Introduction
Foreign investment in Nepal is regulated under specific legal frameworks to ensure transparency, fair treatment, and sectoral growth. Investors can register a new company with foreign ownership or invest in an existing entity. The process involves multiple government bodies, including the Department of Industry (DOI), Office of the Company Registrar (OCR), and Nepal Rastra Bank (NRB). Foreign Direct Investment (FDI) is a major contributor to Nepal’s economic development.
Legal Definition and Purpose
Foreign investment is defined in Section 2(e) of the Foreign Investment and Technology Transfer Act, 2019 as any investment made by a foreign individual, company, or entity in Nepal through share capital, reinvestment, or loans. The purpose of this investment is to promote technology transfer, increase capital inflow, and enhance industrial capacity.
Key Requirements for Registration
To register a foreign investment company in Nepal, the following requirements must be met:
- Minimum investment threshold: NPR 20 million
- Approval from the Department of Industry
- Foreign investor identification and legal documents
- Proposal clearly stating business objectives
- Compliance with the Foreign Investment Act, 2019
- Proof of inward remittance via formal banking channels
Eligibility Criteria for Companies/Investors
Eligible entities for foreign investment include:
- Legally registered foreign companies
- Foreign citizens with valid identification
- Joint ventures between local and foreign companies
- Multinational corporations
Foreign investors must:
- Invest in open sectors as per the FDI policy
- Not fall under restricted industries (as listed by GON)
- Fulfill the minimum capital requirement
Step-by-Step Registration Procedure
- Reserve Company Name with OCR
- Submit FDI Application to DOI
- Include investment plan and project proposal
- Obtain FDI Approval from DOI
- Register Company at OCR
- Open Bank Account in Nepal
- Deposit minimum capital
- Register with Inland Revenue Department (PAN)
- Register with Local Municipality
- Submit Shareholder Details to NRB
Documents Required for Registration
- Application for foreign investment (DOI format)
- Investor’s passport or certificate of incorporation
- Power of attorney
- Board resolution approving investment
- Investment plan and financial projection
- Lease agreement (if office space is arranged)
- Company bylaws and proposed name
- Notarized translation into Nepali (where necessary)
- NRB shareholding submission form
- Proof of inward remittance for capital
Timeline for Registration Completion
The overall timeline for foreign investment company registration ranges between 4 to 6 weeks, depending on documentation quality:
- Name reservation and DOI approval: 7–14 days
- Company registration: 7 days
- PAN and Municipality registration: 5–7 days
- NRB filings and remittance clearance: 5–10 days
Cost and Government Fees Breakdown
- Name Reservation (OCR): NPR 1,000
- DOI Processing Fee: NPR 5,000 to 20,000 (varies)
- Company Registration (OCR): NPR 15,000 to 30,000
- PAN Registration: No fee (service charges may apply)
- Legal/Consultation Fees: NPR 100,000 to NPR 250,000
- Translation/Notarization Costs: Variable based on document volume
Compliance and Document Checklist
- FDI Approval Letter from DOI
- Company Registration Certificate from OCR
- PAN Certificate
- Tax Clearance Certificate
- Annual Return Filing
- NRB Record of Investment Inflow
- Lease Agreement for Business Premises
- Audit Report and Financial Statements
- Shareholder and Director KYC
Laws Governing the Process
The registration of foreign investment companies is governed by:
- Foreign Investment and Technology Transfer Act, 2019
- Companies Act, 2063 (2006)
- Industrial Enterprises Act, 2076 (2020)
- Income Tax Act, 2058 (2002)
- Foreign Exchange (Regulation) Act, 2019
These laws ensure foreign investment transparency and security.
Authorities Involved in Registration
- Department of Industry (DOI): FDI approval and registration
- Office of Company Registrar (OCR): Legal company registration
- Inland Revenue Department (IRD): Tax and PAN registration
- Nepal Rastra Bank (NRB): Approval of share capital remittance
- Local Municipality Office: Local business registration
Annual Filing and Tax Compliance
- File annual financial reports with OCR and IRD
- Conduct yearly audit and submit audit report
- Renew municipal registration annually
- Comply with tax obligations under Income Tax Act
- Submit tax returns and advance tax, if applicable
- Maintain foreign investment compliance as per NRB guidelines
Post-Registration Formalities
- Office setup and lease registration
- Employee hiring and labor registration (if applicable)
- Begin commercial operations
- Submit periodic reports to DOI and NRB
- Maintain records of financial and legal transactions
- Ensure timely tax payment and financial audits
Legal Services Offered for Registration
- FDI proposal drafting and submission
- Translation and notarization services
- Representation at DOI, OCR, IRD, and NRB
- Legal opinion on investment structures
- Drafting company bylaws and MoA/AoA
- Post-registration compliance advisory
- Contract drafting and employment documentation
Benefits and Limitations of Registration
Benefits
- Full legal recognition in Nepal
- 100% ownership permitted in most sectors
- Access to local market and labor
- Profit repatriation allowed under NRB rules
- Legal protection under Nepalese law
Limitations
- Not all sectors are open to FDI
- Minimum investment threshold applies
- Delays due to bureaucratic steps
- Currency remittance requires NRB approval
- Periodic compliance requirements
FAQs
What is considered foreign investment?
It includes capital invested by a foreign individual or company through shares, loans, or reinvestment.
Can I own 100% of my company?
Yes, foreign investors can own 100% in sectors not restricted by the FDI policy.
What’s the approval process like?
You must apply to the Department of Industry and register with OCR and NRB after approval.
What are the costs involved?
Costs include registration fees (NPR 20,000–30,000), legal services, and administrative charges.
What are the annual obligations?
You must file annual returns, audit reports, and pay taxes as per Nepali law.
Do I need prior approval?
Yes, FDI approval from DOI is mandatory before investing.
What sectors are open to FDI?
Most sectors are open, except those listed as restricted by the Government of Nepal.
What are the tax rates?
Corporate tax is generally 25%, with variations based on the sector.
Can I repatriate profits easily?
Yes, if taxes are cleared and NRB conditions are fulfilled.
Is company registration mandatory?
Yes, legal registration is required to conduct business operations in Nepal.