1. Introduction
Nepal is open for foreign investment and technology transfer in industry sector. Foreign investment is open only to industry. Foreign investment is not allowed in trading activity. Though few foreign banks and insurance companies with majority foreign holdings are operating in Nepal, generally, foreign investment is not allowed in commerce.
2. Types of Investment
Investment may be in form of equity or debt form. Investment may be either jointly with Nepalese individual/entity or through 100% equity investment by foreign individual or entity. The project may be financed fully through equity investment or through a mix of domestic debt, foreign debt, domestic equity and foreign equity.
3. Industries Open to Foreign Investment
Nepal is open to foreign investment in any industry except the industries listed in negative list (please see box in the right).
4. Types of Foreign Investment
The foreign investment may be in following forms:
- Investment in Equity.
- Reinvestment of earning derived from existing investment.
- Investment in the form of loan or loan facilities
5. Amount of Foreign Investment
Foreign investment can be any amount exceeding Rupees 20 million. There is no upper limit while minimum amount of foreign investment must be Rupees 20 million except in Information Technology for which there is no lower limit.
6. Form of Investment
Foreign investors may invest their part of the equity capital either in the form of convertible foreign currency through proper banking channel or in the form of plant machinery and equipment required for the approved industry. For the investment in the form of plant and machinery, prior approval of DOI is required. However, Indian nationals may invest in Indian Currency as well through proper banking channel. In some of the industries equity holding cannot exceed following limit.
Aeroplane service – 80%
Telephone service – 80%
Consultancy service – 51%
The investment must be brought inside Nepal only after obtaining the approval of investment from the DOI.
6.1 Equity Investment in Cash
The investment must be brought inside Nepal only after obtaining the approval of investment from the DOI.
6.2 Investment in Kind
Foreign investor desirous of investing in terms of plant, machinery and equipment, is required to clearly state in the Joint Venture Agreement. Approval, prior to the shipment, for custom clearance is required from the DOI if the goods are not imported through Letter of Credit.
List of Industries in which foreign investment is not allowed
Part (A)
1. Cottage Industries.
2. Personal Service Business (Business such as Hair Cutting, Beauty Parlors, Tailoring, Driving Training Etc.)
3. Arms and Ammunition Industries.
4. Explosives, Gunpowder.
5. Industries related to Radio- active Materials.
6. Real Estate Business (Excluding Construction Industries)
7. Motion Picture Business (produced in national languages and the language of the nation).
8. Security Printing.
9. Currencies and Coinage Business.
Part (B)
1. Retail Business.
2. Travel Agency.
3. Trekking Agency.
4. Water Rafting.
5. Pony Trekking.
6. Horse Riding.
7. Cigarette, Bidi (Tobacco), Alcohol (excluding those exporting more than 90%)
8. Internal Courier Service.
9. Atomic Energy.
10. Tourist Lodging.
11. Poultry Farming.
12. Fisheries.
13. Bee-Keeping.
14. Consultancy Services such as Management, Accounting, Engineering and Legal Services.
7. Procedure of Foreign Investment
The foreign investment is required to be approved by Government of Nepal (GoN). Department of Industry, Foreign investment Division is authorized to approve the foreign investment. General procedure of foreign investment is described in following paragraphs.
7.1 Appointment of Consultants
Appointment of consultants is the foremost step in the process of foreign investment. The consultants assist in documentation, submission of documents and follow-up in concerned governmental departments/offices. Further, consultants are helpful in understanding legal provisions and procedures.
L. S. P. Associates is right choice for opting as consultants. We provide not only services required in business setup but support all along even after setup. The services include feasibility study, assistance in obtaining approval, accounts, audit, financial management, post incorporation services etc.
