FDI Support by BizSewa

Foreign Direct Investment, Nepal

We help you invest in Nepal, undertaking the legal and other aspects regarding FDI in Nepal. We help you with document preparation, proxy services, getting approval from the Department of Industry, comply environmental regulations, company updates, submissions, and all other services related to foreign investment in Nepal. Furthermore, we will be with you before, during, and after registering your business in Nepal.

Minimum Threshold for Foreign Investment Approval: 200,000 USD (~Nrs. 2 Crore) per investor

Foreign investment scenario in Nepal

Nepal is a small landlocked country located in South Asia, between India and China. It has a population of about 29 million people and is known for its natural beauty, including the Himalayas, which contain some of the highest mountains in the world, including Mount Everest. Nepal is also rich in cultural and religious diversity.

Foreign investment in Nepal has been limited in the past, due in part to the country’s challenging political and economic environment. However, the government has taken steps in recent years to encourage foreign investment and create a more business-friendly environment. Some sectors in which foreign investment is particularly welcome include hydropower, tourism, hospitality, and manufacturing.

There are several challenges to foreign investment in Nepal, including a lack of infrastructure, a limited pool of skilled labour, and a challenging regulatory environment. Additionally, the country has a relatively small domestic market, which can make it difficult for businesses to achieve economies of scale.

Despite these challenges, Nepal offers countless advantages for foreign investors. These include a low cost of living, a relatively stable political environment, and a strong tradition of entrepreneurship. Additionally, the country’s location between India and China makes it an attractive gateway to these two large markets.

Overall, Nepal presents both opportunities and challenges for foreign investors. Those who are willing to navigate the challenges and are committed to the long-term development of the country may be able to find success in Nepal.

Forms of Foreign Investment

Investment in share (Equity) (a)

Reinvestment of the earnings derived from the clause (a) above

An investment made in the form of loan or loan facilities

Foreign Equity Investment in a New Industry

(Documents required for investment in one of the allowed industry)

Project Report 3 copies
Joint Venture Agreement (IVA), in case of more than one investor 3 copies
Citizenship certificate of local party or Certificate of Incorporation including Memorandum of Association and Articles of Association, if the local party is a company 1 copy
Copy of passport of foreign party or Certificate of incorporation, including Memorandum of Association and Articles of Association, if the party is a company 1 copy
Bio-data / Company profile of the foreign party 1 copy
Financial Credibility Certificate (FCC) of the Foreign Investor provided by a home country bank or domiciled country bank 1 Copy
Authority letter from concerned departments

Foreign Investment in an Existing Industry by Share Transfer

(Documents required for transfer of share)

Request from the share transferor Request from the share transferee
Share Transfer Agreement 3 copies
Copy of minute of the Board meeting of Nepalese company regarding inclusion of foreign investor into the company 1 copy
Copy of minute of Board meeting, Certificate of incorporation and company profile of the foreign party if the party is a company 1 copy
Copy of passport and Bio-data of foreign party, if party is an individual 1 copy
Financial Credibility Certificate of the Foreign Investor provided by a bank 1 copy Current Share Holders’ List as certified by the Company Registrar’s Office 1 copy Auditor’s Report 1 copy
Tax clearance certificate 1 copy
Authority letter(s) from the companies concerned to sign on behalf of the companies. 1 copy
Industry Registration Certificate

Industries that are largely attractive for foreign investment in Nepal

These are some of the most attractive industries for foreign investment in Nepal.

Hydropower

Nepal has significant potential for hydropower generation, with an estimated capacity of more than 83,000 MW. The government has made hydropower development a priority and is encouraging foreign investment in this sector.

Manufacturing

Nepal has a growing manufacturing sector, with opportunities in areas such as textiles, leather goods, and food processing. The government is seeking to increase foreign investment in this sector to help boost economic growth.

Tourism

Nepal is a popular destination for tourists due to its natural beauty, including the Himalayas, and its rich cultural and religious heritage. The government is working to promote tourism and has made it easier for foreign investors to invest in this sector.

Energy

Nepal has a growing energy sector, with opportunities for foreign investment in areas such as solar and wind power. The government is working to increase the country's energy generation capacity to meet the increasing demand for electricity.

Agriculture

Nepal has a diverse range of crops and is a major producer of rice, wheat, maize, and pulses. Foreign investment in the agricultural sector can help to increase productivity and improve the livelihoods of small farmers.

Technology Transfer

Technology transfer is possible even in areas where foreign investment is not allowed.

