Overview of FDI Approval System in Nepal
Foreign Direct Investment (FDI) in Nepal is governed under a structured legal and institutional framework that facilitates investment while ensuring regulatory compliance. The approval system is primarily overseen by the Department of Industry (DOI) and the Investment Board Nepal (IBN), depending on the investment amount. As per the Foreign Investment and Technology Transfer Act, 2019 (FITTA 2019), foreign investors must obtain prior approval before initiating any investment activities in Nepal. This process ensures the proposed investment complies with national laws, aligns with sectoral policies, and meets the economic interest of the country. Approval is mandatory for equity investment, reinvestment, lease financing, technology transfer, and franchising agreements. FDI Approval Process in Nepal Explained | Medha Law and Partners is a leading law firm in Nepal and Best corporate law firm in Nepal.
Eligibility Requirements for FDI Application Approval
Eligibility for FDI in Nepal is governed by clear standards outlined under FITTA 2019. Both natural persons and legal entities registered abroad can apply. The minimum threshold for foreign investment is NPR 20 million (approximately USD 150,000) as stipulated by the Industrial Enterprises Act, 2020. Additionally, foreign investors must not fall under restricted sectors, and they must submit a detailed business plan and financial credentials. Only lawful business activities and sectors open for foreign investment are eligible. The applicant must not be on any international sanctions list and must maintain compliance with Nepal’s tax, labor, and environmental laws.
Stepwise Breakdown of FDI Approval Stages
The FDI approval process involves several sequential steps:
Preliminary Discussion and Feasibility Analysis
Preparation of Business Plan and Required Documents
Submission of FDI Application to DOI or IBN
Evaluation of Application and Legal Vetting
Issuance of FDI Approval Certificate
Company Registration at the Office of the Company Registrar (OCR)
PAN and VAT Registration
Foreign Currency Account Opening and Capital Injection
Customs and Sectoral Registrations (if applicable)
Each stage must be completed as per the standard timelines and with the required compliance certifications. The DOI typically processes investments up to NPR 6 billion, while IBN handles larger projects.
Essential Documents for FDI Approval Request
Applicants must submit the following documents to initiate the approval process:
Application form for foreign investment (as prescribed)
Copy of investor’s passport or registration certificate (for entities)
Board resolution authorizing the investment
Project proposal or business plan
Financial credential documents (e.g., bank statement, source of funds)
Joint venture agreement or MoU (if applicable)
Technology transfer agreement (if applicable)
Power of attorney to legal representative
Environmental compliance documentation (if applicable)
These documents must be submitted in Nepali or translated into Nepali by an authorized translator.
Typical Duration for FDI Approval Procedure
The time required for FDI approval varies depending on the project complexity and the approving authority. For most projects processed by the Department of Industry, the approval time is approximately 7 to 15 working days from the date of complete submission. Investments handled by the Investment Board Nepal may take longer, ranging between 30 to 45 working days, due to higher scrutiny and project valuation. Delays may occur if documents are incomplete or if sector-specific clearances are required.
Estimated Expenses During Approval Process
The cost incurred during the FDI approval process is relatively moderate and primarily includes document translation, legal consultancy, notarization, and courier fees. On average, foreign investors may expect to spend between USD 500 to USD 2,000 during the approval phase. This estimate excludes company registration and capital remittance costs. These expenses also vary based on the type and scale of investment.
Government Charges Applicable on FDI Approval
Government fees for FDI approval in Nepal include:
Application Processing Fee: NPR 10,000 for standard FDI approval
Company Registration Fee: Ranges from NPR 1,000 to NPR 100,000 based on authorized capital
PAN and VAT Registration: Nominal charges under Inland Revenue Department
Visa Processing Fees: Based on investor and staff visa categories
Sectoral License Fees: Applicable for regulated sectors (e.g., hydropower, banking)
These fees are non-refundable and payable in Nepali currency via authorized channels.
Approval Application Checklist for Investors
Before submitting an application, foreign investors should ensure:
Business activity is in an open sector
Investment meets the minimum NPR 20 million threshold
All documents are notarized and translated properly
Financial proof and source of funds are included
Board resolution and JV agreements are legally valid
Environmental and sectoral clearances are secured if needed
Legal representative is authorized with power of attorney
Failure to meet any item in this checklist may result in delay or rejection.
Key FDI-Related Laws to Know About
Foreign investment in Nepal is primarily governed by:
Foreign Investment and Technology Transfer Act, 2019 (FITTA 2019)
Industrial Enterprises Act, 2020
Income Tax Act, 2002
Labour Act, 2017
Environment Protection Act, 2019
These laws collectively regulate company formation, taxation, capital repatriation, dispute resolution, and labor obligations for foreign investors.
