Mode of Investment in Nepal

Foreign Investment can be made in any industry in the following forms

  • through investment in shares in a new or in existing industry, in foreign currency,
  • reinvestment of earnings derived from earlier investment
  • lease financing of specified equipment like airlines, ships, machineries and equipment (up to prescribed threshold),
  • investment in venture capital funds (VCFs) by institutional foreign investors,
  • investment in listed securities through secondary market by VCFs,
  • acquisition of shares/assets of existing companies,
  • issuance of securities in foreign capital market,
  • investment made through technology & know-how transfer agreement

 

Note:

  1. Investment can be made either in cash or in the form of tangible / intangible assets, e.g. machinery and equipment.
  2. “Investment in listed securities through secondary market by VCFs” can be done only after notification by Nepal Government.
  3. Foreign Financial Institution, with recommendation of ministry and approval of NRB can invest in a Foreign Invested Industry, in the form of project loan or project finance.
  4. The minimum ceiling for foreign investment is NPR 50 million as prescribed by government until now.
Approving Authority for Foreign Investment

Project size                                                       Approving Authority

UptoNPR  6 billion                                         Department of Industries (DOI)

More than NPR 6 billion                              Investment Board of Nepal (IBN)

Starting a business in Nepal by establishing a new industry
Procedure for establishing industry with projects upto NPR 6 billion

Procedure for establishing industry with projects upto NPR 6 billion

Documents required for establishing a new industry with projects up to NPR 6 billion
At DOI for FDI approval
  • Project Report / Feasibility Report in two copies
  • Duly filled up online application form
  • Joint Venture Agreement (JVA), in case of more than one investor
  • In case foreign investor is a natural person, his/her notarized copy of the Passport or other ID proving citizenship and personal bio-data
  • In case foreign investor is a company, notarized copy of Certificate of Incorporation, including Memorandum of Association and Articles of Association, Directors and shareholders register, company profile and minute of board meeting deciding to invest in Nepal.
  • In case foreign investor is a firm, notarized copy of certificate of registration, documents evidencing the partners of the firm, firm profile and minute of partners meeting deciding to invest in Nepal,
  • In case foreign investor is a foreign citizen of Nepalese origin or Nepalese citizen residing abroad, documents evidencing such status.
  • In case foreign investor is an International organization, charter documents of such organization, documents showing introduction of its directors, profile of the organization and its decision to make investment in Nepal.
  • Original Financial Credibility Certificate (FCC) of the Foreign Investor provided by a home country bank or domiciled country bank
  • Where the foreign investor cannot be present for application, authority letter from the concerned companies or individuals to carry out any necessary work on their behalf and documents showing identification of the individual who is given such authority.
  • Any additional documents required by the FDI approving authority.

 

At Company Registrar Office for company registration
  • Online Application to obtain approval for Proposed Name of the company
  • Application in prescribed format along with Approved Name of the company, Articles of Association and Memorandum of Association (two sets),
  • Unanimous agreement between promoters, if any
  • Promoters minute to register a company, if applicable
  • FDI approval letter and JV if applicable from DOI
  • Notarized copies of citizenships of local shareholders
  • Notarized copy of passport of foreign party or Notarized Certificate of Incorporation, including Memorandum of Association and Articles of Association if the party is a company

 

At Local Authority for Business registration   
  • Board minute for registration
  • Form dully filled up
  • Copies of company registration certificate
  • Copies of Articles and Memorandum of Association
  • Copy of rental agreement (office)
  • Deposit of TDS of Rent amount
  • Stamp of the company

 

At IRD for PAN registration   
  • Board minute for registration
  • Form dully filled up
  • Copies of company registration certificate
  • Copies of Articles and Memorandum of Association
  • Copy of rental agreement (office) with TDS deposit slip
  • Stamp of the company

 

At DOI for Industry Registration
  • Dully online filled up form
  • Copies of Company registration, Tax registration, FDI approval, Articles and Memorandum of Association
  • Copies of the documents of the Foreign investor as required
  • No objection letter from Local Authority

 

At NRB for FDI approval
  • FDI approval letter from DOI
  • Notarized Company Registration certificate of foreign company and copy of the same from Local company as applicable
  • Notarized Articles and Memorandum of Association of foreign company and copy of the same from Local company as applicable
  • Notarized copy of citizenship of local investor and notarized copy of passport of foreign investor or their authorized representative
  • Tax registration certificate of Local company
  • Copy of Industry Registration of Local company
  • Commitment letter from Foreign investor, for not taking back the investment for 1 year
  • Bank Statement of foreign bank of investor and proof of the Source of investment
  • If Money is not coming at once then should submit the investment schedule or a commitment to do investment as prescribed by the Industrial Enterprise Regulation
  • Audit report of the Foreign Company as applicable (if more than one year of operation)
  • Credit Information Bureau (CIB) report for not being black listed for Local Company
  • Documents showing ultimate beneficiary in case foreign investor is a company.
Procedure for investing in Infrastructure Projects under PPP model
Procedure for establishing industry with Projects of more than NPR 6 billion