Forms of “Technology Transfer”

Use of any technological right, specialization, formula, process, patent or technical know-how of foreign origin

Use of any trademark of foreign ownership

Acquiring any foreign technical consultancy, management and marketing service

Technology Transfer Agreement (TTA)

(Documents required for transfer of Technology)

Technology Transfer Agreement (TTA) 3 copies
Citizenship certificate of local party or Certificate of Incorporation including Memorandum of Association and Articles of Association, if local party is a company
Copy of passport of foreign party/or Certificate of Incorporation, including Memorandum of Association and Articles of Association, if the party is a company
Bio-data / Company profile of the foreign party
Industry Registration Certificate
Copy of the minute of the Board of the recipient company
Authority letter from the concerned companies or individuals to carry out any necessary work on their behalf, if applicable
Audit Report and tax clearance certificate

Provisions under Income Tax Act

Entity: If incorporated in Nepal the entity is Resident Entity.

Foreign Permanent Establishment: the place from where services are being performed by installing machinery, equipment or providing consultancy for more than 90 days either continuously or intermittently in Nepal. The term also includes agency business except independent agent.

Double Tax Avoidance Treaty is done with various countries which helps for avoidance of double taxation on global income.

Areas Not Allowed for Foreign Investment in Nepal

(Please check whether your core service/product falls in either of the categories or not)

Cottage Industries
Personal Service businesses
Arms and Ammunition Industries
Gunpowder and Explosives
Industries related to Radio-Active Materials
Real Estate Business (excluding construction industries)
Film Industries (National Languages and other recognized languages of Nation)
Security Printing
Bank notes and Coins
Retail Business (excluding international chain retail business with its business in more than two countries)
Bidi (excluding more than 90% exportable)
Internal Courier Service
Atomic Energy
Poultry
Fisheries
Bee Keeping
Consultancy Services such as Management, Accounting, Engineering, Legal Services (Maximum 51% foreign investment is allowed)
Processing of Food Grains on Rent
Local Catering Services
Rural Tourism

Government Agencies of Nepal related to FDI process

SN	Agencies	Major Functions
a.	Ministry of Industry, Commerce, and Supplies	Formulate policies and laws regarding FDI
b.	Industry and Investment Promotion Board	Provide consent to industries that require permission
c.	Investment Board of Nepal	Approve the foreign investment exceeding NRs. 6 billion and provide other facilitation
d.	Department of Industry (One Stop Service Center)	Approve the foreign investment not exceeding NRs. 6 billion and provide industry administration related services
e.	Office of Company Registrar	Register company and provide administration related services
f.	Nepal Rastra Bank (Central Bank of Nepal	Provide approval for bringing in foreign currency against approved investment, recording, and repatriation

Business Visa after FDI in Nepal

Foreign investors or his/her authorized representative and family members shall receive business visa after they obtain approval for foreign investment as long as their investment exists. They should apply for visa extension to Department of Industry 1 month prior to expiry of their Visa. And, they have to attend in person when they apply for the first time for Visa.

Documents Required for the Business Visa processing in Nepal along with the Application

Notarized copy of passport with the latest Visa
Letter of Foreign Investment Approval from the Department of Industry
Copy of Industry/Company Registration Certificate
In case of Industry in operation, report of industry inspection
Notarized copies of Letter of Authorization as a Representative of foreign investor and passport
Notarized document of the relation with the dependents
Contact address and telephone number of the investor/representative

Documents Required for the Non-Tourists Visa for Foreign Workers along with the Application

1. Notarized copy of Agreement between labourer and industry
2. Copy of the notice published in the national daily newspaper
3. Progress Report of the industry
4. Labourer’s Bio-Data (showing his/her experience in the industry) and Certificate of Academic Qualification
5. Notarized copy of passport with latest Visa
6. List of Nepali labourers to be trained by the foreign labourers
7. Working Approval and Work Permit
8. Copy of Industry Registration
9. Copies of current Audit Report and Tax Clearance Certificate of the company

*Note: Incase of Non-tourist Visa, the application should be submitted sixty days ahead of Visa expiry date

Residential Visa:

In case of foreign investment equivalent or above 1 million US dollar at a time, a foreign investor or his/her representative and family members shall be recommended for the Residential Visa.

Notarized copy of passport with the latest Visa
Evidence of Realized Investment equivalent or above 1 million US dollar at a time
Copy of the Industry Registration Certificate
Physical and Financial Progress Report of the industry
Document of the relation with the dependent

Compliance with Environmental regulations for FDI approval in Nepal

For establishing an industry, the extension and diversification of existing industry, Initial Environmental Examination (IEE) and Environmental Impact Assessment (EIA) should be approved prior to the operation of the industry as per the existing environment laws

Government Fees For FDI approval and related registrations

a.	Approval of Foreign Investment	Free (Deposit Rs.20,000/-)
b.	Company Registration	As per Company Act (Company Registration Fees)
c.	Industry Registration	Free
d.	Capital Currency against Foreign Investment	Free
e.	Visa Fees	Fees as per immigration Act

General Tax Rates in Nepal

1 %

Corporate Income TAX

1 %

Manufacturing Industries

1 %

Payment of Interest (TDS)

1 %

Payment of Dividend (TDS)

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FDI Support by BizSewa

Foreign Direct Investment, Nepal