Foreign Investment in Nepal: Legal Guidelines and Approval Procedures
1. General Outline Regarding Approval for Foreign Investment in Nepal.
Obtaining Investment Approval:
The initial stage requires obtaining investment approval either from the Department of Industry (DOI) or the Investment Board of Nepal (IBN), depending on the scale and nature of the investment.
Business and Industry Registration:
After obtaining the investment approval, the business or industry must be registered in accordance with the foreign investment authorization.
Approval from Nepal Rastra Bank:
Approval from Nepal Rastra Bank (NRB) is required for the transfer of foreign currency in compliance with the approved investment.
Currency Remittance and Documentation:
Foreign currency must be remitted through established banking channels, and the transaction must be properly documented with Nepal Rastra Bank.
Possible Ways and Procedure
1. Foreign Investment in a New Industry
| Steps | Process | Remarks |
| Step 1 | Obtaining Foreign Investment approval from DOI/IPBN | Along with the approval, the investor should also obtain certification of the submitted project proposal. |
| Step 2 | Obtaining Foreign Investment approval from the DOI/IPBN | Obtain certified copies of the Memorandum of Association, Articles of Association, and the Certificate of Incorporation. The PAN (tax registration) is also issued at this stage. |
| Step 3 | Incorporation of the Company at OCR | A recommendation from the ward office must also be obtained for industry registration. A lease agreement must be entered into for the registered office. The lease agreement is required for local authority and tax registration. If the monthly rent exceeds NPR 1,00,000, the agreement must be registered with the local ward office. |
| Step 4 | Tax Registration at IRD | The authorized representative (in case of a corporate investor) and one of the promoters (in case of an individual investor) must be physically present for biometric registration. |
| Step 5 | Industry registration at DOI | The industry may be required to conduct and comply with environmental examination or assessment, which shall be a prior condition before commencing operation. |
| Step 6 | Open Bank Account (at any commercial bank in Nepal) | The company may open a bank account after obtaining the PAN certificate. However, the investment amount can be remitted to the company’s bank account only after the industry registration. |
| Step 7 | Submit a notification for inward remittance of investment (at Nepal Rastra Bank) | No prior approval is required. Only a notification in the prescribed format must be submitted. |
| Step 8 | Business registration at the local-level ward office | The investor may remit the investment amount to the company’s bank account according to the investment timeline. Within six months of such inward remittance, the company must apply to Nepal Rastra Bank for recording the investment. |
| Step 9 | Start operation and notify the Department of Industry | If the industry cannot commence commercial operation within the specified time mentioned in the industry registration certificate, it must apply for an extension at least 30 days before the expiry of the deadline. |
2. Investment by Technology Transfer
A foreign investor may invest in an industry in Nepal through technology transfer. The conditions governing the technology transfer must be consistent with the technology transfer agreement. This agreement must obtain approval from the authority responsible for foreign investment.
For approval from the Department of Industries, the industry must submit an application to the DOI in the prescribed format along with the following documents:
| S.N. | Document | Copies | Original / Copy | Remarks |
| 1 | Application for approval of technology transfer | 1 | Original | |
| 2 | Agreement between technology transferor and transferee | 2 | Original | |
| 3 | Certificate of Industry Registration | 1 | Copy | |
| 4 | Agreement between the technology transferor and transferee | 1 | Copy | |
| 5 | Certified copy of the approved scheme | 1 | Copy | |
| 6 | Minutes of BOD deciding upon obtaining technology and appointing an authorized representative of the company to sign in TTA | 1 | Copy | If the transferor is a company |
| 7 | Minutes of the BOD deciding upon obtaining technology and appointing an authorized representative of the company to sign the TTA | 1 | Notarized Copy | If the transferor is a company |
| 8 | MOA, AOA (English translation when required) | 1 | Notarized Copy | If the transferor is a company |
| 9 | Certificate of Incorporation of a foreign company | 1 | Copy | If the transferor is a company |
| 10 | If a trademark is being transferred | If the transferor is a company | ||
| 11 | POA | 1 | Notarized Copy | |
| 12 | Trademark Registration Certificate | 1 | Copy | Self-verified profile of a foreign company |
3. Foreign Investment in an Existing Industry by Share Transfer
There are two methods of share transfer. One method involves the transfer of shares from an existing shareholder, while the other involves the issuance of new shares to a foreign investor. The new shares may be issued either from reserved shares or by increasing the issued capital of the company.
To obtain foreign investment approval from the Department of Industry (DOI), each foreign investor must invest a minimum of NPR 2 million.
Share transfer from an existing shareholder to a foreign investor
The industry must submit an application to the DOI in the prescribed form along with the following documents:
- Request from the share transferor
- Request from the share transferee
- Share Transfer/Purchase Agreement
- Copy of the minutes of the Board meeting of the Nepalese company regarding the inclusion of a foreign investor into the company
- Copy of the minutes of the Board meeting, Certificate of Incorporation, and the company profile of the foreign party if the participant is a company
- Copy of passport and bio-data of the foreign party if the participant is an individual
- Financial Credibility Certificate of the foreign investor issued by a bank
- Current shareholders’ list as certified by the Company Registrar’s Office
- Industry Registration Certificate
- Auditor’s Report
- Tax Clearance Certificate
- Authority letter(s) from the companies concerned authorizing a representative to sign on behalf of the companies
At the time of approval, the share transferor must be present in person at the DOI. If the industry is not operational at the time of application, the application must also include a Project Report.
