Nepal’s fiscal year 2082/83 (2025/26) has introduced some legal, regulatory, and policy reforms aimed at improving the investment climate and supporting industrial growth. With a focus on easing foreign investment restrictions, empowering startups, modernizing outdated laws, and introducing investor-friendly tax and trade measures, the government seeks to position Nepal as a more competitive and globally integrated economy. This summary highlights the most important policy changes across key sectors and legal frameworks.
FDI in % in FY 2023/24 as per sectors.
| Sector | % of Total FDI |
|---|---|
| Services | 41.1% |
| Tourism | 41.1% |
| Manufacturing | 8.89% |
| IT | 4.9% |
| Infrastructure | 3.06% |
Recent FDI Reforms
| Reform | Before | After (Reform) |
|---|---|---|
| Minimum FDI Threshold | NPR 50 million | NPR 20 million |
| FDI Threshold for ICT Sector | NPR 20–50 million | No minimum (Automatic Route) |
| FDI Approval Authority | DOI (< NPR 6B), IBN (> NPR 6B) | DOI approves all (conflict with PPPIA) |
| Company Registration & Capital Fees | Charged | Waived for FY 2080/81 |
Industrial Enterprises Act (IEA) 2020 Reforms
| Provision | Before Amendment | After Amendment |
|---|---|---|
| Startup Recognition | No clear framework | Defined + Government Incubation Centers |
| Document Submission Timeline | 90 days | 21 days |
| Extension of Operation | Only within 30 days before expiry | Can be requested anytime |
| Capital & Capacity Expansion | DOI approval required | No approval required (proposed in Budget) |
| IT Business Incentives | Not defined | Incentives if capital exceeds NPR 1B |
FITTA 2019 Reforms
| Provision | Before Amendment | After Amendment |
|---|---|---|
| Contract Manufacturing | Only for ancillary/subsidiary products | Allowed without limitation |
| Reverse Engineering | Not recognized as tech transfer | Recognized as tech transfer |
| Tech Transfer Abroad | Not permitted | Permitted (NRB approval + foreign branch allowed) |
| Ride-Sharing Business | Not clearly regulated | FDI allowed up to 70%; now legally recognized |
SEZA 2018 Amendments
| Provision | Before Amendment | After Amendment |
|---|---|---|
| Used Machinery Transfer to SEZ | Not allowed | Allowed |
| Export Requirement from SEZ | 60% minimum | 15% (first 4 years), 30% after |
| Domestic Sales Start Period | Within 1 year | Within 3 years |
Tax Policy Changes in Nepal 2025: Impacts on Tech and Outsourcing
| Example | Issue |
|---|---|
| BPO tax hike from 1% to 12.5% | Frequent changes disrupt investor planning |
Proposed Reforms for 2025
Intellectual Property Law Reform in Nepal: What to Expect in 2025
| Current Challenges | Proposed Reform |
|---|---|
| Weak enforcement, outdated laws | New IP law aligned with TRIPS, stronger penalties |
| Lack of coordination | Integrated enforcement mechanism across DOI, Police, Customs |
How Nepal is Opening Up to Outward Foreign Investment in 2025
| Current Status | Proposed Change |
|---|---|
| Prohibited by 1964 Act | Repeal the Act and allow limited outward investment (e.g. IT) |
Foreign Exchange Risk & Hedging in Nepal: Legal Barriers and Solutions
| Current Issues | Proposed Reform |
|---|---|
| No hedging entity, unclear risk mechanism | Amend law and establish entity |
Labor Law Reforms in Nepal 2025: Easier Hiring for Foreign Companies
| Current Provision | Proposed Reform |
|---|---|
| Restrictive foreign worker quotas | Increase quotas and simplify permits |
Investment Companies in Nepal: Policy Shifts in 2025
| Current Requirements | Proposed Relaxation |
|---|---|
| Paid-up capital: NPR 1 Arba | Lower capital requirement |
| Sector restriction (FITTA schedule) | Open to all sectors |
| Equity investment only | Allow broader investment forms (loans, debentures) |
Credit Rating System in Nepal: The Need for Reform in 2025
| Current Status | Proposed Development |
|---|---|
| No sovereign rating, fragmented rules | Enact unified law, pursue sovereign rating |
| Credit Bureau lacks analytics | Improve system and data intelligence |
Double Tax Avoidance Agreements (DTAA) in Nepal: 2025 Legal Clarity
| Current Issues | Proposed Solutions |
|---|---|
| Courts override DTAA provisions | Legislative clarity for DTAA enforcement |
| No model DTAA | Create model and initiate negotiations |
Sector-Specific Incentives
| Sector | Incentive |
|---|---|
| Jewelry (gold/silver exporters) | Bonded warehousing + duty exemptions for entities that earn ≥50% in foreign currency earnings |
| Hotels & resorts | Tax/customs duty exemptions and service-charge benefits |
| IT & tourism industries | Treated as “special industries” – tax & electricity tariff exemptions; 5-year income tax relief for startups |
Nepal’s fiscal policy changes for FY 2082/83 (2025/26) reflect an intent shift toward making the country a more competitive and investment-friendly destination. From reducing FDI thresholds and streamlining registration to enabling outward investment and amending key industrial laws, the government has taken meaningful steps to address long-standing regulatory hassel.