Foreign Direct Investment (FDI) in Nepal is regulated primarily by the Foreign Investment and Technology Transfer Act, 2019 (FITTA), the Foreign Investment and Technology Transfer Regulations, 2021, the Companies Act, 2006, the Industrial Enterprises Act, 2020, and applicable foreign exchange laws and regulations. The legal framework permits foreign investors to establish businesses, acquire shares in existing industries, make certain lease investments, reinvest eligible income, and make technology-related investments, subject to the applicable sector restrictions and approval requirements. FITTA provides the principal legal basis for foreign investment and also establishes rights concerning investment, business operation, repatriation and technology transfer.

The Department of Industry (DOI) is the principal authority for foreign investment approval for projects within its jurisdiction, while the Investment Board Nepal (IBN) handles projects falling within its statutory jurisdiction. The DOI has also introduced an automatic route for specified sectors and sub-sectors. Under this route, eligible investors can obtain an FDI approval certificate through the online system without prior approval from the DOI. Fairmont Law firm in Nepal.

What Is Foreign Direct Investment Approval In Nepal

Foreign Direct Investment approval is the regulatory authorization required for a foreign investor to bring qualifying foreign investment into Nepal. Under FITTA, foreign investment may include investment in shares, reinvestment of income generated from the investment, and certain forms of loans or loan facilities. FITTA also permits foreign investors to invest independently or jointly with Nepali investors, subject to the applicable law and sector restrictions.

FDI approval should not be confused with company registration or industry registration. A foreign investor normally needs to establish or acquire the relevant business structure, complete company and industry registration where applicable, comply with tax requirements, and arrange the foreign exchange process through the banking system. Sector-specific licenses may also be required. The legal framework therefore treats FDI approval as one part of the wider establishment and operation process.

Where Foreign Investors Apply For FDI Approval

Foreign investors generally deal with the Department of Industry for FDI approval where the project falls within DOI jurisdiction. The DOI's Foreign Investment and Technology Transfer Section handles foreign investment-related applications and services. The One Stop Service Center also brings together several government services relevant to investment, including foreign investment approval, company registration, industry registration, tax registration, environmental procedures and foreign exchange-related services.

For eligible investments under the automatic route, the investor uses the DOI's online system. The DOI's published guidance states that an investor applying through the automatic route does not require prior DOI approval and can obtain the FDI approval certificate after submitting the application through the prescribed online system.

Projects falling within the jurisdiction of the Investment Board Nepal must follow the applicable IBN process instead. The correct authority therefore depends on the project, investment structure, sector, scale and applicable law.

How Foreign Investment Approval Works In Nepal

The FDI process begins with determining whether the proposed business is open to foreign investment and whether the project qualifies for the automatic route. The investor should then determine the appropriate investment structure, prepare the project information and supporting documents, and submit the application to the competent authority.

For a conventional approval route, the relevant authority reviews the proposed investment, business activity, investor information, ownership structure and supporting documents. After approval, the investor generally proceeds with incorporation or share acquisition, industry registration where required, tax registration, sector-specific licensing and foreign exchange arrangements. The DOI's One Stop Service framework is intended to facilitate these connected procedures.

The foreign investment amount must be brought into Nepal through legally permitted banking channels and recorded in accordance with the applicable foreign exchange framework. Foreign investors should maintain consistent records between the FDI approval, company shareholding, bank remittance and Nepal Rastra Bank records.

What Foreign Investment Structures Are Permitted In Nepal

FITTA permits several forms of foreign investment. A foreign investor may establish an industry independently or jointly with another investor, including a Nepali investor, subject to the applicable restrictions. The Act also permits acquisition of assets or shares of an existing industry in circumstances allowed by law. Lease investment in specified assets is another recognized form of foreign investment.

Foreign investment may also arise through reinvestment of income generated from an existing foreign investment. Technology transfer is separately regulated and may involve rights relating to patents, designs, trademarks, technical specifications, formulas, processes, know-how, licensing and related technical arrangements. Technology transfer agreements require compliance with FITTA and applicable approval requirements.

The appropriate structure depends on the proposed business, ownership arrangement, sector limitations, financing method and intended exit or repatriation strategy. Legal and regulatory review should therefore take place before incorporation or execution of investment agreements.

