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Nepal welcomes foreign investment as a catalyst for economic growth and development. Whether you're an individual investor or a multinational corporation, understanding the Foreign Direct Investment (FDI) approval process is essential before entering the Nepali market.
This guide covers everything about FDI in Nepal—governing laws, regulatory authorities, approval procedures, minimum capital requirements, restricted sectors, and post-investment compliance.
What is Foreign Direct Investment?
Foreign Direct Investment (FDI) refers to investment made by a foreign individual or entity in a business enterprise in Nepal. FDI can take the form of:
- Equity Investment: Purchasing shares in a Nepali company
- Wholly Owned Subsidiary: Establishing a 100% foreign-owned company
- Joint Venture: Partnership between foreign and local investors
- Technology Transfer: Licensing, royalty, and technical service agreements
The Government of Nepal actively encourages FDI through legislative frameworks and investment incentives to promote industrial development and employment.
Governing Laws for FDI in Nepal
Foreign investment in Nepal is governed by the following laws:
| Law | Purpose |
|---|---|
| Foreign Investment and Technology Transfer Act 2019 (FITTA) | Primary law governing FDI approval, technology transfer, and joint ventures |
| Foreign Investment and Technology Transfer Regulations 2021 | Procedural rules complementing FITTA |
| Industrial Enterprises Act 2020 | Regulates industrial businesses and provides investment incentives |
| Companies Act 2006 | Governs company registration and operations |
| Foreign Exchange Regulation Act 1962 (FERA) | Regulates foreign currency transactions and repatriation |
| Public Private Partnership and Investment Act 2019 | Promotes private sector investment in infrastructure projects |
Regulatory Authorities
FDI approval in Nepal involves multiple government bodies:
| Authority | Role | Investment Threshold |
|---|---|---|
| Department of Industry (DOI) | Approves FDI and registers industries | Up to NPR 6 Billion |
| Investment Board of Nepal (IBN) | Approves large-scale investments | Above NPR 6 Billion or Hydropower >200 MW |
| Nepal Rastra Bank (NRB) | Final approval and recording of investment | All FDI |
| Office of Company Registrar (OCR) | Company registration | All companies |
| Inland Revenue Department (IRD) | Tax registration (PAN/VAT) | All businesses |
Permissibility Requirements
For FDI to be approved in Nepal, two conditions must be fulfilled:
- Condition 1: The business must NOT be listed in the "Negative List of Industries" under FITTA Schedule
- Condition 2: The business must be classified as an "industry" under the Industrial Enterprises Act 2020
If your proposed business meets both conditions, you can proceed with the FDI application.
Restricted Sectors (Negative List)
Foreign investment is NOT permitted in the following sectors:
- Primary Agriculture: Poultry, fisheries, beekeeping, dairy, fruits, vegetables, oilseeds, pulses (excluding agro-technology and mechanization)
- Cottage and Small Industries: As defined under Industrial Enterprises Act
- Personal Services: Haircutting, tailoring, driving services
- Defense and Nuclear: Arms, ammunition, explosives, atomic energy, radioactive materials
- Real Estate: Excluding construction industries
- Retail Business: Internal courier, local catering, moneychanger, remittance services
- Tourism Services: Travel agency, trekking guides, homestay, rural tourism
- Media: Newspaper, radio, television, online news, national language films
- Professional Services: Management, accounting, engineering, legal consultancy, language training
Sectors with Investment Caps:
| Sector | Maximum Foreign Investment |
|---|---|
| Consultancy Services | 51% |
| Ride Sharing | 70% |
| Telecommunication | 80% |
| International Airlines | 80% |
| Insurance Companies | 80% |
| Banking & Financial Institutions | 85% (minimum 20%) |
| Domestic Airlines | 49% |
| Aviation Training & Maintenance | 95% |
Note: For sectors not listed above, foreign investors can hold 100% ownership in their Nepali subsidiary company.
FDI Approval Process
The step-by-step procedure for obtaining FDI approval in Nepal:
Step 1: Obtain Foreign Investment Approval
Submit application to Department of Industry (DOI) or Investment Board of Nepal (IBN) based on investment amount. Include project report, investor documents, and financial credibility certificate.
Step 2: Register Company at OCR
After receiving FDI approval, register the company at the Office of Company Registrar. Submit MOA, AOA, and FDI approval letter.
Step 3: Tax Registration at IRD
Obtain PAN registration from Inland Revenue Department. Register for VAT if applicable based on business nature and turnover.
Step 4: Business Registration at Ward Office
Register the business at the local Ward Office where the company will operate.
Step 5: Industry Registration at DOI
After obtaining recommendation from Ward Office, register the industry at Department of Industry.
