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The article provides the general overview of procedure of establishment of Company through FDI (Foreign Direct Investment) in Nepal.
The major law governing foreign investment in Nepal are as mentioned:
Foreign investment is subject to approval. Following are the authorities that provides FDI approval based on the investment amount:
Investment Amount | Approving Authority |
---|---|
For NPR 6 billion or Less | Department of Industry (“DOI”) |
Above NPR 6 billion and Hydropower project more than 200 MW | Investment Board of Nepal (“IBN”) |
Note:Prior to NRB by Laws that came on 8 June 2021, NRB approval for foreign investment was required before injecting the investment amount in Nepal. Currently such approval is waived. However, the waiver is conditional, the NRB approval is required in case of investment through share purchase.
Foreign Investment is not permissible in every business. Following two conditions has to be fulfilled for the permissibility of FDI Companies in Nepal:
Following are the industrial sector where foreign investment is not permissible:
The procedure of foreign investment approval is mentioned herein:
The graphical represenation of the above steps is outlined as below
The minimum capital required for obtaining foreign investment approval has been fixed as NPR 20 million (Approx. USD 153846).
Following are the documents required for registration of FDI Company in Nepal:
S.N. | Documents |
---|---|
1. | Company incorporation certificate, Memorandum of Association, and Article of Association of Investor (Notarized) |
2. | Copy of Passport in case of Individual Investor (Notarized) |
3. | Company profile of the investing company (Bio Data in case of an individual investor) |
4. | Copy of Passports of all the Directors and shareholders of the Investor (Notarized) |
5. | Copy of passport/citizenship of Investor’s authorized representative (Notarized) |
6. | Project report for the operation of a local subsidiary company |
7. | Schedule for investment in the industry |
8. | Financial Credibility Certificate (FCC) of Investor issued by a local bank in the home country |
9. | Latest audit report of Investor (Notarized) |
10. | Resolution of Investor for investing in Nepal |
11. | Signed company profile of the Investor |
12. | Power of attorney authorizing individuals to complete the approval and registration process |
13. | Joint Venture Agreement in case of two or more than two investors |
The overall time period for the registration of foreign direction investment in Nepal takes about three to five (3 to 5) months.
Government fee applicable for FDI approval in Nepal is as mentioned;
S.N. | Particulars | Government Fee |
---|---|---|
1. | Guarantee amount to be deposited at DOI | NPR 20,000 (Approx. USD 155) |
2. | Government fee for Company Registration | Depends on the authorized capital of the company. |
3. | Business Registration at Ward Office | NPR 5,000 to 15,000 per year (Approx. USD 38 to 115). Note: The business registration fees are specific to each local level. |
4. | House Rent Tax | 10% of the house rent amount per month. (Please note house rent rates depend on each local level and are subject to change every fiscal year). |
FERA has categories 3 stages of timeline to inject the foreign investment amount. The schedule of investment as mentioned:
Stages | Details | Percentage of Injection of Investment |
---|---|---|
Stage I | Within 1 year of receiving the investment approval: | Depends on the amount of investment |
Minimum investment amount i.e. NPR 20 Million | 25% | |
20 to 250 million NPR | 15% | |
250 million NPR to 1000 Million | 10% | |
Stage 2 | When the company starts production or does start the commercial transaction | Up to 70% of the investment amount |
Stage 3 | After 2 years of production or commencement of transaction | Remaining 30% of the investment amount |
Certain regulated businesses are also subject to additional business specific approvals or licenses for the commencement of their business activities even after getting FDI approval. Licensing/Approval requirement depends on the nature of business of company. Following are some business which requires additional specific approval before commencement of business activities:
S.N. | Nature of Business | Institution to Grant License/Approval |
---|---|---|
1. | Colleges | Affiliated University |
2. | Insurance Company | Nepal Insurance Authority |
3. | Bank and Financial Institution | Nepal Rastra Bank |
4. | Hydropower | Department of Electricity Development |
5. | Travels and Trek | Ministry of Tourism, Culture and Civil Aviation |
6. | Food Industries | Department of Food, Technology and Quality Control |
7. | Business related to telecommunication | Nepal Telecommunication Authority |
Foreign investors can invest 100% of ownership in local subsidiary companies. However, for few sectors the domestic law restrict investment through investment capping which are as mentioned:
Sector | Investment Percentage Ratio |
---|---|
Telecommunication | 80% |
Banking and Financial Institution | Minimum 20% and Maximum 85% |
Insurance Companies | 80% |
Consultancy Business | 51% |
Following are the main compliances that FDI company has to do after the FDI approval process:
A foreign investor is allowed to repatriate the following:
The investor has obligation to show that all local subsidiary company have complied all the laws, obtained all the necessary approval, pay tax and compiled with all the obligation before repatriation. Approval from DOI or IBN and NRB approval is required before repatriation. Investor can repatriate the investment and earning in the same currency or in other convertible foreign currency.
Related Article Link:
Please click the article published at our law firm website, which are related to the above article topic:
Registration of Company in Nepal
Branch Office Registration Process In Nepal
Liaison Office Registration Process in Nepal
Registration of Company Not Distributing Profit in Nepal
Date of Publication:18 August 2023
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