What Are The FDI Eligibility Requirements In Nepal

A foreign investor must first confirm that the proposed business is eligible for foreign investment. FITTA prohibits or restricts foreign investment in specified industries listed in its relevant schedule. The restrictions include certain small or cottage industries, personal service businesses, specified arms and explosives-related industries, certain real estate activities, and other restricted activities. The precise current restrictions should always be checked against the prevailing legislation and government notifications rather than relying on older summaries.

The business must also fall within an activity recognized under the applicable industrial and investment framework. Sector-specific ownership restrictions can apply. For regulated sectors, additional licensing or approval may be necessary even after FDI approval.

Minimum investment requirements must also be checked against the latest government notification. The previously cited NPR 20 million threshold should not automatically be treated as the current universal minimum because Nepal has subsequently introduced changes and an automatic approval framework for specified sectors. The applicable threshold should be verified at the time of filing.

How Automatic Route FDI Approval Works In Nepal

Nepal's automatic route allows eligible foreign investors to obtain FDI approval without waiting for prior approval from the Department of Industry. The DOI's current published material describes the automatic route as an FDI approval mechanism under which eligible investors submit their application through the online IMIS system and receive the approval certificate through that system.

The automatic route applies only to specified sectors and sub-sectors. The DOI has published categories including certain energy-based industries, agriculture and forest product-based industries, infrastructure industries and other listed activities. Investors must select the applicable sector and sub-sector within the prescribed system.

Automatic approval does not mean that all other regulatory obligations disappear. Company incorporation, industry registration, tax registration, environmental approval, sectoral licensing, foreign exchange compliance and reporting requirements may still apply. Investors should therefore confirm that the entire project, not merely part of its proposed activity, qualifies for the automatic route.

What Documents Are Required For FDI Approval

The exact documents depend on whether the investor is an individual or entity, whether the investment is new or into an existing company, and whether additional sectoral approvals apply. Typical documents may include:

• Project report containing the proposed business, investment, financing and implementation details.
• Passport copy of an individual foreign investor.
• Certificate of incorporation and constitutional documents of a foreign corporate investor.
• Company profile or investor profile.
• Corporate resolution approving investment in Nepal.
• Financial credibility or banking certificate where required.
• Source and schedule of investment information.
• Power of attorney or authorization for the person handling the application.
• Joint venture agreement where a Nepali or other partner participates.
• Proposed shareholding and ownership details.
• Other documents required for regulated sectors or specific investment structures.

Documents issued outside Nepal may require appropriate authentication, certification or translation. The application should also contain information consistent with the proposed company structure and project report.

How To Prepare The FDI Project Proposal Properly

A project proposal should provide a clear description of what the investor intends to establish or acquire in Nepal. It should identify the investor, proposed company, business activity, project location, investment amount, foreign ownership, proposed financing and implementation schedule.

The financial section should explain the source and use of funds, projected capital expenditure, operating expenses, revenue assumptions and expected financial position. The proposal should also address employment generation, production or service capacity, technology, market demand and the intended implementation period.

The proposed activity should correspond with the relevant industrial classification and the activity stated in the FDI application. Inconsistencies between the project report, company documents, investment approval and industry registration can create additional regulatory work. A properly prepared project report therefore provides a consistent basis for the subsequent company, industry, banking and foreign exchange procedures.

What Is The FDI Approval Process Timeline In Nepal

The time required for foreign investment approval depends on the route, project type, completeness of documents, sector and regulatory requirements. Automatic-route applications may be processed through the online system without the prior approval stage applicable to the conventional route.

For non-automatic projects, processing generally involves submission, examination of the application and supporting documents, requests for clarification where necessary, and issuance of the approval decision. FITTA contains statutory provisions concerning processing and written communication where an application cannot be approved.

The complete establishment process takes longer than the FDI approval itself because it may include company incorporation, tax registration, industry registration, environmental approvals, sectoral licenses, bank procedures and foreign exchange recording. Accordingly, an investor should distinguish between the FDI approval timeline and the timeline for making the business fully operational.

What Government Fees Apply To FDI Approval

The Department of Industry's published investment information states that FDI approval is free of charge, while noting that some services may involve refundable deposits. Company registration fees are governed separately under the Companies Act and applicable rules. The DOI also identifies industry registration as free of charge in its investment services information.

