FOREIGN DIRECT INVESTMENT IN NEPAL

Foreign Direct Investment in Nepal

Foreign Direct Investment in Nepal

Blog Article

Foreign Investment in Nepal: A Comprehensive Guide to the Approval Process and Required Documents

Nepal's strategic location between India and China, coupled with its untapped resources in sectors like hydropower, tourism, agriculture, and information technology, makes it an attractive destination for foreign investors. The Government of Nepal has implemented policies and legal frameworks to facilitate and regulate foreign direct investment (FDI), ensuring a conducive environment for international businesses.



Key Regulatory Bodies for FDI in Nepal



  1. Department of Industry (DOI): Responsible for approving foreign investments up to NPR 6 billion.

  2. Investment Board of Nepal (IBN): Handles approvals for investments exceeding NPR 6 billion or hydropower projects over 200 MW. (Onesphere Law)

  3. Nepal Rastra Bank (NRB): The central bank that provides final approval for the inflow of foreign capital and monitors foreign exchange transactions. (One Sphere Law)





FDI Approval Process in Nepal



  1. Project Proposal Submission:

    • Foreign investors must submit a detailed project proposal to the DOI or IBN, depending on the investment amount.

    • The proposal should include a business overview, financial projections, and market feasibility studies.



  2. Company Incorporation:

    • Upon approval, investors must register their company with the Office of the Company Registrar (OCR).

    • This involves submitting the Memorandum and Articles of Association, appointing directors, and detailing share allotments.



  3. Tax and Local Registrations:

    • Register for a Permanent Account Number (PAN) and Value Added Tax (VAT) at the Inland Revenue Office.

    • Register the business at the respective local Ward Office.



  4. Industry Registration:

    • Obtain industry registration from the DOI, which is necessary for businesses classified under industrial or manufacturing enterprises.



  5. Approval from Nepal Rastra Bank:

    • Secure final approval from NRB for capital infusion.

    • This step is crucial for legally remitting funds into Nepal.



  6. Infusion of Capital and Investment Certificate:

    • Deposit the investment capital into a Nepalese bank.

    • Obtain an investment certificate, which is essential for future repatriation purposes.



  7. Sector-Specific Approvals:

    • Depending on the nature of the business, additional regulatory approvals may be required from relevant government agencies.







Required Documents for FDI Approval



  • Project Report: Detailed business plan including financial projections and market analysis.

  • Corporate Profile: Background information of the foreign investor.

  • Certificate of Incorporation: Legal documents of the investing entity.

  • Corporate Resolution: Authorization for investment in Nepal.

  • Financial Credibility Certificate: Issued by a recognized bank in the investor’s home country.

  • Source of Investment Declaration: Details of fund origin and transfer schedule.

  • Power of Attorney: Authorization for a representative to complete the FDI process.

  • copyright Copies: For individual investors and directors of investing entities.

  • Commitment Letter: Statement ensuring investment will not be repatriated for at least one year.

  • Joint Venture Agreement: If applicable.





Minimum Investment Threshold


The minimum investment required for foreign investment approval in Nepal is NPR 20 million (approximately USD 155,000).



Timeline and Costs



  • Approval Timeline: The FDI approval process typically takes 1 to 2 months, depending on the investment size and sector.

  • Government Fees:

    • Foreign Investment Application: NPR 20,000.

    • Company Registration: Fees vary based on authorized capital.

    • PAN Registration: NPR 500.

    • Investment Approval Certificate: NPR 10,000.

    • Technology Transfer Agreement Registration: NPR 10,000.

    • Environmental Impact Assessment Approval: NPR 50,000 – 150,000.







Post-Investment Compliance


After establishing a business through FDI in Nepal, foreign investors must comply with various regulations, including:

  • Annual Reporting: Submit reports to the DOI or IBN.

  • Labor Laws: Adhere to employment regulations and social security contributions.

  • Tax Filings: Regular submission of tax returns and payments.

  • Environmental Compliance: Ensure adherence to approved Environmental Impact Assessments.

  • Foreign Exchange Regulations: Comply with NRB guidelines for currency transactions.

  • Corporate Governance: Maintain proper records and adhere to governance norms.





Nepal's commitment to economic liberalization and international cooperation makes it a promising destination for foreign investors. By understanding the approval process and complying with regulatory requirements, investors can successfully establish and operate businesses in Nepal.

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