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Foreign direct investment in Nepal
FDI in Nepal is the process of investing in Nepal by foreigner which is guided by the foreign investment and technology transfer act 2019. The department of investment (DOI), the Nepal Rastra Bank, Nepal Investment Board, Office of Company registrar, and Inland revenue department are the governmental bodies that handle the foreign direct investment approval process in Nepal.
According to UNCATD Foreign direct investment (FDI) is defined as an investment involving a long- term relationship and reflecting a lasting interest and control by a resident entity in one economy. FDI process of investing in foreign country under the domestic economy of the foreign nation. Foreign direct investment is also known as foreign private investment in majority of European countries.
What regulates FDI Approval process in Nepal?
The foreign investment in Nepal is approved, regulated and administered by Foreign Investment and Technology TransferAct (FITTA) 2019 and the Industrial Enterprise Act (IEA) 2020.
The main sole body that involves in the approval of FDI In Nepal is the department of industry (DOI). And it implements all the laws relating to FDI in Nepal.
Process of FDI Imitation and approval in Nepal
Finding a corporate law firm that handles FDI in Nepal
Finding a good and professional corporate lawyer is the most important part while considering investing in Nepal. Law firms like Attorney Nepal have been serving foreign clients from decade long. Law Firm in Nepal practicing FDI will help foreigner in the following-
- Investment consultation
- Preparation of required documents for FDI in Nepal
- Company registration and Tax office Liasson processing.
- Business visa application and approval
- Injection of investment with collaboration with Nepal Rastra Bank.
Preparation of FCC, with valid passport for FDI Approval at the DOI
The most important documents for FDI approval process in Nepal are:
1. Copy of passport
2. Financial credibility certificate for the investors home country bank.
3. Project report and financial report for the investment in Nepal.
4. If there is Nepali investor also, then Citizenship and NID of the shareholder.
5. Schedule for investment in the industry.
6. Power of attorney
7. Joint venture agreement if there are more than two investor or investor from two different country.
What is FDI Approval application in Nepal
After all the document are gathered the formal process of submission of the document for FDI approval in Nepal is taken forward. The FC, project report are uploaded to DOI’s official website and creation of investor profile is done. The automatic route FDI can be done for investment less than 10 million Nepali rupees which include ICT company in Nepal.
The department has the sole discretion to approval and disapproves investment. Some of the common reason for disapproval of FDI in Nepal are:
1. Investing in prohibited sector as mentioned in the FITTA like:
- Poultry farming, fisheries, bee-keeping, fruits, vegetables, oil seeds, pulse seeds, milk industry and other sectors of primary agro-production;
· Cottage and small industries;
· Personal service business (hair cutting, tailoring, driving etc.);
· Industries manufacturing arms, ammunition, bullets and shell, gunpowder or explosives, and nuclear, biological and chemical (N.B.C.) weapons; industries producing atomic energy and radio-active materials;
· Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service
· Travel agency, guide involved in tourism, trekking and mountaineering guide, rural tourism including homestay;
· Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language;
· Management, account, engineering, legal consultancy service and language training, music training, and computer training; and
· Consultancy services having foreign investment of more than fifty-one percent.
2. Inability to bring strong financial credibility certificate.
3. Inappropriate project report and financial projection.
4. Problem in the joint venture agreement.
Foreign company registration in Nepal
After the FDI approval is granted from the DOI, the foreign company can be registered in Nepal in the office of company registrar.
The process of foreign company registration in Nepal are:
- Step- 1: Name reservation of the company through camis.cor.gov.np
- Step- 2: Preparation of MOA and AOA
- Step- 3: Director signature in MOA and AOA
- Step- 4: Document upload and approval from the OCR portal.
- Step-5: Payment of government fess according to the paid-up capital.
- Step-6: Obtaining company registration certificate.
Foreign company tax registration in Nepal and Local ward registration.
After the company is registered the tax registration must be done in the Inland revenue department. This task must be done physically because it involves Biometric process, corporate law firm help you in this because there may be language barrier in the IRD in Nepal.
Documents required for Pan registration in Nepal:
1. Pan form
2. Letter of Pan from the OCR
3. MOA and AOA
4. Personal pan of the director
5. Rental agreement
6. Water and electricity bill of the land lord.
7. Lalpurja
Physical office is important for a FDI company in Nepal and the business must also be registered in the local ward office. If it is a big industry than industry registration approval is granted by the ward office.
