Foreign Investment Approval in Nepal: A Complete Guide to FDI Requirements

Nepal continues to attract global capital, and understanding the full process of foreign investment approval Nepal is the first step for any overseas company or individual looking to establish a business in Nepal. This guide breaks down the FDI Nepal requirements, the role of the Department of Industry, FDI approval process, and what every foreign investor Nepal needs to prepare before entering the market.

1. Governing Laws of Foreign Direct Investment in Nepal

Any discussion of foreign investment approval Nepal must start with the legal framework. The major laws governing foreign investment in Nepal are:

1. Foreign Investment and Technology Transfer Act, 2019 (2075) (“FITTA”) and Foreign Investment and Technology Transfer Rule, 2020 (2076) (“FITTA”)
2. Industrial Enterprises Act, 2020 (2076) (“IEA”) and Industrial Enterprises Rule, 2022 (2078) (“IEA”)
3. The Companies Act, 2063 (2006) (“Companies Act”)
4. The Environment Protection Act, 2019 (2076) and Environmental Protection Rule, 2020 (2077)
5. Foreign Exchange Regulation Act, 1962 (2019) (“FERA”)

2. Approval Authorities for Foreign Direct Investment in Nepal

Meeting the FDI Nepal requirements starts with knowing which authority reviews your application. Approval depends on the investment amount:

3. Permissibility of Foreign Direct Investment in Nepal

Foreign investment is not permitted in every business category. Two conditions must be satisfied for any foreign investor Nepal to proceed:

1. The industry sector must not fall under the Negative List of Industries in Annex-1 of FITTA (Industries not open for Foreign Investment)
2. The industry sector must be classified as an industry under the Industrial Enterprises Act (IEA) except the industries not open for Foreign Investment)

4. Industries Where Foreign Investment Is Not Permissible

The following sectors are closed to foreign investment under current FDI Nepal requirements:

1. Other Industries or businesses, except the large Industries, Agricultural Technology and mechanisation, exporting at least seventy five percent of their own products, in the sectors of animal husbandry, fisheries, bee- keeping, fruits, vegetables, oilseeds, pulses, dairy business and related to primary products of agriculture.
2. Cottage and micro industries,
3. Personal service business (hair cutting, tailoring, driving etc.),
4. Industries manufacturing arms, ammunition, bullets and shell, gunpowder or explosives, and nuclear, biological and chemical (N.B.C.) weapons; industries producing atomic energy and radio-active materials,
5. Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remitance service,
6. Travel agency, guide involved in tourism, trekking and mountaineering guide, rural tourism including home stay,
7. Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language,
8. Management, account, engineering, legal consultancy service and language training, music training, computer training, and
9. Consultancy services having foreign investment of more than fifty-one percent.
10. Ride Sharing having foreign investment of more than Seventy percent.
11. In the case of aircraft operation, training, maintenance, and passenger service facility provider industries, foreign investment shall not exceed the following limits:
12. International air services: 80%
13. Domestic air services: 49%

• Training Institutions (aviation-related): 95%

1. Maintenance Institution: 95%

5. Procedure for Foreign Investment Approval in Nepal

The step-by-step process for foreign investment approval Nepal is as follows:

Step 1: Obtain Foreign Investment Approval from the DOI (automatic route or manual route) or IBN

Step 2: Register the company at the Office of the Company Registrar (“OCR”)

Step 3: Complete business registration at the local ward office

Step 4: Obtaining Tax Registration Certificate or PAN Certificate at the Inland Revenue Office (“IRD”)

Step 5: Register the industry with the Department of Industry (“DOI”)

Step 6: Obtain a “Non-blacklisted Certificate” from the Credit Information Bureau (“CIB”)

Step 7: Open a local bank account for the company

Step 8: Provide prior notification before injecting the investment amount at Nepal Rastra Bank (“NRB”)

Step 9: Remitting the investment amount and obtain the share registry certificate

Step 10: Record the investment amount with the NRB

Step 11: Approval of Environmental Study i.e BES, IEE, EIA

Step 12: Information of operation of Industry at the DOI

Step 13: Dividend repatriation

6. Minimum Capital Requirement for Foreign Investment in Nepal

One of the most searched FDI Nepal requirements is the minimum capital threshold. The minimum capital required for obtaining foreign investment approval is fixed at NPR 20 million (approx. USD 153,846). However, minimum capital threshold is not applicable to the Information and Technology Business.

7. Timeline for FDI Approval Process

The overall timeline for foreign investment approval Nepal typically takes 1 week to two month.

8. Government Fees Applicable for FDI Approval

9. Timeline for remitting the Foreign Investment Amount

FERA sets out three stages for injecting approved investment capital:

10. Checklist of Required Documents New Foreign Direct Investment

1. Online Application via Industry Management Information System (https://imis.doind.gov.np)
2. Copy of project proposal; See appendix for project proposal template
3. Copy of Joint Venture Agreement (in case of more than 1 investor);
4. Project proposal.

1. Letter of authorization from the investing company or individual (if intended to process through any representative)

1. Other additional documents for the an individual as an investor

1. Notarized copy of citizenship (Nepali)/Passport (Foreigner)
2. Bio-data
3. Notarized copy of Financial Credibility Certificate (FCC) of the foreign
4. investor issued by the bank of home country

1. Other additional documents for the Company as an investor

1. Notarized copy of Certificate of Incorporation including memorandum of association and article of association
2. Board decision to invest in Nepal
3. Shareholders details showing the ultimate beneficiaries
4. Company profile