Kathmandu, Nepal – In a landmark move poised to reshape Nepal’s technology landscape, the Nepal Rastra Bank (NRB), the nation’s central bank, has introduced new regulations enabling Nepali IT companies to invest up to $1 million abroad. This long-awaited policy shift is a significant stride towards empowering the domestic tech sector, fostering global competitiveness, and driving foreign exchange earnings.
A New Era for Nepali IT
Previously, stringent restrictions on foreign investments significantly hampered the global expansion aspirations of Nepali businesses. The amended Foreign Investment and Foreign Loan Management Bylaw, 2021, a result of the government’s strategic policy decision announced in the fiscal year 2025-26 budget, now opens doors for IT companies to:
- Invest in foreign ventures: This allows Nepali tech firms to acquire stakes in overseas companies, fostering collaboration and market access.
- Establish satellite offices and subsidiaries: Setting up a physical presence abroad can facilitate closer client relationships, tap into new talent pools, and enhance operational efficiency in international markets.
- Partner with international accelerators: Engaging with global accelerators can provide Nepali startups with crucial mentorship, funding, and exposure to cutting-edge technologies and business practices.
This progressive regulation recognizes the immense potential of Nepal’s IT sector to become a significant contributor to the national economy and a key player in the global digital arena.
Eligibility and Investment Scope
To qualify for this foreign investment facility, IT companies must meet specific criteria:
- Legal Registration: The company must be registered under Nepali industrial laws.
- Consistent Foreign Currency Earnings: A proven track record of earning foreign currency by exporting IT-related services over the past three fiscal years is mandatory.
- Investment Limit: Companies can invest up to $1 million or an amount equivalent to 50 percent of their average foreign currency earnings from IT service exports over the last three fiscal years, whichever is lower.
The permitted types of investments are specifically tailored to IT-related ventures, including:
- Investing in foreign tech companies.
- Establishing subsidiaries for IT operations.
- Setting up innovation labs and research and development centers abroad.
Furthermore, the new arrangement allows up to 25 percent of the annual income generated from exports to be reinvested abroad, with a mandate to repatriate 50 percent of the profits earned from such ventures back to Nepal through formal banking channels.
Application Process and Compliance
Nepali IT companies seeking to invest abroad must submit an application to the Ministry of Communication and Information Technology, providing comprehensive financial, legal, and corporate documents. The NRB will then facilitate the foreign currency exchange process upon approval.
The emphasis on compliance remains strong. The bylaws clearly outline the importance of adhering to the regulations and the potential consequences, including penalties and legal action, for misusing the facility. Companies are also required to submit audited financial reports of their foreign investments annually, or unaudited reports if the investing country’s laws do not mandate audits, within six months of the end of the fiscal year.
Impact and Challenges for Global Expansion
This policy is anticipated to have several positive impacts on the Nepali IT sector:
- Enhanced Global Competitiveness: By allowing investment abroad, Nepali IT companies can better compete with international firms, access larger markets, and integrate into global value chains.
- Knowledge and Technology Transfer: Foreign investments facilitate the inflow of advanced technology, specialized knowledge, and modern management practices into Nepal.
- Increased Foreign Revenue and Job Creation: Successful global expansion will lead to higher foreign currency earnings, contributing to the national economy and creating more high-value jobs domestically.
- Attracting Talent: Global exposure and opportunities can help retain skilled IT professionals within Nepal and attract international talent.
Despite these promising opportunities, Nepali IT companies may still face challenges:
- Navigating Foreign Markets: Understanding diverse international business practices, legal frameworks, and cultural nuances can be complex.
- Access to Capital Beyond Initial Limits: While the $1 million limit is a good start, some larger expansion projects might require more substantial capital, necessitating further policy adjustments in the future.
- Talent Retention: Despite global opportunities, the “brain drain” of skilled professionals seeking opportunities abroad remains a concern that needs continuous attention through competitive salaries and career development.
- Inadequate Digital Infrastructure: While improving, gaps in high-speed internet access and advanced research facilities outside major cities could still pose challenges for widespread digital transformation.
Government and Ecosystem Support
The Nepali government, alongside various organizations, is actively working to create a supportive ecosystem for IT startups and their international ambitions. Initiatives include:
- Digital Nepal Framework: A vision to integrate IT into various sectors, from e-governance to fintech.
- Tax Incentives: Exemptions on software and hardware imports and potential tax holidays for companies in Special Economic Zones (SEZs).
- Startup Policy and Funds: The establishment of the ‘Nepal Startup Fund’ aims to provide financial assistance and support to entrepreneurial ventures.
- Simplification of Business Processes: Efforts to streamline company registration and other administrative procedures.
This new move by the Nepal Rastra Bank isn’t just another rule change; it seems like a real game-changer for Nepal’s IT industry. It’s not just about giving our tech companies a push to go global; it really suggests that Nepal is becoming serious about being a player in the international tech scene. With smart planning, solid support, and a continued focus on fresh ideas, our Nepali IT companies could very well make a significant mark on the world.