Other costs may arise depending on the transaction. These can include company incorporation expenses, document certification, translation, professional fees, environmental assessment expenses, sectoral licensing fees, visa charges and banking-related costs. Immigration fees are governed under the applicable immigration framework.

Investors should distinguish government fees from professional service fees. A legal adviser, accountant, consultant or corporate service provider may charge separately for preparing documents, filing applications and completing post-approval registrations. Government fees should be confirmed at the time of application because administrative charges can change.

How Company Registration Follows FDI Approval In Nepal

Company registration and FDI approval are separate legal procedures. Where a new Nepalese company will receive foreign investment, the investor normally needs to incorporate the company under the Companies Act, 2006 and structure its memorandum, articles and shareholding consistently with the approved investment.

The Office of the Company Registrar is responsible for company registration. The incorporation process generally involves reserving or approving the company name, preparing constitutional documents, identifying shareholders and directors, providing required identification and completing the prescribed filing process.

The company should not be structured in a manner inconsistent with the foreign investment approval. Changes to ownership, capital or business activities may require further regulatory action. After incorporation, the company may also need PAN or VAT registration, industry registration and sector-specific licenses. The DOI's One Stop Service framework provides several connected investment-related services.

How Industry Registration Follows Foreign Investment Approval

Industry registration is a separate step from FDI approval where the proposed activity qualifies as an industry requiring registration. The Department of Industry and its relevant registration section handle industry registration for industries falling within its jurisdiction. The One Stop Service Center also provides industry registration services.

The investor should submit the approved investment information, company documents, project details and other required materials for industry registration. Environmental requirements must also be addressed where applicable. The DOI identifies environmental procedures under the Environment Protection Act, 2019 as part of the investment service framework.

Industry registration authorizes the business to proceed under the industrial regulatory framework, but it does not replace sector-specific licensing. A business operating in banking, insurance, energy, telecommunications, education, health, tourism or another regulated field may require additional approval from the competent regulator.

What Laws And Authorities Govern FDI In Nepal

The main legal framework includes the Foreign Investment and Technology Transfer Act, 2019, Foreign Investment and Technology Transfer Regulations, 2021, Industrial Enterprises Act, 2020, Companies Act, 2006 and applicable foreign exchange legislation. The Public Private Partnership and Investment Act may also apply to investment projects falling within its scope.

FITTA establishes the central rules for foreign investment, including permitted forms of investment, approval, technology transfer, investment protection, repatriation and related rights.

The Department of Industry is a principal FDI approval authority. The Investment Board Nepal has jurisdiction over projects assigned to it under applicable law. The Office of the Company Registrar handles company incorporation, while the Inland Revenue Department deals with tax registration and administration. Nepal Rastra Bank regulates foreign exchange and records foreign investment through the banking system. Other regulators become relevant according to the sector.

How Foreign Investors Bring Investment Into Nepal

After obtaining the necessary approval and completing the relevant corporate procedures, foreign investors bring the approved investment into Nepal through the banking system in accordance with applicable foreign exchange rules. The Foreign Exchange Regulation Act and Nepal Rastra Bank's regulatory framework govern foreign currency transactions.

The remittance should correspond with the approved investment and the company's shareholding or investment records. Proper banking documentation should be retained because evidence of the actual investment may later be required for regulatory reporting, share transfers, repatriation or other transactions.

Foreign investors should not treat an informal transfer of money to a Nepalese business as equivalent to an approved foreign investment. The investment must be properly documented and recorded through the prescribed channels. The DOI identifies foreign exchange and transfer of investment as a service involving the Nepal Rastra Bank unit under its One Stop Service framework. Law firm in Nepal.

What Services And Compliance Follow FDI Approval

FDI approval is followed by continuing corporate, tax, industry and foreign exchange compliance. Depending on the business, the investor may need PAN or VAT registration, industry registration, environmental approval, local registration, sector-specific licenses and immigration or business visa arrangements.

Foreign-invested companies must maintain proper corporate records and comply with applicable tax, accounting, labour, industry and reporting requirements. Changes in ownership, capital structure, business activity or investment arrangements may require notification or approval.

