Foreign Direct Investment in Nepal | FDI in Nepal
Foreign Direct Investment (“FDI”) means investment made by the foreign investor including foreign individual, firm, company, Non-resident Nepali or foreign government or international agency or other corporate body of similar nature that makes foreign investment.
In recent years, Nepal has gained recognition as a rising hub for foreign investment. The country’s strategic geographical location and convenient access to neighboring markets offer extensive investment opportunities. Nepal’s welcoming policy framework, labour availability, affordable and efficient labour force, a favorable business environment, ample green energy sources, and abundant natural resources constitute the primary factors attracting FDI to Nepal
Governing Laws:
The Foreign Investment and Technology Transfer Act, 2019 (“FITTA”) and Foreign
Investment and Technology Transfer Rule, 2021 (2077) (“FITTR”);
- The Industrial Enterprises Act, 2076 (2020) and Industrial Enterprises Rule 2022 (2078);
- The Companies Act, 2063 (2006);
- Foreign Exchange Regulation Act, 1962 (2019) (“FERA”)
- Public Private Partnership and Investment Act, 2019;
- The Environment Protection Act, 2019 (2076) and Environmental Protection Rule, 2020;
- Nepal Rastra Bank Foreign Investment and Foreign Loan Management Regulations, 2021(“NRB Bylaws”).
Concerned Authority for Foreign Direct Investment (FDI) Approval
FDI Approving Authority is classified based on the investment amount:
| Investment Amount | Approving Authority |
| For NPR 6 billion or Less | Department of Industry (“DOI”) |
| Above NPR 6 billion and Hydropower project more than 200 MW | Investment Board of Nepal (“IBN”) |
According to recent reports, Nepal has seen a modest increase in FDI inflows, with significant interest in sectors such as hydropower, tourism, manufacturing, and IT Company. However, Nepal’s FDI figures still lag behind those of its South Asian neighbors, a gap that the government aims to bridge through ongoing reforms and international partnerships.
Permissibility of the Foreign Direct Investment in Nepal.
The foreign investor intending to establish a business in Nepal must meet the permissibility criteria of the foreign investment in Nepal, they are:
- Firstly, the sector of industry must not fall under “Negative List of Industries for Foreign
Investment” provided in the Schedule of the FITTA; and - Secondly, the sector of business must fall under the classification of an “industry” under schedule of the Industrial Enterprise Act.
Procedure of FDI in Nepal
Once the permissibility criteria are fulfilled, the foreign investor may establish a business in Nepal by following procedures as below:
| FDI Approval from the Department of Industry (DOI) or Investment Board | |
|---|---|
| Through the Manual Process | |
| Incorporation of the Company from the Office of Company Registrar (OCR) | Business Registration at the Concerned Ward Office |
| Tax (PAN/VAT) Registration at the Inland Revenue Office (IRD) | Opening of the Bank Account at Any Local Bank of Nepal |
| Obtaining Non-blacklist Letter from the Credit Information Bureau (CIB) | Through the Automatic Route |
| Incorporation of the Company from the Office of Company Registrar (OCR) | Obtaining Share Registry from the OCR |
| Business Registration at the Concerned Ward Office | Pre-informed to the Nepal Rastra Bank (NRB) for FDI Inflow |
| Tax (PAN/VAT) Registration at the Inland Revenue Office (IRD) | Injection of the FDI Capital at the Bank Account of the Company |
| Opening of the Bank Account at Any Local Bank of Nepal | Recording of the Investment Amount at the NRB |
| Obtaining Non-blacklist Letter from the Credit Information Bureau (CIB) | Approval of Environmental Study (If Required) |
| Registration of the Industry at the DOI | Operation of the Industry and Information to the DOI |
| Repatriation of the Dividend | |
Note: “Automatic Route” means the FDI approval route through which investment by foreign investors do not require the prior manual approval of the Department of Industry (DOI). For certain permissible business sectors, the investors will automatically get the FDI approval certificate just after submitting the application through the online by of the DOI.
“Manual Route” means route to all permissible business sector, except the businesses fall under the Automatic Route, where prior manual FDI approval is required from the DOI,
Minimum Capital Requirement for FDI in Nepal
Regarding the investment threshold, a minimum capital of NPR. 20 million (Approx. USD 1,50,000) must be invested to establish a company through foreign investment by each foreign investor.
However, investment threshold is not applicable to the few Information, communication and Technology Services Businesses. They are: Technology park, IT park, Biotech park, Software development, Data processing, Digital mapping, Business process outsourcing (BPO), Knowledge process outsourcing (KPO), Data center, Data mining, Cloud computing, Web portal, and Web designing service.
Timeline for FDI approval process
It will tentatively take 1 to 6 months for the completion of incorporation of the business.
Timeline for injecting the investment amount in Nepal
Foreign Investors are required to inject the investment amount as following:
| Timeline | Conditions | Percentage required to be injected |
| Stage I: Within 1 year of receiving the investment approval: | If the Minimum investment amount i.e. NPR 20 Million | 25% |
| If the Minimum investment amount NPR 20 Million to NPR 250 million | 15% | |
| If the Minimum investment amount NPR 250 million NPR to 1000 Million | 10% | |
| Stage II: When the company starts production or does start the commercial transaction | For all the investment cap | Up to 70% of the investment amount |
| Stage III: After 2 years of production or commencement of transaction | For all the investment cap | Remaining 30% of the investment amount |
For expert guidance and hassle-free FDI process in Nepal, contact Moksha Legal Group. Our experienced legal team ensures a smooth and efficient process.
Read More:
How is the trend of FDI in Nepal evolving in recent years?
The trend of FDI in Nepal is gradually shifting towards diversification, with growing investments not just in traditional sectors like tourism and hydropower but also in emerging fields like IT, agriculture technology, and renewable energy, driven by digitalization and global green initiatives.
What are the problems faced by foreign investors in Nepal?
Foreign investors in Nepal confront a number of challenges, including complex land acquisition processes, lengthy project approvals, corruption, frequent policy changes, and difficulty repatriating profits. These factors make the investing climate more unpredictable.