Introduction
Foreign Direct Investment (FDI) in Nepal plays a significant role in economic growth by bringing foreign capital, technology, expertise, and employment opportunities. Nepal has adopted a liberal investment regime through the Foreign Investment and Technology Transfer Act, 2019 (FITTA) and the Industrial Enterprises Act, 2020 to encourage foreign investors.
Investors from abroad can establish a new company, invest in an existing Nepali company, enter into a joint venture, or engage in technology transfer arrangements. However, prior approval from the relevant government authority is required before making an investment.
Governing Laws of Foreign Investment in Nepal
The legal framework for FDI in Nepal is primarily governed by:
| Laws | Purpose |
| Foreign Investment and Technology Transfer Act, 2019 (FITTA) | Main law governing foreign investment |
| Foreign Investment and Technology Transfer Regulations, 2021 | Procedural regulations |
| Industrial Enterprises Act, 2020 | Classification and regulation of industries |
| Companies Act, 2006 | Company incorporation and management |
| Foreign Exchange Regulation Act, 1962 | Foreign currency and repatriation matters |
| Public Private Partnership and Investment Act, 2019 | Large infrastructure and PPP projects |
Authorities Approving Foreign Investment
The authority responsible for approval depends on the investment amount.
| Investment Size | Approving Authority |
| Up to NPR 6 Billion | Department of Industry (DOI) |
| Above NPR 6 Billion | Investment Board Nepal (IBN) |
| Foreign Currency Recording & Repatriation | Nepal Rastra Bank (NRB) |
Sectors Open and Restricted for FDI
Foreign investment is permitted in most sectors including manufacturing, information technology, tourism, hydropower, infrastructure, and renewable energy.
However, foreign investment is restricted in certain sectors such as:
- Cottage and small industries
- Primary agriculture and livestock farming
- Personal service businesses
- Real estate trading
- Retail business
- Local travel and trekking services
- National language media businesses
- Certain consultancy services
Before investing, investors should verify whether the proposed business falls within the Negative List under FITTA.
FDI Approval Process in Nepal
The registration and approval process generally involves the following steps:
Step 1 : Obtain FDI Approval from DOI or IBN
Step 2 : Register Company at Office of Company Registrar
Step 3 : Obtain PAN and Tax Registration
Step 4 : Register Business at Local Ward Office
Step 5 : Register Industry with DOI
Step 6 : Obtain Non-Blacklist Certificate
Step 7 : Open Company Bank Account
Step 8 : Inject Foreign Investment
Step 9 : Record Investment with Nepal Rastra Bank
The entire process typically takes between 1 and 3 months depending on the nature of the project and regulatory requirements.
Minimum Capital Requirement
The minimum foreign investment threshold in Nepal is:
| Sector | Minimum Investment |
| Most Industries | NPR 20 Million |
| Information Technology (IT) Industry | No Minimum Requirement |
This exemption has made Nepal increasingly attractive for foreign investment in software development, outsourcing, and technology-based businesses.
Documents Required for FDI Approval
Foreign investors generally need the following documents:
- Project Report
- Company Profile or Investor Bio-data
- Certificate of Incorporation
- Memorandum and Articles of Association
- Board Resolution Approving Investment
- Financial Credibility Certificate
- Source of Funds Declaration
- Investment Schedule
- Passport Copies
- Power of Attorney
- Joint Venture Agreement (if applicable)
Repatriation of Profits
Nepal permits foreign investors to repatriate:
- Dividends
- Capital gains
- Share sale proceeds
- Technology transfer fees
- Royalty payments
- Lease payments
- Liquidation proceeds
Repatriation is subject to tax compliance and approval from the relevant authorities, including Nepal Rastra Bank.
Conclusion
Nepal offers growing opportunities for foreign investors in sectors such as information technology, hydropower, tourism, manufacturing, infrastructure, and renewable energy. With a modern legal framework under FITTA 2019 and investor-friendly policies, Nepal continues to attract international investment. However, investors should obtain proper legal guidance to ensure smooth approval, compliance, and successful implementation of their investment projects in Nepal.
Frequently Asked Questions (FAQs)
1. What is the minimum investment required for FDI in Nepal?
The minimum foreign investment threshold is NPR 20 million, except for IT industries where no minimum investment requirement applies.
2. Can a foreigner own 100% of a company in Nepal?
Yes. Foreign investors may own 100% of a company in most sectors unless sector-specific restrictions apply.
Disclaimer:
This material is provided solely for academic and informational purposes. It does not constitute legal advice or create any lawyer-client relationship.
