Establishment of Information, Communication, Technology ("ICT") Business in Nepal by the Foreign Investor
The foreign investor can operate an ICT business in Nepal through two types of business vehicle. They are:
- Establishment of an ICT business by the foreign investor through Foreign Direct
Investment (FDI). - Establishment of a branch office of the foreign investor’s company.
1) Establishment of an ICT business by the foreign investor through Foreign Direct Investment (FDI).
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. 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.
a. Governing Laws
Some of the governing laws which governs the FDI are as follows:
i. The Foreign Investment and Technology Transfer Act, 2019 (“FITTA”) and Foreign
Investment and Technology Transfer Rule, 2021 (2077) (“FITTR”);
ii. The Industrial Enterprises Act, 2076 (2020) and Industrial Enterprises Rule 2022 (2078);
iii. The Companies Act, 2063 (2006);
iv. Foreign Exchange Regulation Act, 1962 (2019) (“FERA”)
v. Public Private Partnership and Investment Act, 2019;
vi. The Environment Protection Act, 2019 (2076) and Environmental Protection Rule, 2020;
vii. Nepal Rastra Bank Foreign Investment and Foreign Loan Management Regulations, 2021 (“NRB Bylaws”).
b. Concerned Authority for 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”) |
c. Permissibility:
One of the options available for foreign investors to operate an ICT Business in Nepal is by establishing a company through foreign investment in Nepal. For this option, a foreign company desirous to invest in Nepal must invest in a permitted sector of “industry” in Nepal. The permissibility of foreign investment in Nepal is subject to the fulfillment of the following two criteria:
- Firstly, the sector of industry must not fall under the “Negative List of Industries for Foreign Investment” provided in the Schedule of the Foreign Investment Act; and
- Secondly, the sector of business must fall under the classification of an “industry” under the Industrial Enterprise Act, which is also called “Positive List”.
The Industrial Enterprise Act enlists ICT Business under the classification of Positive List and the Foreign Investment Act does not include it under the Negative List. Thus, the Investor can apply for foreign investment approval to establish a company with the objective of operating an ICT Business with 100% foreign ownership in equity shares of the company or in Joint Venture (JV) with Nepalese/foreign investor/s.
d. Minimum Capital Requirement:
Investment threshold is not applicable to the few ICT Business. 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.
e. Procedure of establishment of ICT Business in Nepal:
Following steps are followed for registration of ICT Business:
f. Required documents:
The list of the documents required for foreign investor are as follows:
| S.N. | Documents |
| 1. | Company incorporation certificate (if the company is an investor) |
| 2. | Memorandum of Association (if the company is an investor) |
| 3. | Article of Association (if the company is an investor) |
| 4. | Copy of passports of all the directors and shareholders of an investors |
| 5. | Copy of passport or citizenship of an investor’s authorized representative |
| 6. | Project Report and schedule for investment |
| 7. | Financial Credibility Certificate (“FCC”) |
| 8. | Board Resolution of the investor company (if the company is an investor) |
| 9. | Profile of the company or biodata of an individual investor |
| 10. | Power of attorney |
g. Timeline for registration of the ICT Business
The overall time period for the registration of foreign direct investment in Nepal takes about 15 days to 1.5 month.
h. Timeline for injection of Foreign Investment amount
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 |
2. Establishment of a branch office of the foreign investor’s company.
The second option for the Investor to establish an ICT Business in Nepal is by establishing a branch office. The branch office can carry out the business activities that the Investor carries out in the country of its incorporation as stated in the Memorandum of Association or related incorporation documents. Thus, the incorporation documents of the company issued from the home country must state the objective related to ICT Business if it wants to carry out such activities in Nepal.
a. Governing Laws:
The registration of a branch office of a foreign company in Nepal is governed by the Companies Act, 2006 (2063) (“Companies Act”). Section 154 (1) of Companies act incorporates the provision related to the registration of branch office of a foreign company in Nepal.
b. Minimum Capital Requirement:
The minimum capital investment threshold is not applicable to this option. It is free to transfer the operating costs into the local bank account as required for the branch office. However, the activities of making an investment in share of any company, lending money to any company, or participating in the operation or management of such company is not allowed.
c. Procedure for establishment of the branch office
Following steps are followed for branch office registration:
Kindly Note:
Separate approval shall not be required if the foreign company has already executed the agreement with government authority.
d. Required documents:
The list of the documents required for the establishment of a branch office are as follows:
| S.N. | Documents |
| 1. | Certificate of Registration, Memorandum of Association, Article of Association of the Foreign Company and its Nepalese Translation. |
| 2. | Application for Branch Office Registration |
| 3. | Board Resolution of the Foreign Company to set up a branch office. |
| 4. | Signed Copy of Company Profile |
| 5. | Copy of passport of all directors of Company |
| 6. | Copy of citizenship certificate of Nepal Representative authorized to receive notices |
| 7. | Letter of appointment of Authorized Representative |
| 8. | Proposed Plan of Branch Office |
| 9. | Power of Attorney. |
| 10. | Declaration of director or their representative of Company that the information submitted is correct and accurate |
| 11. | Approval letter from the Ministry of Communication and Information Technology |
| 12. | Agreement executed by the foreign company with the government authority of Nepal (if available) |
e. Timeline for completion of registration of branch office
The timeline for registration of a branch office in Nepal is usually 15 to 45 days. Sometimes it may require additional days to receive the approval from concerned government authority.