Description

 FOREIGN DIRECT INVESTMENT (FDI) IN NEPAL

 Meaning of Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) is an investment made in a company or doing project in a country by an investor, company or government of another company.

Legal Environment

The major laws that governing the foreign direct investment in Nepal are:

a)      Foreign Investment and Technology Transfer Act, 2019

b)      Foreign Investment and Technology Transfer Regulation, 2021

c)      Companies Act, 2006 (amended in 2019)

d)      Industrial Enterprises Act, 2016

e)      Industrial Enterprises Rules, 2020

f)       Income Tax Act, 2002

g)      Public Private Partnership and Investment Act, 2019

h)      Investment Enterprise Regulation, 2022

i)        Environment Protection Act, 2019

j)        Environment  Protection Rule, 2020

Government authorities and their functions related to FDI

 Steps to obtain approval  FDI in Nepal

1.      Obtain Foreign Investment approval from Department of Industry Foreign investment and Technology Transfer section
(Related laws and regulation: Foreign Investment and Technology Transfer Act, 2019)

2.      Registration of Company at Office of the Company Registrar (OCR) after obtaining foreign investment approval
(Related Laws and regulation: Companies Act,2006 (amended with 2019) )

3.      Open Bank Account from A-class licensed Commercial Banks
(Related laws and regulation: Bank and Financial Institution Act, 2017)

4.      Registration of PAN / VAT from Inland revenue Office / One Stop Service Center (OSSC)
(Related Laws and regulation: VAT Act, 1996, Income Tax Act, 2002 and amendments)

5.      Registering industry in accordance with the foreign investment approval from Department of Industry
(Related Laws and regulation: Industrial Enterprises Act, 2016 and regulations)

6.      Obtain permission from Nepal Rastra Bank to bring in foreign currency through proper banking channels, and recording of remitted FCY
(Related laws and regulation: Nepal Rastra Bank Act,  2002 and amendments)

7.      Other permits and approvals (Visa, trademark, environmental clearance, land acquisition, etc.) by relevant government agencies.

 Industry or Enterprise Restricted for Foreign Investment

§  Primary agriculture sectors such as fish farming, animal husbandry, horticulture, milk business and others.

§  Micro and cottage enterprise.

§  Personal Service Business (such as Hair saloon, Tailoring, Driving etc.

§  Arm and ammunition industry, industry producing biological and chemical weapons, industries related to explosives, gunpowder, radio-active materials, atomic energy.

§  Real estate businesses (excluding construction industries), Retail business, internal courier services, local catering services, money changer, remittance service.

§  Tourism based travel agency, trekking agency, expedition service provider, home stay and rural tourism.

§  Mass-media business (such as newspaper, radio, TV and online news), movies of national language.

§  Business and organizations providing management, accountancy, engineering and legal consultancy services and language training, music training, and computer training &

§  Business having more than 51% foreign investment in consultancy services.

Permitted types of FDI

1.      FOREIGN CURRENCY INVESTMENT IN SHARES

2.      INVESTMENT THROUGH LEASING OF MACHINES

3.      INVESTMENT THROUGH VENTURE CAPITAL FUNDS

4.      INVESTMENT THROUGH  TECHNOLOGY TRANSFER

5.      INVESTMENT THROUGH SECONDARY SECURITIES MARKET

6.      INVESTMENT THROUGH ESTABLISHING AND EXPANDING INDUSTRY

7.      INVESTMENT THROUGH SHARES OR ASSETS PURCHASE OF A COMPANY   IN NEPAL

8.      REINVESTMENT OF DIVIDEND AMOUNT RECEIVED FROM FOREIGN INVESTMENT

9.      INVESTMENT THROUGH BANKING CHANNEL ISSUING SECURITIES IN FOREIGN CAPITAL MARKET BY INDUSTRY OR COMPANY IN NEPAL

 Documents required for approval of FDI in industry

a)      Online application for investment approval through the DOI portal: imis.doind.gov.np

b)      Project proposal signed and stamped by investor/s

c)      Joint Venture Agreement (in case of more than one investor), signed by investors

d)      Notarized copies of citizenship certificate of local partner or Certificate of Incorporation, including Memorandum of Association, if the local party is a company.

e)      Notarized copy of passport of foreign partner or Certificate of Incorporation, including Memorandum of Association and Articles of Association, if the party is a company.

f)       Bio data of foreign investor or company profile signed by investor.

g)      Financial Credibility Certificate of the foreign investor issued by a home country bank.

h)      Letter of Authorization from the company or the investor (if necessary).

 Approval of FDI in existing industry through share purchase

a)      Online application through the DOI portal: imis.doind.gov.np from the share transferor

b)      Share transfer agreements signed by investors.

c)      Notarized copy of Board meeting minutes, Certificate of Incorporation and company profile if the foreign party is a company.

d)      Notarized copy of passport and bio-data of foreign party, if the party is an individual.

e)      Notarized Financial Credibility Certificate of the Foreign Investor issued by a home bank,

f)       Current shareholders’ list as recorded in the Office of Company Registrar, and Audit Report.

g)      Tax Clearance Certificate/extension of certificate

h)      Letter of Authorization to sign on behalf of the company.

i)        Certificate of industry/company registration.

 Applicable Charges and Fees

(SOURCE: https://www.doind.gov.np/uploads/notices/Notices-20240109182644849.pdf)

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Rabin Dhakal and Associates, Chartered Accountants

Kathmandu, Nepal.

rabindhakalassociates@gmail.com

rdhakalassociates.com

Whatsapp / Viber: +977-9851232718