Table of Contents
Foreign investment in Nepal is governed by the Foreign Investment and Technology Transfer Act (FITTA) 2075 (2019), which replaced the earlier FITTA 1992 to create a more investor-friendly environment. Nepal welcomes foreign direct investment (FDI) in most sectors, though certain industries remain restricted or prohibited for foreign investors. Whether you are setting up a joint venture, a fully foreign-owned company, or investing through share purchases, understanding Nepal's FDI framework is essential. This guide covers the legal framework, approval process, restricted sectors, minimum investment requirements, tax incentives, and repatriation rules for 2026.
Foreign investment in Nepal is regulated by FITTA 2075 (2019). Minimum investment: NPR 20 million (approx. USD 150,000) for new foreign investment. Approval authority: Department of Industry (DOI) or Investment Board Nepal (IBN) for large projects (above NPR 6 billion). Prohibited sectors: cottage industries, personal service businesses, arms/ammunition, real estate (except construction). Foreign investors can own up to 100% in most permitted sectors. Profit repatriation: guaranteed in convertible currency. Company setup: register at Office of the Company Registrar (OCR), obtain DOI approval, then register with IRD for PAN.
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What Is Foreign Investment in Nepal?
Under the FITTA 2075, Section 2(a), foreign investment means investment made by a foreign investor in Nepal in any of the following forms:
- Investment of foreign currency (equity capital)
- Reinvestment of earnings from existing foreign investment
- Investment through technology transfer (patents, trademarks, know-how)
- Loan investment from a foreign company to its subsidiary in Nepal
- Purchase of shares of a Nepali company by a foreign investor
| Detail | Information |
|---|---|
| Governing law | Foreign Investment and Technology Transfer Act (FITTA) 2075 (2019) |
| Regulatory authority | Department of Industry (DOI), Ministry of Industry, Commerce and Supplies |
| Large projects | Investment Board Nepal (IBN) — for projects above NPR 6 billion |
| Minimum investment | NPR 20 million (approximately USD 150,000) |
| Maximum foreign ownership | Up to 100% in most permitted sectors |
| Currency | Must be brought in convertible foreign currency through banking channel |
| Profit repatriation | Guaranteed in convertible currency after tax |
Legal Framework for Foreign Investment
Nepal's foreign investment regime is governed by multiple laws working together:
| Law | Year | Key Provisions |
|---|---|---|
| Foreign Investment and Technology Transfer Act (FITTA) | 2075 (2019) | Primary law governing FDI — defines forms, approval process, sectors, repatriation |
| Industrial Enterprises Act | 2076 (2020) | Classifies industries, defines incentives, tax holidays, and concessions |
| Company Act | 2063 (2006) | Company incorporation, governance, and compliance — company registration process |
| Special Economic Zone Act | 2073 (2016) | SEZ incentives for export-oriented and foreign investment |
| Public Private Partnership Act | 2076 (2019) | Framework for PPP projects involving foreign investors |
| Income Tax Act | 2058 (2002) | Corporate tax rates, withholding tax, double tax treaty provisions — income tax details |
| Nepal Rastra Bank Act / Foreign Exchange Regulation | Various | Foreign currency regulations, capital account transactions |
Types of Foreign Investment Permitted
FITTA 2075 recognises several forms of foreign investment entry into Nepal:
| Investment Type | Description | Ownership |
|---|---|---|
| 100% foreign-owned company | Wholly owned subsidiary registered in Nepal | 100% foreign |
| Joint venture with Nepali partner | Shared ownership between foreign and Nepali investors | Any ratio (minimum NPR 20M foreign share) |
| Share purchase | Buying shares of an existing Nepali company | Subject to NRB and SEBON approval |
| Technology transfer | Licensing patents, trademarks, or technical know-how | Royalty-based agreement |
| Branch office | Branch of a foreign company operating in Nepal | Parent company ownership |
| Liaison office | Representative office for market research (no commercial activity) | Parent company |
Minimum Investment Threshold
One of the most important requirements for foreign investors in Nepal is the minimum investment threshold.
