Procedure of Foreign Direct Investment (FDI) in Nepal

25 March 2020

This questionnaire provides a general overview of establishing company through foreign investment in Nepal.

1) What are the laws that govern foreign investment in Nepal?

The matters related to foreign investment is mainly dealt by the following laws:

  • Foreign Investment and Technology Transfer Act 2019 (“FITTA”);
  • Public Private Partnership and Investment Act 2019 (“PIA”);
  • Industrial Enterprise Act 2020 (“IEA”); and
  • Foreign Exchange (Regulation) Act 1962 (“FERA”).

2) What are the governing authorities for foreign investment?

The governing authorities that provide approval and regulate foreign investment are set out as follows:  

3) What are the permissibility requirements?

The proposed business activity must fulfill following two conditions to obtain foreign investment approval:

4) What are the businesses that fall under the Negative List?

The Negative List comprises of the businesses/industries in which foreign investment is prohibited. Foreign investment is not allowed in the following:

  • Poultry farming, fisheries, bee-keeping, fruits, vegetables, oil seeds, pulse seeds, milk industry and other sectors of primary agro-production;
  • Cottage and small industries;
  • Personal service business (hair cutting, tailoring, driving etc.);
  • 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;
  • Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service;
  • Travel agency, guide involved in tourism, trekking and mountaineering guide, rural tourism including homestay;
  • Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language;
  • Management, account, engineering, legal consultancy service and language training, music training, and computer training; and
  • Consultancy services having foreign investment of more than fifty-one percent.

5) What is the procedure for establishment and operation?

The basic corporate and regulatory procedure for establishment and operation is outlined as below.

6) Is there a minimum capital requirement?

The minimum investment required for obtaining foreign investment approval has been fixed at NPR 50 million (approx. USD 450,000).

7) What are the application and documentary requirements for approval?

The documents required for obtaining foreign investment approval are set out as follows:

8) What is the time for completion of the approval process?

It generally takes around 3 to 5 months for the completion of the entire process.

9) Are there any sector specific approvals?

After incorporation, the company may further need to obtain approval or licenses from regulatory authorities depending upon the nature of the industry or business such as :

  • Approval from the Insurance Board for insurance business,
  • NRB Approval for bank and financial institutions
  • Department of Electricity Development for electricity projects
  • Department of Tourism for tourism related business
  • Department of Food Technology and Quality Control for food industry and so on.

Disclaimer:This questionnaire is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The firm shall not be liable for any consequence arising out of  actions undertaken by any person relying on the information provided herein.

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