Procedure for establishing industry with Projects of more than NPR 6 billion

Documents required for establishing a new industry with projects of more than NPR 6 billion
Documents Required at IBN
  • Preliminary Feasibility Report (must include following information)
    • Project Design
    • Estimated Cost of the Project
    • Proposed Financial Resources
    • Business/Operation Plan
    • Preliminary EIA Report
    • Proposed Revenue model
    • Proposed Royalty / Fee to Government
  • Joint Venture Agreement (JVA), in case of more than one investor
  • Citizenship certificate of local investor or Certificate of Incorporation, including Memorandum of Association and Articles of Association, Shareholders register, tax clearance certificate if the local investor is a company
  • Notarized Copy of passport of foreign investor or Certificate of Incorporation, including Memorandum of Association and Articles of Association if the party is a company
  • Bio-data / Company profile of the foreign party
  • Financial Credibility Certificate (FCC) of the Foreign Investor provided by a home country bank or domiciled country bank
  • Authority letter from the concerned companies or individuals to carry out any necessary work on their behalf, if applicable
  • Other documents as demanded later based on the progress

 

Documents required at Company Registrar Office, Local Authority, IRD, DOI, NRB, are more or less similar as explained above (in case of projects upto NPR 6 billion ). 

 

Procedure for investing in Infrastructure Projects under PPP model

Procedure for investing in Infrastructure Projects under PPP model

Note:

  1. At present, Infrastructure projects of up to NPR 6 billion or hydropower project up to 200 MW is approved by the concerned ministry of Nepal Government.
  2. Any entity desirous of implementing a project which it has identified, may submit their EOI directly to the appropriate authority without any public notice. The appropriate authority may either directly grant license for detailed study or invite competitive bidding if competitive bidding seems better option.
Starting a business in Nepal by investing in an existing industry
Procedure for investing in an existing Industry in Nepal

Procedure for investing in an existing Industry in Nepal

Documents required for investing in an existing industry
At DOI / IBN
  • Proposed Business Plan and Shareholding Structure
  • Request from the Investor
  • Request from the Seller
  • Share Purchase Agreement (2 copies)
  • In case foreign investor is a natural person, his/her notarized copy of the Passport or other ID proving citizenship and personal bio-data
  • In case foreign investor is a company, notarized copy of Certificate of Incorporation, including Memorandum of Association and Articles of Association,
  • Directors and shareholders register, company profile and minute of board meeting deciding to invest in Nepal.
  • In case foreign investor is a firm, notarized copy of certificate of registration, documents evidencing the partners of the firm, firm profile and minute of partners meeting deciding to invest in Nepal,
  • In case foreign investor is a foreign citizen of Nepalese origin or Nepalese citizen residing abroad, documents evidencing such status.
  • In case foreign investor is an International organization, charter documents of such organization, documents showing introduction of its directors, profile of the organization and its decision to make investment in Nepal.
  • Original Financial Credibility Certificate (FCC) of the Foreign Investor provided by a home country bank or domiciled country bank
  • Where the foreign investor cannot be present for application, authority letter from the concerned companies or individuals to carry out any necessary work on their behalf and documents showing identification of the individual who is given such authority.
  • Any additional documents required by the FDI approving authority.
  • Current Share Holders’ List of local company as certified by the Company Registrar’s Office
  • Current Directors’ List of local company as certified by the Company Registrar’s Office
  • Latest Auditor’s Report of the local company
  • Tax registration and Latest Tax clearance certificate of local company
  • Valuation Report of local company

 

At NRB for FDI approval
  • FDI approval letter from DOI
  • Company Registration certificate
  • Articles and Memorandum of the company
  • Tax registration certificate and Tax clearance certificate
  • Credit Information Bureau (CIB) report for not being black listed for Local Company
  • Financial Credibility Certificate of the Foreign Investor provided by the bank
  • Payment Schedule if the investment is coming in phases/tranches of as prescribed.
  • Notarized Passport copy of Investor or Passport of the Authorized Representative if investor is a company
  • Registration documents of the investor, if investor is a company
  • Audit Report of the foreign company if investor is a company (if more than one year of operation)
  • Letter of Commitment from Foreign investor
  • Letter of declaration and proof of source of investment from Foreign investor
  • Valuation Report of local company
  • Documents showing ultimate beneficiary of foreign company with their IDs or Passport
Process Flow for Starting a business in Nepal

Process Flow for Starting a business in Nepal

Provision of Single Point Service Centre

As specified in Industrial Enterprises Act 2016, the Nepal Government has established a Single Point Service Center (Centre). All services required by an industry including concessions, facilities and incentives shall be provided through this Centre in an easy and spontaneous manner. In addition, other administrative services such as approval, registration, expansion and approvals for industries will be provided from the Centre on a timely manner.

