Foreign Direct Investment in Nepal: FDI in Nepal (2025)

1. Introduction to FDI in Nepal

Foreign Direct Investment (FDI) in Nepal is regulated under the Foreign Investment and Technology Transfer Act, 2019 (FITTA 2019). FDI entails the investment of capital by a foreign individual or entity into a Nepalese business enterprise. The process necessitates initial approval from the Department of Industry (DOI) or Investment Board of Nepal (IBN), followed by final clearance from Nepal Rastra Bank (NRB).

This document provides a comprehensive legal framework, procedural guidelines, and compliance obligations for foreign investors interested in establishing business operations in Nepal.

2. Governing Laws and Regulatory Framework

Foreign investment in Nepal is primarily governed by the following statutes:

1. Foreign Investment and Technology Transfer Act, 2019 (FITTA 2019): Establishes the fundamental legal framework for foreign investment, including provisions on technology transfer and joint ventures.
2. Foreign Investment and Technology Transfer Regulations, 2021: Supplements FITTA 2019 by detailing procedures and compliance requirements.
3. Industrial Enterprises Act, 2020: Provides incentives and streamlines industrial investment procedures.
4. Companies Act, 2006: Governs the incorporation, operation, and regulation of companies in Nepal.
5. Public Private Partnership and Investment Act, 2019 (PPPIA): Facilitates private sector investment in infrastructure, construction, and service industries through public-private partnerships.

3. Competent Authorities for Foreign Direct Investment Approval

The approval and regulation of FDI in Nepal are managed by the following authorities:

Governing Authority	Approval Requirements
Department of Industry (DOI)	Approves foreign investments below NPR 6 billion.
Investment Board of Nepal (IBN)	Approves foreign investments exceeding NPR 6 billion or hydropower projects over 200 MW.
Nepal Rastra Bank (NRB)	Provides final approval for the inflow of foreign capital.

4. Eligibility Criteria for Foreign Investment

To be eligible for foreign investment, the business activity must:

• Not be listed in the Negative List of Industries (as prescribed by FITTA 2019).
• Qualify as an industry under the Industrial Enterprises Act, 2020.

5. Prohibited Business Sectors (Negative List)

FDI is not permitted in the following industries:

• Primary agricultural production (e.g., poultry farming, fisheries, bee-keeping, fruit and vegetable farming).
• Cottage and small-scale industries.
• Personal service businesses (e.g., hair salons, tailoring, driving schools).
• Manufacturing of arms, ammunition, explosives, and nuclear materials.
• Real estate, retail business, local courier services, and remittance services.
• Mass communication media (e.g., newspapers, television, radio, online news portals).
• Consultancy services exceeding 51% foreign ownership in sectors such as legal, engineering, and accountancy.

6. Procedural Requirements for Establishment and Operation of FDI

The process for establishing foreign investment in Nepal involves the following steps:

1. Obtain FDI approval from DOI/IBN.
2. Incorporate the company with the Office of the Company Registrar.
3. Register for tax at the Inland Revenue Office.
4. Register the business at the respective local Ward Office.
5. Obtain industry registration from DOI.
6. Secure a Non-Blacklist Certificate from the Credit Information Bureau.
7. Obtain final approval from NRB for capital infusion.
8. Deposit investment capital into a Nepalese bank and obtain an investment certificate.
9. Record the investment with NRB for future repatriation purposes.

7. Minimum Capital Requirements

The minimum investment threshold for foreign investment approval in Nepal is NPR 20 million (approximately USD 155,000).

8. Documentary and Application Requirements

The following documents are required for FDI approval:

• Project Report (covering business overview, financial projections, and market feasibility).
• Corporate Profile of the foreign investor.
• Certificate of Incorporation and other constitutional documents of the investing entity.
• Corporate Resolution authorizing investment in Nepal.
• Financial Credibility Certificate issued by a recognized bank in the investor’s home country.
• Source of Investment Declaration and fund transfer schedule.
• Power of Attorney authorizing a representative to complete the FDI process.
• Copy of Passport (for individual investors and directors of investing entities).
• Commitment Letter stating that investment shall not be repatriated for at least one year.
• Joint Venture Agreement (if applicable).

9. Sector-Specific Approvals and Additional Compliance

Depending on the nature of the business, additional regulatory approvals may be required, such as:

• Insurance Board: For insurance-related businesses.
• Nepal Rastra Bank: For financial institutions and banks.
• Department of Electricity Development: For hydropower projects.
• Department of Tourism: For tourism-related enterprises.
• Department of Food Technology and Quality Control: For food processing industries.

10. Applicable Fees and Charges

Process	Fees and Charges
Foreign Investment Approval	No fee (deposit may be required, refundable upon project initiation).
Company Registration	As per the Companies Act.
Industry Registration	Free of charge.
Capital Currency Exchange	No exchange fee applicable.
Visa Fees	Determined under the Immigration Act.

11. Conclusion

FDI in Nepal is facilitated through an established regulatory framework requiring approval from designated authorities and compliance with legal procedures. The process generally takes 1 to 2 months for completion. Expert legal guidance is essential to navigate complex regulatory requirements and ensure seamless investment approval.

For legal assistance in FDI matters, investors are encouraged to consult experienced corporate attorneys specializing in Nepalese investment law.

12. Frequently Asked Questions (FAQs)

1. Why invest in Nepal?
   • Nepal’s strategic location between India and China, growing economy, and untapped investment potential make it a lucrative destination.
2. What are the key sectors for FDI?
   • Hydropower, tourism, agriculture, infrastructure, and IT services.
3. What benefits does Nepal offer to foreign investors?
   • High ROI, tax incentives, government support, and access to regional markets through SAFTA.
4. What challenges exist for foreign investors?
   • Political instability, bureaucratic hurdles, and infrastructure deficits.
5. What is the timeline for FDI approval?
   • Typically, 1 to 2 months, subject to regulatory compliance and document verification.

For professional legal advisory services on FDI in Nepal, consult Onesphere Law Associates.