Government Agencies Overseeing FDI Approvals
Multiple government agencies play roles in FDI facilitation:
Department of Industry (DOI) – Approves general FDI under NPR 6 billion
Investment Board Nepal (IBN) – Approves large-scale and strategic FDI
Office of the Company Registrar (OCR) – Registers FDI companies
Nepal Rastra Bank (NRB) – Monitors foreign currency flow and approval
Inland Revenue Department (IRD) – Issues tax registration and monitors compliance
Sectoral Ministries – Approve FDI in regulated sectors like energy, health, etc.
Each agency operates under specific laws and timelines.
Legal Services Offered for FDI Approval Help
Legal firms in Nepal provide several services to assist foreign investors:
FDI application preparation and submission
Drafting and vetting joint venture agreements
Translation and notarization of foreign documents
Legal representation during DOI or IBN hearings
Compliance audits before approval
Liaising with government departments for follow-up
Legal opinion on investment laws and sectoral restrictions
These services ensure that the investment process is compliant, efficient, and successful.
How to Appeal FDI Rejection Decisions
If an FDI application is rejected, the investor can:
Review the rejection letter for deficiencies
Rectify issues and resubmit the application
File a formal written appeal to the Ministry of Industry, Commerce and Supplies
Request a legal hearing or clarification from DOI or IBN
Seek legal intervention or mediation through licensed law firms
FITTA 2019 provides the basis for appeals, and legal support is often essential to address complex denials.
Sectors Requiring Additional FDI Approvals
Certain sectors in Nepal require additional scrutiny and licensing before approving foreign investment:
Hydropower and infrastructure (require approval from Ministry of Energy)
Education and health (require sectoral ministry clearance)
Aviation and telecommunications (require regulatory authority approval)
Banking, insurance, and securities (require NRB and SEBON clearance)
Mining and petroleum (require Ministry of Industry permissions)
Investors must obtain such approvals before receiving final FDI clearance.
Renewal and Amendment of FDI Approvals
FDI approvals are valid for the duration mentioned in the business plan. If there are changes in shareholding, capital amount, project scope, or business structure, the investor must:
File an application for amendment with DOI or IBN
Submit updated business plans or agreements
Pay applicable amendment fees
Receive updated approval documentation
Renewals are usually required for technology transfer agreements and certain types of visa facilitation tied to investment.
Legal Guidance for Fast FDI Approvals
For a timely and successful FDI approval, legal experts recommend:
Consulting qualified FDI lawyers before submission
Verifying that the project falls within the permitted sector
Preparing a comprehensive and compliant business plan
Engaging a law firm to communicate with DOI or IBN
Ensuring all documents are complete, notarized, and translated
Maintaining transparency in source of investment and ownership structure
Legal assistance can help avoid delays, rejections, and non-compliance penalties.
FAQs
What is the first step for FDI?
The first step for FDI in Nepal is preparing and submitting an application to the Department of Industry or Investment Board Nepal, along with a business proposal, legal documents, and financial credentials.
Who gives final FDI approval?
FDI approvals are granted by either the Department of Industry (for investments below NPR 6 billion) or Investment Board Nepal (for investments exceeding that amount), depending on project scale.
What documents are needed for FDI?
Documents include a business plan, passport or company certificate, board resolution, financial proof, joint venture agreement (if applicable), and a power of attorney for legal representation.
What is the cost of FDI approval?
The cost includes government fees, legal consultancy, translation, and document preparation. It typically ranges between USD 500 to USD 2,000, depending on complexity and service provider.
Can I apply without a lawyer?
Yes, but engaging a lawyer ensures legal compliance, faster processing, and proper documentation. Legal firms also liaise with government authorities to minimize delays.
How long does approval usually take?
Approval generally takes 7 to 15 working days through the Department of Industry. Applications through Investment Board Nepal can take up to 45 working days.
What laws guide FDI approval process?
Key laws include the Foreign Investment and Technology Transfer Act, Industrial Enterprises Act, Companies Act, Income Tax Act, and sector-specific laws regulating investment.
Can I reapply after rejection?
Yes. Rejected applications can be corrected and resubmitted. Legal counsel can help identify and resolve issues that led to the rejection.
Do all investments need approval?
Yes, all forms of foreign investment, including equity, lease financing, and technology transfer, require prior approval from the concerned authority.
Can approval be amended later?
Yes. Investors can apply to amend approval terms, such as investment amount, ownership changes, or project scope, by submitting a revised application and relevant documents.