| Investment Category | Minimum Amount | Notes |
|---|---|---|
| New foreign investment (general) | NPR 20 million (≈ USD 150,000) | Per FITTA 2075, Section 3 |
| Technology transfer only | No minimum capital required | Royalty-based agreement |
| Investment Board Nepal projects | NPR 6 billion+ (≈ USD 45 million) | Large infrastructure, energy, manufacturing |
| Share purchase in listed company | Subject to SEBON regulations | Through stock exchange or private placement |
Important: The NPR 20 million minimum applies to the foreign investor's share. In a joint venture, the Nepali partner's investment has no minimum. The foreign currency must enter Nepal through a licensed commercial bank's banking channel.
Sectors Open, Restricted, and Prohibited for Foreign Investment
Not all sectors are open to foreign investors. FITTA 2075 and the Industrial Enterprises Act 2076 categorise industries as follows:
Prohibited Sectors (No Foreign Investment Allowed)
| Sector | Reason |
|---|---|
| Cottage and micro industries | Reserved for Nepali citizens to protect small businesses |
| Personal service businesses | Hairdressing, tailoring, driving schools, etc. |
| Arms, ammunition, and explosives | National security |
| Real estate (buying/selling land) | Land ownership restricted to Nepali citizens |
| Poultry farming, fishery, and bee-keeping | Reserved for domestic investors (small scale) |
| Local catering and retail businesses | Below certain thresholds |
| Money exchange and domestic remittance | Reserved for domestic financial institutions |
| Cigarette, bidi, alcohol (domestic market) | Restrictions on foreign investment in domestic-oriented production |
Restricted Sectors (Foreign Investment with Conditions)
| Sector | Restriction | Maximum Foreign Ownership |
|---|---|---|
| Banking and financial institutions | NRB approval required | Up to 85% (varies by class) |
| Telecommunications | NTA license required | 80% |
| Mass media (print, broadcast) | Nepali ownership required | Not permitted in most media |
| Consultancy services | Must be joint venture | 51% maximum |
| Domestic airlines | Must be majority Nepali-owned | 49% maximum |
| International courier | Joint venture only | Up to 80% |
| Security/guard services | Nepali majority ownership | 49% maximum |
Open Sectors (100% Foreign Ownership Permitted)
- Manufacturing (large and medium scale)
- Hydropower and energy
- IT and software development
- Tourism (hotels, resorts, travel agencies above threshold)
- Infrastructure (roads, bridges, airports)
- Education (higher education and technical training)
- Healthcare (hospitals, clinics, pharmaceuticals)
- Agriculture (commercial-scale only)
- Construction (housing, commercial building)
- Mining (with Department of Mines approval)
Not sure if your sector is open for FDI? Ask our legal team →
Step-by-Step: How to Set Up Foreign Investment in Nepal
Step 1: Determine Investment Structure
Decide between 100% foreign-owned company, joint venture, branch office, or share purchase. Each has different registration requirements and timelines.