Industry registration process in Nepal
After getting the recommendation from the local ward specific industry must be register at the department of industry, the DOI asks for following documents:
1. Non-Black list certificate from the credit Information Bureau
2. Police clearance certificate
Bank account opening and recording investment amount before NRB
After the industry is registered and company and PAN is done any commercial bank corporate account can be opened by the Foreign investor which will let them bring the investment to Nepal.
Government Fee Applicable for FDI Approval Process:
|
S.N. |
Particulars |
Government Fee |
|
1. |
Guarantee amount to be deposited at DOI |
NPR 20,000 (Approx. USD 155) |
|
2. |
Government fee for Company Registration |
Depends on the authorized capital of the company which is mintoined in below table ( For both public and private company) |
|
3. |
Business Registration at Ward Office |
NPR 5,000 to 15,000 per year
(Approx. USD 38 to 115). |
|
4. |
House Rent Tax |
10% of the house rent amount
per month. |
Government Fee for Private Company Registration
The government fee that is required to be paid for registration of private company at Office of Company Registrar is as mentioned:
|
S.N. |
Amount of Authorized Capital (in NRs.) |
Registration Fee (in NRs.) |
|
1 |
5,00,001 to 25,00,000 |
9,500 |
|
2 |
25,00,001 to 1,00,00,000 |
16,000 |
|
3 |
1,00,00,001 to 2,00,00,000 |
19,000 |
|
4 |
2,00,00,001 to 3,00,00,000 |
22,000 |
|
5 |
3,00,00,001 to 4,00,00,000 |
25,000 |
|
6 |
4,00,00,001 to 5,00,00,000 |
28,000 |
|
7 |
5,00,00,001 to 6,00,00,000 |
31,000 |
|
8 |
6,00,00,001 to 7,00,00,000 |
34,000 |
|
9 |
7,00,00,001 to 8,00,00,000 |
37,000 |
|
10 |
8,00,00,001 to 9,00,00,000 |
40,000 |
|
11 |
9,00,00,001 to 10,00,00,000 |
43,000 |
|
12 |
10,00,00,000 |
30 Per Lakh |
Government Fee for Public Company Registration
The government fee that is required to be paid for registration of public company at Office of Company Registrar is as mentioned:
|
S.N. |
Amount of Authorized Capital (in NRs.) |
Registration Fee (in NRs.) |
|
1 |
Up to 1,00,00,000 |
15,000 |
|
2 |
1,00,00,001 to 10,00,00,000 |
40,000 |
|
3 |
10,00,00,001 to 20,00,00,000 |
70,000 |
|
4 |
20,00,00,001 to 30,00,00,000 |
1,00,000 |
|
5 |
30,00,00,001 to 40,00,00,000 |
1,30,000 |
|
6 |
40,00,00,001 to 50,00,00,000 |
1,60,000 |
|
7 |
Above 50,00,00,000 |
3000 Per Lakh |
Timeline for injecting the foreign investment amount in Nepal
FERA has categories 3 stages of timeline to inject the foreign investment amount. The schedule of investment as mentioned:
|
Stages |
Details |
Percentage of Injection of Investment |
|
Stage I |
Within 1 year of receiving the investment approval: |
Depends on the amount of investment |
|
Minimum investment amount i.e. NPR 20 Million |
25% |
|
|
20 to 250 million NPR |
15% |
|
|
250 million NPR to 1000 Million |
10% |
|
|
Stage 2 |
When the company starts production or does start the commercial transaction |
Up to 70% of the investment amount |
|
Stage 3 |
After 2 years of production or commencement of transaction |
Remaining 30% of the investment amount |
Threshold of Foreign Investment:
Foreign investors can invest 100% of ownership in local subsidiary companies. However, for few sectors the domestic law restrict investment through investment capping which are as mentioned:
|
Sector |
Investment Percentage Ratio |
|
Telecommunication |
80% |
|
Banking and Financial Institution |
Minimum 20% and Maximum 85% |
|
Insurance Companies |
80% |
|
Consultancy Business |
51% |
Disclaimer: Attorney Nepal is one of the leading law firm in Nepal with team of best professional lawyersin Nepal. This article published on website of the law firm is just for information purpose only. It shall not be taken as the legal advice, advertisement, personal communication, solicitation or inducement. Attorney Nepal or any of the team members of the firm shall not be liable for the consequence arising of the information provided. As the factual situation may be different on your case, thereof if you need further legal advice on the subject matter, please Contact Us.