Nepal is open for business in many areas, with progressive policies by the Government of Nepal to attract foreign investment and agencies such as the Department of Industry under the Ministry of Industry and Investment Board Nepal, which is headed by the Prime Minister himself, mandated to provide investors with all the help they need. For national priority projects, foreign investment is especially encouraged in the recently enacted Foreign Investment Policy, 2015. Foreign Investment approval from the relevant government authorities as discussed below is required for making any foreign investment in Nepal.
We can assist you with obtaining the necessary approvals for your investments in all types of industries (except those mentioned in the Negative List) in Nepal. Foreign investment in open in most of the sectors barring few which are listed in the Negative List in the Industrial Enterprises Act. We have an experienced staff of lawyers, accountants and business consultants who are intimately familiar with the nuances of various industries in Nepal and can act as an extension of your team to support you and guide you through all the processes.
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Forms of foreign investment
The Foreign Investment and Technology Transfer Act (FITTA) 1992 governs foreign investment and classifies the following activities as foreign investment:
- Establishing a new industry either with 100% foreign equity or as a joint venture with Nepalese or other foreign investor(s)
- Investing equity in an existing industry by share transfer
- Reinvesting the earnings derived from equity
- Making a loan or loan facilities, foreign or local, to an existing industry
- Engaging in technology transfer in an existing industry/ Investment in kinds
Minimum Amount of Foreign Investment
NPR 5 million (approx. USD 50,000)
Step 1: Applying for foreign investment approval
Foreign investors need to apply for approval before they incorporate a company and conduct business activities in Nepal. Application can be made to the Department of Industry or the Investment Board Nepal (IBN), depending on the size of the investment. FITTA 1992 is the law regulating the entry and operation of foreign investment in the country.
To the Department of Industry
If the foreign investment capital is less than NPR 2 billion (approx. USD 20 million), the Director General of Department of Industry (DOI) has the authority to approve the project.
To the Industrial Promotion Board
If the investment amount is NPR 2–10 billion (approx. USD 20–100 million), the Industrial Promotion Board, chaired by the Minister of Industry, has the authority to grant foreign investment approval.
Step 2: Company Registration
Step 3: Industry Registration/ Tax Registration
Step 4: Commissioning of Industry
There are no fees for FDI approval by the Department of Industry. However, a sum within the range of NPR 4,000 to a maximum of NPR 20,000 (approx. USD 200) depending upon the size of fixed asset should be deposited at the Nepal Rastra Bank at the time of issuing an approval letter. This amount is refunded when the project becomes operational.
To the Investment Board Nepal
For Investment of NPR 10 billion or above (approx. USD 100 million), the government has created a special vehicle called the Investment Board Nepal to facilitate large projects of national importance. The Investment Board is headed by the Prime Minister of Nepal and has the overriding power to approve projects and direct various line agencies of the government to implement its decisions.
The fees for investors through IBN are set out in the following table.
|Type of Fee||Time of Payment||Hydropower Generation Projects||Other Projects|
|Application Fee||With submission of foreign investment application||NPR 10,000 (USD 100)||NPR 10,000 (USD 100)|
|License Fee||On receiving a licence for investment||NPR 100,000 (USD 1,000) depends on MW||NPR 100,000 (USD 1,000)|
|Negotiation Fee||Prior to commencing the negotiations of the project development agreement (PDA) or project investment agreement (PIA)||USD 1,500/MW||30% of 0.2% of the total project cost|
|Facilitation Fee||On successful completion of negotiation of PDA or PIA, but prior to signing||Difference between 0.2% of the project cost and USD 1,500/MW||70% of 0.2% of the total project cost|