Step 2: Obtain DOI Approval
| Step | Action | Details |
|---|---|---|
| 1 | Prepare application | Application form, investment proposal, company documents |
| 2 | Submit to Department of Industry | Tripureshwor, Kathmandu (or online through DOI portal) |
| 3 | DOI review | Sector eligibility, investment amount, security clearance |
| 4 | Approval or rejection | Within 15 days for standard applications (FITTA 2075, Section 5) |
| 5 | Approval letter issued | Specifies sector, investment amount, and conditions |
Step 3: Register the Company
- Register at the Office of the Company Registrar (OCR) — see our company registration guide
- Required: Memorandum of Association, Articles of Association, DOI approval letter
- For joint ventures: shareholder agreement with Nepali partner
Step 4: Bring in Foreign Capital
- Open a bank account in a licensed commercial bank in Nepal
- Transfer minimum NPR 20 million through official banking channel
- Obtain foreign currency exchange certificate from the bank
- Submit capital arrival proof to DOI
Step 5: Obtain Industry Registration
- Register industry at DOI to obtain Industry Registration Certificate
- Required for tax incentives and repatriation rights
Step 6: Post-Registration Compliance
- Register for PAN at IRD
- Register for VAT if turnover exceeds NPR 50 lakh
- Register with local municipality for business tax
- Enrol employees in Social Security Fund (SSF)
- Obtain sector-specific licenses (e.g., NRB for banking, NTA for telecom)
Required Documents for Foreign Investment Approval
| Document | Purpose |
|---|---|
| Application form (DOI format) | Investment details and sector |
| Investment proposal / feasibility study | Project viability, employment generation, environmental impact |
| Passport copy of foreign investor(s) | Identity verification |
| Certificate of incorporation (home country) | For corporate investors |
| Audited financial statements (2 years) | Proof of financial capability |
| Board resolution authorising Nepal investment | For corporate investors |
| Joint venture agreement | If investing with Nepali partner |
| Technology transfer agreement | If technology component involved |
| Power of attorney | If using legal representative in Nepal |
| Bank reference letter | Creditworthiness of investor |
Tax Incentives for Foreign Investors
Nepal offers several tax incentives under the Industrial Enterprises Act 2076 and the Income Tax Act 2058 to attract foreign investment.
| Incentive | Benefit | Conditions |
|---|---|---|
| Income tax holiday | Up to 5 years tax exemption + 50% reduction for next 3 years | Manufacturing industries in specified areas |
| Reduced corporate tax rate | 20% (instead of standard 25%) | Special industries, export-oriented businesses |
| SEZ benefits | Income tax exemption for first 5 years, 50% for next 5 years | Companies operating in Special Economic Zones |
| Infrastructure sector | Tax holiday for energy, roads, airports | Project-specific approval by IBN |
| Employment incentive | Additional 25% deduction on Nepali employee wages | Employing more than minimum required Nepali staff |
| Depreciation benefit | Accelerated depreciation on plant and machinery | Manufacturing and energy sectors |
| Loss carry-forward | Up to 7 years | Business losses can offset future profits |
| Double taxation avoidance | Treaty benefits with select countries | Nepal has DTAs with India, China, South Korea, and others |
Repatriation of Profits and Capital
One of the key concerns for foreign investors is the ability to take profits and capital out of Nepal. FITTA 2075 provides clear guarantees:
| Repatriation Type | Permitted? | Conditions |
|---|---|---|
| Dividends / profits | Yes | After payment of applicable taxes (5% dividend tax) |
| Principal and interest on foreign loans | Yes | As per approved loan agreement |
| Sale proceeds of shares | Yes | After capital gain tax |
| Technology transfer fees / royalties | Yes | As per approved technology agreement |
| Compensation from nationalisation | Yes | Fair compensation guaranteed by law |
| Salary of foreign employees | Yes | Up to 75% of salary in convertible currency (after tax) |
Process: Apply to Nepal Rastra Bank (NRB) through your commercial bank with DOI approval, tax clearance, and audited financial statements. NRB approves repatriation within the banking framework.
Investment Board Nepal (IBN)
For large-scale investments exceeding NPR 6 billion (approx. USD 45 million), the Investment Board Nepal (IBN) serves as the one-stop approval authority.