Step 6: Obtain Non-Blacklist Certificate
Get certificate from Credit Information Bureau (CIB) confirming the company is not blacklisted.
Step 7: Open Local Bank Account
Open a bank account in the company's name at a commercial bank in Nepal.
Step 8: Inject Investment Amount
Transfer the foreign investment amount through proper banking channels to the local company account.
Step 9: Record Investment at NRB
Record the infused investment amount at Nepal Rastra Bank and obtain the investment certificate.
Minimum Capital Requirement
| Category | Minimum Investment |
|---|---|
| General FDI | NPR 20 Million (~USD 150,000) |
| IT Companies | No minimum requirement |
The minimum threshold was reduced from NPR 50 Million to NPR 20 Million to encourage more foreign investment in Nepal.
Documents Required for FDI Approval
| S.N. | Document | Notes |
|---|---|---|
| 1 | Project Report | Background, market analysis, technical aspects, financial projections |
| 2 | Company Registration Documents | Certificate, MOA, AOA of investing company (notarized) |
| 3 | Company Profile / Bio-data | Investor's company profile or individual bio-data |
| 4 | Passport Copies | All directors and shareholders (notarized) |
| 5 | Financial Credibility Certificate | Issued by bank in investor's home country |
| 6 | Latest Audit Report | Investor company's audited financial statements (notarized) |
| 7 | Board Resolution | Resolution authorizing investment in Nepal |
| 8 | Investment Schedule | Timeline and source of investment funds |
| 9 | Power of Attorney | Authorizing representative to complete registration |
| 10 | Joint Venture Agreement | Required if investing with local partner |
| 11 | Commitment Letter | Stating investor won't repatriate for one year |
Timeline for FDI Registration
The overall FDI approval and registration process takes approximately 3 to 5 months, depending on:
- Completeness of documentation
- Nature and complexity of the business
- Sector-specific approvals required
- DOI/IBN processing time
Government Fees
| Particulars | Fee |
|---|---|
| FDI Approval (DOI guarantee deposit) | NPR 20,000 (refundable) |
| Company Registration | NPR 9,500 - 43,000+ (based on capital) |
| Industry Registration | Free |
| Business Registration (Ward Office) | NPR 5,000 - 15,000 per year |
| House Rent Tax | 10% of monthly rent |
| Currency Exchange | No fee |
Investment Injection Schedule
Under FERA, foreign investment must be injected in stages:
| Stage | Timeline | Percentage |
|---|---|---|
| Stage 1 | Within 1 year of approval | 5-25% (based on investment amount) |
| Stage 2 | When production/commercial transaction starts | Up to 70% |
| Stage 3 | After 2 years of operation | Remaining 30% |
Sector-Specific Approvals
Certain businesses require additional licenses after FDI approval:
| Business | Licensing Authority |
|---|---|
| Banking & Financial Institutions | Nepal Rastra Bank |
| Insurance | Nepal Insurance Authority |
| Hydropower & Energy | Department of Electricity Development |
| Telecommunications | Nepal Telecommunications Authority |
| Tourism & Trekking | Ministry of Tourism |
| Food Industries | Department of Food Technology |
| Educational Institutions | Affiliated University |
Repatriation of Investment
Foreign investors can repatriate the following after fulfilling compliance requirements:
- Dividend earnings
- Sale proceeds from share transfer
- Capital returns upon liquidation
- Technology transfer fees and royalties
- Lease rent under lease financing
- Compensation and indemnity
Repatriation requires approval from DOI/IBN and NRB after demonstrating compliance with all applicable laws and tax obligations.
Planning to Invest in Nepal?
Our legal team assists foreign investors with complete FDI registration—from approval at DOI/IBN to company registration and NRB compliance. We also provide ongoing corporate compliance and due diligence services. Contact us for a consultation.
Frequently Asked Questions
Foreign Direct Investment (FDI) refers to investment made by foreign individuals or entities in business enterprises in Nepal. FDI can take the form of:
- Equity investment in shares of a Nepali company
- Wholly owned subsidiary (100% foreign-owned company)
- Joint venture with local partners
- Technology transfer agreements
FDI is governed by the Foreign Investment and Technology Transfer Act 2019 (FITTA).
| Category | Minimum Investment |
|---|---|
| General FDI | NPR 20 Million (~USD 150,000) |
| IT Companies | No minimum requirement |
The minimum threshold was reduced from NPR 50 Million to NPR 20 Million to encourage more foreign investment. IT companies are exempt from minimum capital requirements.
| Investment Amount | Approving Authority |
|---|---|
| Up to NPR 6 Billion | Department of Industry (DOI) |
| Above NPR 6 Billion | Investment Board of Nepal (IBN) |
| Hydropower >200 MW | Investment Board of Nepal (IBN) |
After DOI/IBN approval, Nepal Rastra Bank (NRB) provides final approval and records the investment.