 

Services provided by the Centre includes:

  1. Services such as registration, establishment, approval, license renewal, transaction approval, capacity enhancement and classification of company, firm, industry which were earlier provided by Office of Company Registrar, DOI and Department of Commerce, Supply & Protection of Consumers.
  2. Accepting document required for business registration in electronic form which can be used by various units internally.
  3. Approval of foreign investment and repatriation thereof. Where departmental limit is above the center’s authority, take initiative to get the approval from appropriate authority.
  4. Providing concessions on tax and duties and such other facilities, services and incentives as per prevailing laws.
  5. Facilitating the process of getting approval to hold land beyond the approved ceiling for the purpose of establishment of an industry. The Center shall also facilitate to obtain government land on lease and other approval necessary for environment examination.
  6. Facilitate infrastructure such as connection of electricity, communication, water, access road etc.
  7. Providing work permits and visa related facilities to foreign investors and employees.
  8. Issue Export and Import Code Number (EXIM code).
  9. Facilitation in import and providing necessary approvals for all kinds of raw materials required in an industry.
  10. Approval for Initial Environment Examination (IEE) and if delegated from the concerned ministry, approve, scoping documents and Terms of Reference (TOR).
  11. Facilitate approval of Environment Impact Assessment (EIA).
  12. Approval of foreign exchange up to US$ 100,000 at a time and facilitation for approval above USD 100,000 at a time.
  13. Establish an investment portal to provide necessary information on investment.
  14. Provide Permanent Account Number (PAN).
  15. Provide export subsidy etc.

 

The FITTA 2019 has also introduced One-Stop Service Mechanism, which is to be established as per the prevailing law . Government of Nepal can provide exemptions, facilities, concession or services to foreign investors through One-Stop Service Mechanism.  Such services are registration of Industries, various approvals, labor permit, visa service, quality check and control of products produced by industries and others.

Recording/Endorsement of Foreign Investment in NRB

The Firm/Companies incorporated under FDI in Nepal are required to submit application for the recording /endorsement of the foreign investment in shares or as loan in Nepal Rastra Bank (NRB). The information is required to be updated every year (within 3 months of the end of the financial year) if there are any changes. If account for is not done properly and regularly, then there may be problem at the time of repatriation while taking approval of NRB.

Following documents are required to be submitted to record/endorse the Foreign Investment in NRB

  • Foreign Investment approval from DOI / IBN
  • Board Decision to endorse or record for the investment in NRB
  • Previous approval provided by the NRB to bring Foreign exchange into Nepal
  • Proof of inflow of foreign investment into Nepal (from respective banks as per the prescribed format of NRB along with SWIFT message slip)
  • Letter from CIB that the firm/company is not black listed
  • Articles and Memorandum, Company registration certificate, FDI approval, Industry Registration, PAN certificate, Periodic tax clearance
  • Approval of business operation (if the firm/companies are required to take such approval)
  • Certificate of Registration of foreign investor if company/firm, and Passport in case of individual
  • Decision of company to have endorsement of investment in Nepal
  • Latest Audited financials of the Nepalese company
  • Audited financial of foreign investor if it’s an entity, and if applicable(if more than one year of operation)
  • Updated Share Register from office of Company Registrar
  • Documents showing ultimate beneficiary of foreign company with their IDs or Passport (if applicable)
  • Documents showing sources of investment, and other documents as asked by NRB.
Registration Requirements for Foreign Companies before carrying out any business or transaction in Nepal

 Foreign companies shall not carry on any business or transactions in Nepal without being registered under any of the following modalities:

  • BRANCH
  • LIAISON OFFICE
  • LOCAL SUBSIDIARY
  • JOINT VENTURES

 

Note

  • A foreign company registered as liaison office shall not be entitled to do any income generating activity in Nepal. It is merely a contact office in Nepal.
  • A foreign company can register a branch with rights to do income generating activities in Nepal.
  • A foreign company can register a fully owned subsidiary company in Nepal. A private company is the most common corporate vehicle used by foreign companies seeking to establish a business presence in Nepal.
  • A joint venture can take the form of a limited liability company among foreign and Nepali investors or among foreign investors only. International Joint Ventures between a foreign company and a local business are common in Nepal as well as individual level Joint Ventures between local and foreigner is also common phenomenon.
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