Handbook

Foreign Direct Investment

FDI is an investment made in business interests located in another country by a company or individual in one country. In general, FDI occurs when an investor conducts a foreign business transaction or acquires foreign business property in a foreign corporation. According to Foreign Investment and Technology Transfer Act, 2019(2075) for the production and movement of products and services, foreign direct investment delivers packages that include new technology, managerial techniques, and funding and market access. In comparison to its neighbors, Nepal receives very little foreign direct investment.

Foreign Investment under the law of Nepal

A foreign investor’s investment in any industry in the form of;

SN Foreign Investment Transfer of Technology.
1
  • Investment in equity
  • Reinvestment of earning deprived from existing investment
  • Investment made in form of loan or loan facilities
  • Transfer of technology
  • Lease finance
  • Opening a branch to carry out business.
  • Use of any intellectual property rights of foreign origin
  • Acquiring any foreign technical consultancy and management
  • Acquiring foreign market service.

Entry, Exit and Restricted of FDI

SN Entry Exit Restricted
1
  • GON follows open/free admission/entry of foreign investments
  • Foreign investment is opened almost in all sectors of economy ( both in manufacturing and service sectors)
  • No limitation in equity ownership (up to 100%)
  • No minimum threshold for foreign investment
Foreign Investor may dispose off his/her investment at any time/free exit,
  • Small scale industries like cottage industry and micro- industry
  • Sensitive industries –atomic energy , radioactive materials
  • Arms, ammunitions , explosives
  • Security printing, mint.
  • Real estate business
    • Some other small scale business,

    Foreign Exchange and Repatriation Facilities

    1 Investors entitled to open and operate bank accounts in Nepal in Foreign Currency and transfer funds in foreign currency through banking channel.
    2 An investor making investments in foreign currency is entitled to repatriate the following amounts with the approval of the Nepal Rastra Bank, after paying the tax related liabilities under the prevailing Law:
    • Amount received from the sale of shares with foreign investment,
    • Amount of profit or dividend received from foreign investment
    • In the case of liquidation or winding up of the industry or company, amount remaining after paying all liabilities following the liquidation or winding up
    • Amount of royalty received under the technology transfer agreement
      • (Note: Amount of royalty shall not exceed 5 % of the total selling price, excluding the prevailing tax.
    • Amount of lease rent under the lease investment,
    • Amount received as damages or compensation, if any received from the final settlement of a law suit, arbitration or any other legal process in Nepal
    • Amount that can be repatriated in accordance with the prevailing law.

    Procedures for approbate of Foreign Investments

    SN Agency Time Cost Remarks
    1 Investor should apply in concerned department for investment approvals GON/DOI/BOI Approves within 30 days According to FITTA SEC.3(3) FDI Approval Agency is depending on Volume of Investment;
    DOI Approve: FDI up to RS. 50 Million
    Note: If the amount is exceeds than RS. 50 Million DOI refers the case to Industrial Promotion Board.
    According to BOI Act, sec.10 (5) BOI Approve: FDI Exceeds 1 billion.     		A permit/license is to be issued by the concerned authority.

    According to investment Board Act, section 9, the Project falls under the BOI are;

    1. Project or any other  infrastructure, manufacturing & service industry cost estimate - more than ten billion NRS
    2. Infrastructure projects prescribe by GON such as - tunnel roads, highways, high bridge, rope-ways, and railways.
    3. Regional or international airports
    4. Chemical fertilizer and petroleum refinery plant
    5. Hydro-power generation - more than 500 MW capacity
    6. SEZ, Export Promotion Zone or Special Industrial District, IT parks,
    7. Special treatment to the projects established under BOI Act
    8. Industrial Enterprises Act, 1992 and FITTA (sec.12, 17 BOI Act) provides additional facilities; incentives and exemptions shall be extended to the investment.
    9. Rule 28 of BOI Rules, 2012 provide the criteria and facilities to be given to such projects.

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