Are you looking for information on Foreign Direct Investment (FDI) in Nepal? If yes, this article is for you. Here, you will get complete details about FDI laws, sectors open for FDI, registration process, required documents, benefits, challenges, and FAQs. Read this article till the end to understand how foreign investors can invest in Nepal.
Contents
- 1 What is Foreign Direct Investment (FDI)?
- 2 Laws Governing FDI in Nepal
- 3 Sectors Open for FDI in Nepal
- 4 Minimum Investment Requirement for FDI in Nepal
- 5 FDI Registration Process in Nepal
- 5.1 Step 1: Approval from Department of Industry (DOI) or Investment Board Nepal (IBN)
- 5.2 Step 2: Company Registration at Office of Company Registrar (OCR)
- 5.3 Step 3: Approval from Nepal Rastra Bank (NRB)
- 5.4 Step 4: Tax Registration (PAN & VAT) at Inland Revenue Department (IRD)
- 5.5 Step 5: Sector-Specific License Approvals
- 6 Required Documents for FDI Approval in Nepal
- 7 Benefits of FDI in Nepal
- 8 Challenges of FDI in Nepal
- 9 Frequently Asked Questions (FAQs)
- 10 Final Thoughts
What is Foreign Direct Investment (FDI)?
Foreign Direct Investment (FDI) refers to the investment made by foreign individuals, companies, or organizations in Nepalese businesses, industries, or projects.
FDI can be in the form of:
✅ Equity Investment – Owning shares in a Nepali company
✅ Reinvestment of Earnings – Investing profits back into the business
✅ Loan or Debt Investment – Foreign loans to Nepali businesses
✅ Technology Transfer – Bringing new technologies, expertise, and management skills
The Foreign Investment and Technology Transfer Act (FITTA) 2019 regulates all FDI activities in Nepal.
Laws Governing FDI in Nepal
FDI in Nepal is regulated by the following laws:
Foreign Investment and Technology Transfer Act (FITTA) 2019 – Governs foreign investment, technology transfer, and repatriation of profits.
Industrial Enterprises Act 2020 – Defines business classifications, incentives, and taxation for industries.
Public Private Partnership (PPP) and Investment Act 2019 – Regulates large-scale infrastructure and investment projects.
Companies Act 2006 – Governs company registration, ownership, and operations.
Income Tax Act 2002 – Determines tax policies for foreign investments and businesses.
Nepal Rastra Bank (NRB) Guidelines – Regulates foreign currency exchange, repatriation of profits, and financial transactions.
These laws provide a legal framework for FDI approvals, investment security, and business operations in Nepal.
Sectors Open for FDI in Nepal
Nepal welcomes FDI in most sectors, except for certain restricted industries.
✅ Sectors Open for FDI in Nepal:
- Hydropower & Renewable Energy
- Tourism & Hospitality (Hotels, Resorts, Adventure Tourism)
- Information Technology (IT) & Software Development
- Agriculture & Agro-based Industries
- Manufacturing & Industrial Production
- Banking, Finance & Insurance
- Health & Medical Services (Hospitals, Pharmaceuticals)
- Education & Training Institutes
- Mining & Minerals Exploration
- Infrastructure & Real Estate Development
Sectors Restricted for FDI in Nepal:
The Government of Nepal prohibits foreign investment in the following sectors:
- Small-scale retail and wholesale trade
- Tobacco & alcohol production
- Private security services
- Law, accounting, and engineering consultancy services
- Mass media (newspapers, radio, and TV broadcasting)
Before investing, foreign investors must check whether their industry is open for FDI in Nepal.
Minimum Investment Requirement for FDI in Nepal
The minimum foreign investment amount required for FDI in Nepal is NPR 50 million (approx. USD 375,000).
This means foreign investors must invest at least NPR 50 million to be eligible for FDI approval.
FDI Registration Process in Nepal
To invest in Nepal, foreign investors must follow these 5 steps:
Step 1: Approval from Department of Industry (DOI) or Investment Board Nepal (IBN)
- Submit an FDI Proposal to the Department of Industry (DOI) or Investment Board Nepal (IBN) (for large-scale investments).
- Provide details about business activities, investment amount, technology transfer, and expected benefits.
- Approval is granted within 15-30 days.
Step 2: Company Registration at Office of Company Registrar (OCR)
- Register a Private Limited or Public Limited Company in Nepal.
- Submit Memorandum of Association (MOA), Articles of Association (AOA), and investor details.
Step 3: Approval from Nepal Rastra Bank (NRB)
- Get Foreign Investment Approval from Nepal Rastra Bank (NRB) to bring investment funds into Nepal.
- This ensures that foreign capital enters Nepal through legal banking channels.
Step 4: Tax Registration (PAN & VAT) at Inland Revenue Department (IRD)
- Obtain a Permanent Account Number (PAN) and register for VAT (if applicable).
- This step is required to start business operations legally.
Step 5: Sector-Specific License Approvals
- Obtain industry-specific licenses (e.g., tourism, banking, hydropower, etc.) before launching operations.
- Start business activities after receiving all required approvals.
Required Documents for FDI Approval in Nepal
To register FDI in Nepal, the following documents are required:
✅ FDI Proposal (Business Plan)
✅ Company Registration Documents (MOA & AOA)
✅ Shareholder Agreement (If applicable)
✅ Passport Copy of Foreign Investor (Notarized)
✅ Bank Statement Showing Investment Capital
✅ Approval Letter from DOI/IBN & NRB
✅ Lease Agreement of Business Location
These documents must be translated into English or Nepali and notarized before submission.
Benefits of FDI in Nepal
Foreign Direct Investment (FDI) in Nepal offers several benefits, including:
✅ Tax Exemptions & Incentives – FDI projects enjoy corporate tax holidays, duty-free imports, and VAT exemptions.
✅ Access to a Growing Market – Nepal is a gateway to India & China, offering trade opportunities.
✅ Affordable Workforce – Nepal has a low-cost, skilled labor market.
✅ Government Support – Nepal provides investment-friendly policies and ease of business reforms.
✅ 100% Profit Repatriation – Foreign investors can legally repatriate profits as per NRB guidelines.
✅ Emerging Investment Sectors – Hydropower, tourism, IT, and manufacturing offer high ROI.
Challenges of FDI in Nepal
Despite opportunities, foreign investors may face certain challenges, such as:
⚠️ Bureaucratic Delays – Lengthy approval process for business registration.
⚠️ Political & Legal Uncertainty – Frequent policy changes affecting investment.
⚠️ Infrastructure Limitations – Inconsistent electricity supply, road connectivity, and digital access.
⚠️ Foreign Exchange Restrictions – Strict NRB policies on profit repatriation.
⚠️ Labor Union Disputes – Strikes and labor laws can affect business operations.
Foreign investors should conduct due diligence and consult legal experts before investing in Nepal.
Frequently Asked Questions (FAQs)
1. What is the minimum FDI requirement in Nepal?
Foreign investors must invest at least NPR 50 million (USD 375,000) to qualify for FDI approval.
2. Can foreign investors own 100% of a business in Nepal?
Yes, foreigners can own 100% of a business, except for restricted sectors.
3. How long does it take to get FDI approval in Nepal?
It usually takes 15-30 days to receive approval from DOI/IBN and NRB.
4. Can FDI profits be repatriated from Nepal?
Yes, foreign investors can repatriate 100% of profits, subject to NRB approval.
Final Thoughts
FDI in Nepal provides great investment opportunities in hydropower, tourism, IT, and agriculture. With government support, tax incentives, and an emerging market, Nepal is an ideal destination for foreign investors.
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