| Feature | Details |
|---|---|
| Threshold | Projects above NPR 6 billion |
| Chaired by | Prime Minister of Nepal |
| Functions | One-stop approval, facilitation, and monitoring |
| Sectors | Energy, infrastructure, tourism, manufacturing mega-projects |
| Website | ibn.gov.np |
Foreign Investment in Key Sectors
Hydropower and Energy
- Nepal's largest FDI-attracting sector with 83,000 MW theoretical hydropower potential
- 100% foreign ownership permitted
- Power Purchase Agreements (PPA) with Nepal Electricity Authority (NEA)
- Tax holidays available for energy projects
- DOI or IBN approval depending on project size
Tourism and Hospitality
- Hotels, resorts, and adventure tourism open for FDI
- Minimum investment threshold applies
- Tourism sector gets tax incentives under Industrial Enterprises Act
- Visit Nepal campaigns have increased FDI interest
IT and Software
- 100% foreign ownership permitted
- No sector-specific license required beyond DOI approval
- IT Park incentives available in Banepa and other locations
- Growing BPO and software development sector
Manufacturing
- Medium and large-scale manufacturing fully open
- SEZ benefits for export-oriented manufacturing
- Tax holidays for industries in underdeveloped regions
- Competitive labour costs compared to regional peers
Labour Requirements for Foreign-Invested Companies
Nepal's Labour Act 2074 and FITTA 2075 impose specific staffing requirements on foreign-invested companies:
| Requirement | Details |
|---|---|
| Nepali employee ratio | Minimum 80% of workforce must be Nepali citizens |
| Foreign work permits | Required for all foreign employees — maximum 5 years (renewable) |
| Skill transfer | Foreign employees must train Nepali counterparts |
| Minimum wage | Must comply with Nepal minimum wage (NPR 19,550/month) |
| SSF enrolment | Must enrol employees in Social Security Fund |
| TDS obligations | Must deduct TDS on employee salaries |
Challenges for Foreign Investors in Nepal
| Challenge | Details | Mitigation |
|---|---|---|
| Bureaucratic delays | Multiple approvals from DOI, NRB, OCR, local government | Engage a local legal firm for facilitation |
| Foreign exchange controls | NRB controls capital account transactions | Work through licensed commercial bank |
| Land ownership restriction | Foreign nationals cannot own land | Long-term lease (up to 50 years) or company-owned property |
| Infrastructure gaps | Power supply, roads, internet in remote areas | Focus on urban areas or SEZs with infrastructure |
| Policy uncertainty | Frequent changes in government and policy | Monitor FITTA amendments and DOI notices |
| Dispute resolution | Court proceedings can be slow | Include arbitration clauses in contracts |
| NRN-specific restrictions | NRNs cannot invest through NRN card alone | Must invest as foreign investor through banking channel |
Foreign Investment and Marriage in Nepal
For foreign nationals married to Nepali citizens, there are specific considerations:
- Foreign spouse cannot own land independently — see court marriage for foreigners
- Can invest through a company — register a company and invest in permitted sectors
- NRN card holders can own apartments but not land — see dual citizenship rules
- Joint business with Nepali spouse — possible as joint venture; foreign spouse must meet minimum investment threshold
- Visa implications — business visa or spousal visa depending on investment and residence status
Need legal help setting up a business in Nepal? Contact our team →
Dispute Resolution for Foreign Investors
FITTA 2075 provides specific dispute resolution mechanisms for foreign investment disputes:
- Negotiation and mediation — first step for resolving disputes
- Arbitration — FITTA 2075 allows international arbitration under UNCITRAL or ICC rules
- Nepal courts — commercial bench of the High Court for investment disputes
- Bilateral Investment Treaties (BITs) — Nepal has BITs with several countries providing investor protections
- ICSID Convention — Nepal is a member of the International Centre for Settlement of Investment Disputes
Key Sections of FITTA 2075
| Section | Subject | Key Provision |
|---|---|---|
| Section 2 | Definitions | Defines foreign investment, foreign investor, technology transfer |
| Section 3 | Approval for foreign investment | DOI approval required; minimum NPR 20 million |
| Section 4 | Prohibited and restricted sectors | Lists sectors closed or conditional for FDI |
| Section 5 | Approval process | 15-day timeline for DOI decision |
| Section 11 | Technology transfer | Royalty payments, licensing agreements |
| Section 14 | Facility and concessions | Tax incentives, visa facilitation |
| Section 15 | Repatriation | Right to repatriate profits, dividends, capital |
| Section 16 | Visa for foreign investors | Business visa for investors and their dependants |
| Section 17 | Nationalisation protection | No nationalisation without fair compensation |
| Section 22 | Dispute resolution | Arbitration and judicial remedies |
Frequently Asked Questions
The minimum foreign investment in Nepal is NPR 20 million (approximately USD 150,000) under FITTA 2075, Section 3. This applies to the foreign investor's share of equity. Technology transfer agreements have no minimum capital requirement. Large projects above NPR 6 billion go through the Investment Board Nepal.
