Foreign Direct Investment in N...

Introduction: Nepal's FDI Landscape in 2025

Nepal has transformed into a high-potential investment destination with strategic reforms under the Foreign Investment and Technology Transfer Act (FITTA) 2019. Recent updates include the automatic approval route for investments up to NPR 500 million (~$38 million) and sector-specific incentives targeting energy, IT, and infrastructure 510. This guide unpacks legal procedures, compliance frameworks, and commercial opportunities for global investors.

✅ Step 1: Pre-Investment Compliance

Legal Eligibility Assessment

• Permitted Sectors: Nepal follows a negative list approach – all sectors open unless restricted 14.
• Restricted Sectors: Real estate retail, consultancy services (51% cap), media (49% cap), and arms manufacturing.
• Minimum Investment:
• General: NPR 20 million (~$150,000)
• IT Sector: No minimum under automatic route.

Entity Structure Options

⚡ Step 2: Approval Pathways

Automatic Route (Fast-Track)

Eligibility: Projects ≤ NPR 500M in:

• Energy/agriculture
• IT/manufacturing
• Tourism/infrastructure
  Process:

1.     Online application via DOI portal

2.     Instant pre-approval (no manual review)

3.     Document submission within 15 days
Timeline: 48 hours vs. 30+ days traditionally.

Standard Approval

• DOI Authority: Projects < NPR 6 billion
• IBN Authority: Projects > NPR 6 billion or hydropower >200MW 19

Table: Approval Timelines & Costs

📑 Step 3: Document Checklist

Core Requirements:

• Notarized passport/company incorporation papers
• Financial credibility certificate (home country bank)
• Project feasibility study
• Joint venture agreement (if applicable)
• Apostilled documents for non-Hague Convention countries 911

Sector-Additions:

• Environmental Impact Assessment (energy/mining)
• NRB clearance (financial services)
• Tourism Board license (hospitality)

💰 Step 4: Post-Approval Compliance

Capital Injection Rules

• Deadlines:
• ≤ NPR 500M: 1 year
• NPR 500M: 3 years 3
• Reporting: Mandatory NRB recording via designated banks.

Ongoing Obligations

• Annual financial filings to DOI/IBN
• Tax compliance (25-30% corporate tax)
• Renewal of sector licenses

Repatriation Process

1.     Audit by Nepali CA firm

2.     Tax clearance certificate

3.     NRB approval for forex transfer
Permitted: Dividends, loan repayments, technology fees 29

🔑 Key Investor Incentives (2025 Updates)

• Tax Holidays: 5-10 years for hydropower/export industries
• Customs Waivers: Machinery import duty exemption
• Land Subsidies: 50% discount in industrial zones 1011
• Visa Fast-Track: Business visas for investors + families 2

⚠️ Risks & Mitigation Strategies

❓ FDI Nepal: Critical FAQs

Q: Can foreigners own 100% of a Nepali company?
A: Yes, except in capped sectors like telecom (80%) or domestic airlines (49%).

Q: Is physical presence required for registration?
A: No – Power of Attorney to local representatives suffices for paperwork, but court marriage in Nepal requires physical appearance for the ceremony.

Q: How are dual taxes avoided?
A: Nepal has DTAA treaties with 11+ countries including India/China.

Q: What is the fastest FDI route?
A: Automatic online approval for eligible sectors (under NPR 500M).

Q: Can FDI be used for local loans?
A: No – project financing requires foreign/consortium banking.

▶️ Conclusion: Strategic Entry for 2025

Nepal’s FDI reforms – particularly the automatic approval system and IT sector exemptions – create unprecedented opportunities. Success hinges on:

1.     Sector alignment with negative list policies

2.     Document precision for DOI/IBN submissions

3.     Post-compliance rigor for profit repatriation
Partner with FDI legal consultants in Nepal for entity structuring, automated route navigation, and dispute resolution under FITTA 2019.

"Investors using Nepal’s automatic approval system reduce incorporation time by 92% versus standard pathways" – DOI 2025 Report.

Legal Disclosure: This article summarizes FITTA 2019 amendments. Consult Nepal’s Department of Industry for project-specific advice. Authored by: Corporate Law Partners (25+ years FDI advisory in Nepal).