Foreign Direct Investment(FDI) in Nepal

Introduction of FDI and FDI Registration

FDI in Nepal refers to the investment into a business or industry by a foreign investor. It includes:

1. Buying shares using foreign currency.
2. Putting profits from foreign investments back into the same industry.
3. Providing lease financing under certain rules.
4. Investing in venture capital funds according to specific regulations.
5. Buying listed securities in the secondary securities market based on certain rules.
6. Purchasing shares or assets of a Nepalese company.
7. Getting investment through banks after issuing securities in a foreign capital market by a Nepalese business.
8. Investing through technology transfer.
9. Creating or expanding a business in Nepal to maintain the investment.

This Article provides a comprehensive guide for investors and Foreign Individuals alike who are planning to invest in Nepal.

FDI Laws in Nepal

The Following Laws regulate Foreign Investment in Nepal. They are as follows:

Foreign Investment and Technology Transfer Act 2019

It was promulgated in Nepal to consolidate and unify laws concerning Foreign Investment and Technology Transfer in Nepal and promote National Economic Expansion through Foreign Investment in Nepal. It has provisioned that a foreign investor can invest in any industry and derive gains from such investment in Nepal. The Methods in which Foreign Investment can be conducted in Nepal are:

1. Purchase of Assets or Shares
2. Lease Investment
3. Technology Transfer
4. Establishing a Branch
5. Venture Capital Fund
6. Trading in Securities

Industrial Enterprises Act 2020

Industrial Enterprises Act 2020 has guaranteed incentives to Foreign Investors securing their investment in Nepal in Industrial Enterprises of Nepal. It has further simplified the procedures through which investment can be conducted.

Investment Board Act 2068

The Investment Board Act was enacted in Nepal to mobilize Public-Private Partnerships as well as channel foreign Private Sectors for Industrialization and Economic Development in Nepal. It has outlined the formation of the Board and the Functions, Duties, and Powers of the Investment Board.

FDI Regulatory Bodies of Nepal

The Governing Authorities responsible for overseeing Foreign Investment in Nepal provide approvals and regulate investments. They are:

Department of Industry

Department of Industry approves Foreign Investment below NPR 6 billion in Nepal. It acts as the primary entry point for Investors in Nepal.

Investment Board of Nepal

The Investment Board of Nepal established by the Investment Board Act 2068 has assumed authority for investment exceeding NPR 6 billion or Hydropower Projects with a Capacity greater than 200 MW in Nepal. It is integral to get the consent of the Investment Board before making any Investment decisions in Nepal.

Nepal Rastra Bank

After the preliminary approval from the Department of Industry or the Investment Board of Nepal, Nepal Rastra Bank provides the final approval for receiving Foreign Currency in Nepal in accordance with prevailing rules and regulations.

FDI Process in Nepal

Here are the steps to be followed for the establishment and operation of Foreign Investment in Nepal. (Note: Consult a Law Firm in Nepal before making a Substantial Decision.)

Step 1: Obtain approval for foreign investment from the Department of Industry (DOI) or the Investment Board Nepal (IBN).

Step 2: Register your Company with the Office of the Company Registrar.

Step 3: Register for taxes with the Inland Revenue Office.

Step 4: Register your business with the local Ward Office. You also need to obtain a recommendation letter from the local Ward Office and the Municipality for industry registration.

Step 5: Register your industry with the Department of Industry (DOI).

Step 6: Obtain a non-blacklisted certificate in the company’s name from the Credit Information Bureau.

Step 7: Obtain approval from the Nepal Rastra Bank (NRB) to bring in the foreign investment amount.

Document for FDI in Nepal

The Applications and Documents required for Foreign Investment Approval in Nepal are as follows:

1. Project Report: Includes project background, market analysis, and technical and financial details.
2. Bio-Data/Company Profile: Information about the foreign investor or their company.
3. Registration Documents: Copies of the Certificate of Registration and related documents.
4. Corporate Resolution: A document showing the foreign investor’s intent to invest in Nepal.
5. Financial Credibility Certificate: A bank certificate showing the investor’s financial credibility.
6. Source of Investment: Documents explaining the source and investment timeline.
7. Power of Attorney: A document authorizing someone to handle the registration process.
8. Passport: Passport of the foreign investor (or directors for entities).
9. Commitment Letter: A letter stating the investor won’t repatriate funds for a year.
10. Joint Venture Agreement: Only if relevant, for joint ventures. Not needed if it’s a fully owned subsidiary or the investor is an individual.

Time, Charge, Fees

Foreign investments in Nepal are approved by the Government within 3 to 5 Months. Moreover, the Approval Process takes a longer period of time than other procedures.

The Minimum Foreign Investment in Nepal is NPR 50 Million.

Further, the Industry Registration Fees for Foreign Investment are free. The Company Registration Fee is as prescribed in this Article starting from NPR 31,000 for a Private Company and starting from NPR 40,000 for a Public Company.

Privileges and Concessions of FDI in Nepal