NPR 6 billion.

Investment Board of Nepal (IBN)

Deals with investments exceeding NPR 6 billion, as well as large-scale projects like hydropower ventures over 200 MW.

Nepal Rastra Bank (NRB)

Final approval for the inflow of foreign funds is provided by NRB.

Authority	Approval Process
Department of Industries (DOI)	For foreign investments below NPR 6 billion
Investment Board of Nepal (IBN)	For investments over NPR 6 billion or large-scale hydropower projects
Nepal Rastra Bank (NRB)	Final approval for remitting foreign funds

3) Eligibility Requirements for FDI in Nepal

The eligibility criteria for obtaining FDI approval include the following:

Negative List Check

The proposed business should not fall within the negative list of industries specified in FITTA’s schedule.

Industry Status

The business must qualify as an "industry" under the Industrial Enterprise Act of Nepal.

4) Restricted Sectors for Foreign Investment (FDI Negative List)

FDI is restricted in the following sectors:

Primary agricultural activities (e.g., poultry, dairy farming, etc.)
Small and cottage industries
Personal services such as tailoring, hairdressing, and driving
Manufacturing of arms and ammunitions
Real estate, retail businesses, and local courier services
Media businesses including newspapers, radio, television, and national language films
Certain professional services (e.g., legal consultancy and language training)

5) Stepwise FDI Process in Nepal

Follow these key steps to obtain FDI approval in Nepal:

Step 1: Investment Approval

Apply to the DOI or IBN depending on the investment amount for initial approval.

Step 2: Company Incorporation

Step 3: Tax Registration

Obtain tax registration from the Inland Revenue Office.

Step 4: Local Business Registration

Step 5: Industry Registration

Step 6: Non-Blacklist Certificate

Obtain a certificate from the Credit Information Bureau confirming the company is not blacklisted.

Step 7: NRB Approval

Obtain final approval from the Nepal Rastra Bank to remit the investment funds.

Step 8: Fund Infusion

Transfer the foreign investment funds into a local bank account and obtain an Investment Certificate.

Step 9: Filing with NRB

File the invested capital amount with NRB.

6) Minimum Investment Threshold

The minimum capital required to obtain FDI approval is NPR 20 million (approximately USD 155,000).

7) Required Documents for FDI Approval

To apply for FDI approval, submit the following documents:

Project report detailing market, technical, and financial aspects
Foreign investor's profile or bio-data
Company registration certificate
Corporate resolution authorizing the foreign investment
Certificate of financial credibility issued by a bank in the investor's home country
Proof of source and schedule for the investment
Power of Attorney authorizing a representative
Passport copies for foreign investors and company directors
Commitment letter to retain the investment for at least one year
Joint venture agreement (if applicable)

8) Estimated Timeline for FDI Approvals

The entire FDI approval process typically takes 1 to 2 months for completion.

9) Additional Approvals Based on Industry

Certain sectors require additional approvals, such as:

Insurance Board for insurance businesses

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Disclaimer

This article is for educational purposes only and should not be considered legal advice. FinLex Associates holds exclusive rights to this content.

Contact Us for Legal Advice on FDI in Nepal

Frequently Asked Questions (FAQ) on Foreign Direct Investment (FDI) in Nepal

FDI in Nepal is primarily governed by the Foreign Investment and Technology Transfer Act (FITTA) of 2019, along with regulations from the Foreign Investment and Technology Transfer Regulations of 2021 and other laws such as the Industrial Enterprises Act and the Companies Act.
The main authorities for FDI approvals are:
- Department of Industries (DOI): For investments below NPR 6 billion.
- Investment Board of Nepal (IBN): For investments over NPR 6 billion or hydropower projects exceeding 200 MW.
- Nepal Rastra Bank (NRB): For approval of foreign fund remittance and recording.
To be eligible for FDI approval, a business must:
- Pass a "Negative List" check to ensure it does not fall under restricted industries.
- Qualify as an "industry" under the Industrial Enterprise Act.
FDI is restricted in the following areas:
- Primary agricultural activities (e.g., poultry, fish farming, dairy).
- Small and cottage industries.
- Personal services (e.g., hairdressing, tailoring).
- Arms and ammunition production.
- Real estate business (excluding construction).
- Consultancy services with over 51% foreign investment.
The FDI process involves the following steps:
- Obtain investment approval from DOI or IBN.
- Incorporate the company with the Office of the Company Registrar.
- Register for tax at the Inland Revenue Office.
- Register with the local Ward Office.
- Complete industry registration with DOI.
- Obtain a non-blacklist certificate from the Credit Information Bureau.
- Secure NRB approval for remitting funds.
- Infuse funds into a local bank and obtain an Investment Certificate.
- File the invested capital with NRB.
The minimum required investment for FDI approval is NPR 20 million (approx. USD 155,000).
The required documents include:
- A project report detailing the business aspects.
- Bio-data or profile of the foreign investor.
- Company registration certificates.
- A corporate resolution authorizing the investment.
- Bank certificate of financial credibility from the investor's home country.
- Proof of investment source and schedule.
- Power of Attorney for an authorized person.
- Passport copies of the foreign investor and directors.
- A commitment letter to retain the investment for at least one year.
- A joint venture agreement, if applicable.
The FDI approval process typically takes 1 to 2 months.
Yes, additional approvals may be required for specific sectors:
- Insurance businesses: Insurance Board.
- Banks/Financial institutions: NRB.
- Energy projects: Department of Electricity Development.
- Tourism-related businesses: Department of Tourism.
- Food industries: Department of Food Technology and Quality Control.
The main costs include:
- Foreign Investment Approval: No deposit required (refundable upon approval).
- Company Registration: Fees as per the Companies Act.
- Industry Registration: No cost.
- Currency Exchange: No fee for foreign currency issuance.
- Visa Fees: As per the Immigration Act of Nepal.