This article will guide you with the foreign direct investment law in Nepal, documents, and procedures.
Foreign investment means the investment in domestic companies and assets of a foreign country by a foreign investor. Big multinational corporations will see and search for new opportunities for economic upliftment by opening branches and expanding their investments in other countries. Foreign investments can be made by individuals, but are most often proceed by companies and corporations looking to extend their availability.
Foreign investments can be divided into two types:
- Foreign Direct Investment (FDI)
- Foreign Indirect or Portfolio Investment (FPI)
Foreign Direct Investment (FDI) plays a significant role in raising capital formation and productive capacity as well as the transfer of technology, skill, innovation, and managerial ability. Analyzing the importance of FDI in economic upliftment and transformation, Nepal has adopted the policy of regular improvement of major factors determining FDI inflow.
Nepal has also introduced policy, plan, and procedural improvements along with the policy of national treatment of foreign investors. In addition, the government is committed to providing some tax and non-tax facilities, post-investment services, and a hassle-free business environment.
The government tends to attract more foreign investment through growing markets, natural resources, flexible labor markets, and bilateral investment and double-taxation avoidance agreements.
Foreign Direct Investment in Nepal is mainly guided by the Foreign Investment and Technology Transfer Act, of 2019.
For establishing an industry, the extension and diversification of existing industry, Brief Environment Study (BES), Initial Environmental Examination (IEE), and Environmental Impact Assessment (EIA) should be approved prior to the operation of the industry as per the existing environmental laws
Documents Required for Approval of Foreign Investment in Industry
- Project proposal – 2 copies
- Joint Venture Agreement (in case of more than 1 investor) – 2 copies
- Notarized copies of citizenship certificate of local partner or Certificate of Incorporation, including Memorandum of Association if the local party is a company – 1 copy
- Notarized copy of the passport of foreign partner or Certificate of Incorporation, including Memorandum of Association and Articles of Association if the party is a company– 1 copy
- Bio-Data of foreign investor or company profile – 1 copy
- Financial Credibility Certificate of the Foreign Investor issued by a home country bank
- Letter of Authorization from the company or the investor (if necessary)
- Application from the share transferor
- Share transfer agreements – 3 copies
- Copy of minutes of the meeting of the Board of Directors of Nepali Company – 1 copy
- Notarized copy of minutes of Board meeting, Certificate of Incorporation, and company profile if the foreign party is a company – 1 copy
- Notarized copy of passport and Bio-data of the foreign party, if the party is an individual– 1 copy
- Financial Credibility Certificate of the Foreign Investor issued by a bank– 1 copy, Current Share Holders’ List as recorded in the Office of Company Registrar- 1 copy and Audit Report – 1 copy
- Tax Clearance Certificate – 1 copy
- Letter of Authorization to sign on behalf of the company – 1 copy
- Certificate of industry/company registration – 1 copy
Forms of Foreign Investment through Technology Transfer
- Patent, design, trademark, goodwill, technological specificity, formula, process,
- User’s license, technological know-how sharing or use of technological knowledge (franchise),
- Provision of foreign technical adviser, management and marketing service, or other technological skill or knowledge.
Foreign Direct Investment Law in Nepal
Documents Required for Approval of Foreign Investment through Technology Transfer Agreement
- Technology Transfer Agreement – 3 copies
- Notarized photocopies of Certificate of Incorporation, including Memorandum of Association and Articles of Association of the domestic company – 1 copy
- Notarized copy of the passport of foreign investor or Certificate of Incorporation, including Memorandum of Association and Articles of Association if the party is a company – 1 copy
- Foreign investor’s Bio-Data or company profile
- Minutes of the meeting of the Board of Directors from concerned companies for Technology Transfer
- Letter of Authorization from the company
- Notarized copy of current Audit Report and Tax Clearance Certificate
Investment Procedures for Foreign Investors
- Obtaining investment approval from the Department of Industry or Investment Board of Nepal
- Registering the company after the approval of foreign investment
- Registering the industry in accordance with the foreign investment approval
- Obtaining the permission of Nepal Rastra Bank to remit in foreign currency as per the approved investment
- Remitting in the foreign currency through proper banking channel
- Recording of foreign currency in Nepal Rastra Bank
Documents Required for Repatriation of Investment, Dividend, etc
- Application and copy of Industry, Company Registration Certificate
- Copy of Approval for Foreign Investment
- Minutes of the meeting of the Board of Directors
- Approved Share Purchase Agreement
- AGM decision on paying dividend
- Copy of the Approved Loan Agreement or an attested copy of the decision regarding compensation
- Copy of approved Agreement of Technology Transfer and Lease Investment
- Copy of current Audit Report, Tax Clearance Certificate, and notarized copy of the letter of being not blacklisted
- Copy of the list of promoters and share-holders documented in the Company Registrar’s Office
- Letter of FDI Recording in Nepal Rastra Bank
- Document showing the amount received from the sale of share
- Royalty Calculation by Certified Chartered Accountant
- Copy of the document showing the amount paid as the principal or interest on foreign investment
Also Read: Obtaining a Work Permit in Nepal
Documents Required for the Business Visa
- Notarized copy of passport with latest Visa
- Letter of Foreign Investment Approval from the Department of Industry
- Copy of Industry/Company Registration Certificate
- In the case of Industry in operation, a report of industry inspection
- Notarized copies of Letter of Authorization as a Representative of foreign investor and passport
- Notarized document of the relation with the dependents
- Contact address and telephone number of the investor/representative
Documents Required for the Non-Tourists Visa
- Notarized copy of Agreement between laborer and industry
- Copy of the notice published in the national daily newspaper
- Progress Report of the industry
- Labourer’s Bio-Data (showing his/her experience in the industry) and Certificate of Academic Qualification
- Notarized copy of passport with latest Visa
- List of Nepali laborers to be trained by the foreign laborers
- Working Approval and Work Permit
- Copy of Industry Registration
- Copies of the current Audit Report and Tax Clearance Certificate of the company
Note: In the case of a Non-tourist Visa, the application should be submitted sixty days ahead of the Visa expiry date.
Cost of Foreign Investment in Nepal
a. | Approval of Foreign Investment | Free (Deposit Rs.20,000/-) |
b. | Company Registration | As per Company Act |
c. | Industry Registration | Free |
d. | Capital Currency against Foreign Investment | Free |
e. | Visa | As per the Immigration Act |