Share transfer from reserved shares or by increasing the issued capital of the company
The industry must apply to the DOI in the prescribed application form along with the documents mentioned above, except items A and B.
For items A and B, the following documents must be enclosed:
A. Request a letter from the share transferor
This is an application letter from the existing shareholder of the company (duly authorized by the Board meeting) stating that the company agrees to transfer all or some of the shares from the company’s share stock.
B. Request a letter from the share transferee
This is an application letter from the prospective foreign investor stating that he or she intends to invest in the existing Nepalese industry and agrees to purchase shares of the Nepalese company for the specified amount.
4. Loan Investment in an Existing Nepalese Industry
If a Nepalese company intends to obtain a loan from a foreign lending institution or an individual lender, it must submit an application to the DOI using the prescribed application form.
The following documents must also be submitted along with the application:
- Loan Agreement
- Certificate of Incorporation, including Memorandum of Association and Articles of Association of the lending agency
- Company profile of the lending agency
- Industry Registration Certificate
- Copy of the minutes of the Board meeting of the recipient company regarding the loan to be acquired
- Auditor’s Report
- Tax Clearance Certificate
| Steps | Process | Remarks |
| Step 1 | The entity bringing foreign investment must inform NRB through an application in the prescribed format. The following documents must be submitted to the bank for depositing the investment amount: application to deposit the foreign investment; decision of the Board of Directors or authorized person; copy of foreign investment approval; certificate from Credit Information Center confirming that the entity is not blacklisted; copy of passport of the foreign investor. | The minimum amount for foreign investment in an investment company is NPR 1,000,000,000 (based on the notice published in Nepal Gazette on 2nd March 2023). |
| Step 2 | Obtaining Foreign Investment approval from the DOI/IPBN | Business registration at the local-level ward office |
| Step 3 | Required documents include: Copy of foreign investment approval issued by DOI; Copy of citizenship certificate of Nepali promoters; Copy of passport of foreign investors/promoters; Proposed Memorandum and Articles of Association in Nepali language; Identity document or passport; Project proposal submitted to DOI; Application for reserved company name obtained from CRO or online at the website, Authorization letter or Power of Attorney( for representatives) | A recommendation from the ward office must also be obtained for industry registration. |
| Step 4 | Tax Registration at IRD | Required documents include: Certificate of Incorporation; Memorandum and Articles of Association; Citizenship certificate (or passport for foreign nationals) of the signatory; passport-size photo; hand-drawn sketch of the business location; Power of Attorney. |
| Step 5 | Industry registration at DOI | After obtaining foreign investment approval and company incorporation, the industry must be registered with DOI within 35 days. Required documents include: prescribed application form; copies of Certificate of Incorporation, Memorandum, and Articles of Association; and other documents as required by DOI. |
| Step 6 | Informing Nepal Rastra Bank | After bringing the foreign investment into Nepal, it must be recorded with the NRB. The entity must apply to NRB with the following documents: application in the prescribed format; Board decision to record the investment; copy of foreign investment approval; company and industry registration certificates; PAN/VAT registration certificate; MOA and AOA; latest audit report; latest tax clearance certificate; latest share registry certified by OCR; system-generated evidence provided to the bank showing inward remittance; evidence showing that prior information was given to NRB; copy of passport of the foreign investor. |
| Step 8 | Recording the Foreign Investment | After bringing the foreign investment into Nepal, it must be recorded with NRB. The entity must apply to NRB with the following documents: application in the prescribed format; Board decision to record the investment; copy of foreign investment approval; company and industry registration certificates; PAN/VAT registration certificate; MOA and AOA; latest audit report; latest tax clearance certificate; latest share registry certified by OCR; system-generated evidence provided to the bank showing inward remittance; evidence showing that prior information was given to NRB; copy of passport of the foreign investor. |
4. Creating an Investment Company
Additional Provisions Regarding Foreign Investment Company
(Notice published in Nepal Gazette on 2nd March 2023 (2079/11/18))
a. The sector in which investment is made must be within the territorial jurisdiction of Nepal.
b. Investment may only be made in industries classified under the Industrial Enterprise Act and in sectors where foreign investment is permitted under the Foreign Investment and Technology Transfer Act.
c. The investment company may invest only in the form of share capital and shall not invest through loans, credit facilities, bonds, or debentures.
d. The investment company shall not perform activities governed by the prevailing laws related to banks and financial institutions.
e. While investing in different sectors, the foreign investment company must obtain foreign investment approval from the relevant industry registering authority for each sector.
f. The registration and regulation of the investment company shall be governed by the Industrial Enterprise Act and other applicable laws.
g. While bringing or repatriating investment, the investment company must comply with the Foreign Investment and Technology Transfer Act, its regulations, policies, guidelines, and procedures issued by Nepal Rastra Bank.
h. The investment company shall not carry out activities of a cooperative established under the Cooperative Act.
i. Investment through shell companies and financial transactions with shell banks shall not be permitted.
j. The investment company shall not be allowed to purchase shares or debentures from the secondary market of the Nepal Stock Exchange Limited.
k. The investment company shall not invest in sectors such as securities exchange brokerage or real estate transactions.
l. Investment companies shall not obtain loans from national banks and financial institutions, nor shall they obtain financing based on bank guarantees from foreign banks.
m. Monitoring of investment companies shall be conducted by the Department of Industries
If you are planning to invest in Nepal or require assistance with foreign investment approvals and regulatory procedures, our team, US Nepal Legal Solutions, is ready to guide you through every step of the process.