Yes. Foreign investors can own up to 100% of a company in most permitted sectors including manufacturing, IT, tourism, energy, and healthcare. However, some sectors are restricted (banking, telecom, airlines) with maximum foreign ownership caps, and some are completely prohibited for foreign investment.
Prohibited sectors include: cottage and micro industries, personal service businesses, arms and ammunition, real estate (land buying/selling), poultry/fishery/bee-keeping (small scale), local catering, domestic remittance services, and cigarette/bidi/alcohol production for the domestic market.
Under FITTA 2075 Section 5, the Department of Industry must decide within 15 days of receiving a complete application. In practice, the total process including company registration, DOI approval, and bank account setup typically takes 1-3 months. Large projects through IBN may take longer.
Yes. FITTA 2075 Section 15 guarantees the right to repatriate dividends, profits, loan principal and interest, sale proceeds, and technology fees in convertible foreign currency. Repatriation requires tax clearance and NRB approval through a commercial bank.
The standard corporate tax rate is 25%. Special industries may get a reduced rate of 20%. Companies in Special Economic Zones get tax holidays (5 years exemption + 50% reduction for next 5 years). Dividend distribution is subject to an additional 5% dividend tax.
Yes. NRNs can invest in Nepal as foreign investors, but they must invest through convertible foreign currency via banking channels and meet the minimum NPR 20 million threshold. NRN card alone does not qualify — the investment must follow FITTA 2075 procedures through DOI approval.
Yes. A foreign spouse can invest in a company in Nepal under FITTA 2075 with minimum NPR 20 million. They cannot own land independently but can operate through a registered company. Joint ventures with the Nepali spouse are common. The foreign spouse needs DOI approval like any other foreign investor.
IBN is the one-stop approval authority for large-scale investment projects exceeding NPR 6 billion (approximately USD 45 million). Chaired by the Prime Minister, IBN handles energy, infrastructure, and manufacturing mega-projects. It facilitates approvals, land acquisition, and regulatory coordination.
No. Foreign nationals cannot own land in Nepal — land ownership is restricted to Nepali citizens. However, foreign-invested companies registered in Nepal can lease land for up to 50 years for industrial/business purposes. Foreign investors can own buildings and apartments through a registered company.
Foreign-invested companies must ensure at least 80% of employees are Nepali citizens. Foreign employees need work permits (maximum 5 years, renewable) and must train Nepali counterparts. Companies must comply with minimum wage, SSF enrolment, and TDS obligations under the Labour Act 2074.
A technology transfer agreement under FITTA 2075, Section 11 allows foreign companies to license patents, trademarks, technical know-how, or management expertise to Nepali companies in exchange for royalties. Unlike equity investment, technology transfer has no minimum capital requirement but needs DOI approval.
Yes. Nepal has established SEZs under the Special Economic Zone Act 2073. Benefits include 5 years income tax exemption + 50% reduction for next 5 years, customs duty concessions, simplified approvals, and dedicated infrastructure. SEZs are located in Bhairahawa, Simara, and other locations.
FITTA 2075, Section 22 provides for: (1) negotiation and mediation, (2) international arbitration under UNCITRAL or ICC rules, and (3) Nepal courts (commercial bench). Nepal is also a member of ICSID. Bilateral Investment Treaties with several countries provide additional protections.
FITTA 2075, Section 16 provides for business visas for foreign investors and their dependants. The visa duration corresponds to the investment period. Foreign investors can apply through the Department of Immigration with DOI approval letter, company registration, and investment proof.
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