FITTA also recognizes repatriation rights subject to the applicable legal and regulatory procedure. The statutory framework provides protection for repatriation of eligible investment returns, including profits or dividends, and relevant foreign exchange laws govern the actual transfer abroad.

Technology transfer arrangements require separate compliance where applicable. Investors should therefore review both the original FDI approval and all subsequent regulatory obligations throughout the life of the investment.

Frequently Asked Questions About FDI In Nepal

How long does FDI approval take in Nepal?

The timeline depends on the investment route and project. Eligible automatic-route investments can obtain approval through the prescribed online system without prior DOI approval. Conventional applications require document review and regulatory processing. The complete investment setup can take longer because company incorporation, industry registration, tax registration, environmental approvals, licensing and foreign exchange procedures are separate stages.

What documents are needed for Nepal FDI approval?

Documents depend on the investor and investment structure. Common documents include the project report, passport or corporate registration documents, company profile, corporate investment resolution, financial credibility evidence, investment source and schedule, authorization documents and joint venture agreement where applicable. Sector-specific projects may require additional documents. Foreign documents may also need certification, authentication or translation.

How much foreign investment can enter Nepal?

There is no single answer that applies to every project. The permitted amount depends on the applicable investment threshold, sector restrictions, ownership limitations, project requirements and current government notifications. Investors should not rely solely on older references stating NPR 20 million as a universal minimum. The applicable minimum and sector conditions should be confirmed before submitting the FDI application.

Is FDI approval free in Nepal currently?

The Department of Industry's published investment information states that FDI approval is free of charge, although some services may involve refundable deposits. Company registration fees and other transaction costs are separate. Industry registration is also identified as free in the DOI investment information. Professional fees, document certification, translation, licensing and other administrative expenses may still apply.

Where can foreign investors submit FDI applications?

Foreign investors generally submit applications through the Department of Industry where the project falls under DOI jurisdiction. Eligible investments under the automatic route use the DOI's prescribed online system. Projects within the Investment Board Nepal's statutory jurisdiction follow the applicable IBN procedure. The correct filing authority depends on the project, sector, investment structure and applicable legislation.

Can foreign investors use automatic FDI approval?

Yes, but only for eligible sectors and sub-sectors covered by the automatic route. The DOI's published guidance states that eligible investors do not need prior DOI approval and can obtain the FDI approval certificate after submitting the required application through its online system. Automatic approval does not remove company, tax, industry, environmental or sector-specific compliance requirements.

Which authority approves foreign investment in Nepal?

The Department of Industry is a principal authority for foreign investment approval, while the Investment Board Nepal has jurisdiction over projects assigned to it by law. The Office of the Company Registrar handles company registration, and Nepal Rastra Bank handles foreign exchange regulation and investment recording. Other regulators may issue additional approvals depending on the business sector.

What happens after receiving FDI approval?

After FDI approval, the investor generally proceeds with company incorporation or the relevant acquisition transaction, industry registration, tax registration and required sectoral approvals. The investor then brings the approved investment into Nepal through the prescribed banking and foreign exchange channels. The company must maintain proper corporate, tax, industry and foreign investment records and comply with continuing reporting obligations.

Is company registration required after FDI approval?

Where the investment involves establishing a new Nepalese company, company registration is generally a separate requirement under the Companies Act. FDI approval does not itself create the Nepalese company. The constitutional documents and shareholding structure should correspond with the approved investment. Existing-company investments may follow a different process involving share acquisition, ownership changes and regulatory recording.

Can foreign investors repatriate profits from Nepal?

Foreign investors have statutory rights relating to repatriation, subject to compliance with applicable law and regulatory procedures. FITTA provides a framework for repatriating eligible investment returns, while foreign exchange laws and Nepal Rastra Bank procedures govern the actual transfer. Applicable taxes, corporate records, investment records, approvals and banking documentation must be addressed before funds are remitted outside Nepal.

What is the role of Nepal Rastra Bank in FDI?

Nepal Rastra Bank plays a central role in the foreign exchange side of FDI. Foreign investment funds must enter Nepal through permitted banking channels and be properly recorded. NRB-related procedures also become relevant when an investor seeks to repatriate eligible investment, dividends, profits or other permitted amounts. The precise banking and foreign exchange procedure depends on the transaction.