The process involves 9 steps:
- Obtain FDI approval from DOI or IBN
- Register company at Office of Company Registrar
- Tax registration (PAN/VAT) at Inland Revenue Department
- Business registration at local Ward Office
- Industry registration at DOI
- Obtain Non-Blacklist Certificate from Credit Information Bureau
- Open local bank account
- Inject investment amount through banking channels
- Record investment at Nepal Rastra Bank
Key documents include:
- Project report (market, technical, financial analysis)
- Company registration documents (MOA, AOA) - notarized
- Passport copies of directors/shareholders - notarized
- Financial Credibility Certificate from home country bank
- Latest audit report - notarized
- Board resolution authorizing investment
- Investment schedule and source of funds
- Power of Attorney
- Joint Venture Agreement (if applicable)
- Commitment letter (no repatriation for 1 year)
The FDI approval and registration process typically takes 3 to 5 months, depending on:
- Completeness of documentation
- Nature and complexity of business
- Sector-specific approvals required
- DOI/IBN processing time
Simpler projects with complete documentation may be faster; complex projects requiring multiple approvals may take longer.
Foreign investment is NOT permitted in:
- Primary agriculture (poultry, fisheries, dairy, vegetables)
- Cottage and small industries
- Personal services (haircutting, tailoring, driving)
- Defense and nuclear industries
- Real estate (excluding construction)
- Retail, courier, local catering, moneychanger
- Travel agency, trekking guides, homestay
- Media (newspaper, radio, TV, online news)
- Professional consultancy (management, legal, accounting)
Yes, foreign investors can hold 100% ownership in most sectors. However, certain sectors have investment caps:
| Sector | Maximum Foreign Investment |
|---|---|
| Consultancy Services | 51% |
| Ride Sharing | 70% |
| Telecommunication | 80% |
| Insurance | 80% |
| Banking & Financial Institutions | 85% |
| Domestic Airlines | 49% |
| Particulars | Fee |
|---|---|
| FDI Approval (DOI deposit) | NPR 20,000 (refundable) |
| Company Registration | NPR 9,500 - 43,000+ (based on capital) |
| Industry Registration | Free |
| Ward Office Registration | NPR 5,000 - 15,000/year |
| Currency Exchange | No fee |
Under FERA, investment must be injected in stages:
| Stage | Timeline | Percentage |
|---|---|---|
| Stage 1 | Within 1 year of approval | 5-25% |
| Stage 2 | When commercial operations start | Up to 70% |
| Stage 3 | After 2 years of operation | Remaining 30% |
The exact percentage for Stage 1 depends on the total investment amount.
Yes, certain businesses require additional licenses after FDI approval:
- Banking: Nepal Rastra Bank
- Insurance: Nepal Insurance Authority
- Hydropower: Department of Electricity Development
- Telecommunications: Nepal Telecommunications Authority
- Tourism: Ministry of Tourism
- Food Industries: Department of Food Technology
These are obtained after company registration, before commencing business operations.
Yes, foreign investors can repatriate:
- Dividend earnings
- Sale proceeds from share transfer
- Capital returns upon liquidation
- Technology transfer fees and royalties
- Lease rent under lease financing
Repatriation requires approval from DOI/IBN and NRB after demonstrating compliance with tax and legal obligations.
FDI companies must maintain ongoing compliance:
- Submit quarterly compliance documents to OCR
- Record investment at NRB
- Submit annual compliance documents to OCR
- File annual returns and audited financial statements
- Comply with Companies Act, Labor Act, and Tax Laws
- Maintain proper books of accounts
- Pay applicable taxes on time
Yes, individual foreign investors can establish companies in Nepal. Requirements include:
- Passport copy (notarized)
- Bio-data/profile of the investor
- Financial Credibility Certificate from bank in home country
- Minimum investment of NPR 20 Million
- Meeting permissibility requirements (not in negative list)
The process is similar to corporate investors, but individual documents replace company documents.
| Aspect | Department of Industry (DOI) | Investment Board of Nepal (IBN) |
|---|---|---|
| Investment Threshold | Up to NPR 6 Billion | Above NPR 6 Billion |
| Special Projects | General industries | Hydropower >200 MW, mega projects |
| Processing | Standard procedure | Fast-track for large investments |
| Focus | Small to medium FDI | Large-scale national priority projects |
Both authorities have similar documentary requirements; the difference is primarily based on investment size.
