Foreign Direct Investment in Nepal / Registration of Company by Foreigners in Nepal – Exclusive 3 Mins Read

#Updated August 7, 2024

Legal

Foreign investors can invest in a permissible industry in Nepal by obtaining the FDI approval from the Government of Nepal . The Foreign Investment and Technology Transfer Act, 2019 (Act) is the governing Act to regulate FDI in Nepal. The Act imposes restrictions on certain industries for foreigners. The minimum capital requirement for foreign person or entity is NPR 20 million (approximately USD 155,000). However, there is no minimum capital requirement for IT companies.

POSSIBLE WAYS FOR FOREIGN DIRECT INVESTMENT IN NEPAL

– Investment in an existing company through Share Purchase Agreement

– Investment in a new company (Equity – Wholly Owned)

– Investment in a new industry (Equity – Joint venture)

– Technology Transfer

RESTRICTED INDUSTRIES FOR FOREIGN DIRECT INVESTMENT IN NEPAL

Retail Business (Trading, local stores, wholesale and retail shops); Cottage & Micro Industries,

Travel & Tour (Travel agencies, Trekking, Mountaineering and Expedition, Rafting etc.),

Business of Mass Communication media like Radio, Television, Newspaper, Film Industry (Investment in a motion picture in local language),

Arms and Ammunition Industries; Atomic Energy; Gun Power and Explosives; Bullets; Radio Active Substance; Nuclear weapon,

Real Estate Business (excludes construction) (Purchasing and selling of lands, buildings, housings etc),

Internal Courier Service; Local Catering Services; Money Changer; Remittance service,

Industries except large industries that exports more than 75% of the products in sectors like Animal husbandry, Poultry, Fisheries, Bee Keeping etc,

Business of personal nature (Hair Salon, Beauty Parlor, Driving Center, Tailor etc),

Consultancy services having more than 51% foreign investment; Legal service; Management; Account; Language Institute; Computer Academy etc,

Ride Sharing companies like Uber, Pathao having more than 70% foreign investment.

VISAS AND PERMITS

Government of Nepal provides various visa facilitations for foreign investors or their representatives/directors. Following visas are available to investors:

Business Visa

Dependent Visa

On the recommendation of the Department of Industry, the Department of Immigration grants Business Visas to the investor or representative of investors (in case of corporate investor). The dependents (spouse and children) of investor or their representatives are entitled to obtain dependent visa. The Business Visa and Dependent Visa are issued for a year and can be renewed until the operation of the industry in Nepal.

REPATRIATION

Foreign investors can repatriate profits (dividend) generated by the operation of industry in Nepal after deducting dividend tax. The law doesn’t allow investors to repatriate within one year of investment. Before repatriation, the investors have to obtain approval from the central bank (NRB). NRB only allows repatriation for investors who have fully complied with the due process of FDI. It is therefore very crucial to abide by the due process of FDI.

TAX RATES

Corporate Tax @ 25%

Capital Gains Tax @ 10%

Dividend Tax @ 5%

Windfall Gain Tax @ 25%

V.A.T. @ 13%

FACILITIES AND INCENTIVES FOR FOREIGN INVESTORS

Work permits: Government of Nepal provides facilities of working visas and permits for foreigners (experts). Usually work permit is given to a foreign individual for the technical and expert knowledge, a knowledge or experience, which is not available from among the Nepalese manpower. On the recommendation of DOI, the Department of Labor issues work permits to eligible foreign individual for 1 year that can be renewed for 3 years. Foreigners obtaining work permits are issued Non-Tourist Visa. The number of foreign employees working in a company cannot exceed 5% of the total number of employees.

Tax Concessions: Industrial Enterprise Act, 2017 provides various concessions on tax.

EMPLOYMENT & LABOR

All the employees to be provided with employment contract.

Salary to be categorized in to basic salary and allowance.

Provident Fund: 10% of basic salary to be deducted and 10% to be added by employer and deposited in the Social Security Fund (SSF).

Gratuity: 8.33% of basic salary each month to be contributed by employer and deposited in SSF.

Medical and Accidental insurance facilities for employees.

Learn about Company Registration in Nepal

https://www.lawchintan.com/company-registration-in-nepal

If you want to learn more about Foreign Direct Investment in Nepal, feel free to contact us at info@lawchintan.com or call us at +977 9851133809.