To facilitate the implementation of Foreign Investment and Technology Transfer Act 2075 (2019 AD), Nepal Government has recently issued FITTA Regulations 2077 (2021 AD). Some major highlights of the new Regulations are given hereunder.

A.   Timeline for bringing the foreign Investment [Rule (9)]

The new regulation has prescribed a timeline to bring the foreign investment into Nepal as mentioned below:

However, in any case, at least 70 percent of the approved amount must be brought prior to the commercial production or transaction and balance amount to be brought within two years from the date of the commencement of commercial production or transaction from such industry or business.

Where investment is made by acquisition of the shares in an industry, the investment has to be brought in within one year of the approval of the foreign investment.

Foreign investors who have not injected the investment committed in industries that are in operation at the time of enactment of the regulations have been granted 6 months i.e. up to 10 July 2021 to submit and get approved its foreign investment plan and bring the foreign investment according to that approved plan.

B.   Limit on royalty and other fees to be repatriated [Rule (5)]

The new regulation has prescribed a limit on the amount of royalty and other fees that can be repatriated as prescribed in Schedule 1 of the regulation. The limit of royalty and other fees as prescribed in Schedule is tabulated below:

Limit of Royalty or other fees for all types of Technology Transfer

Limit of Royalty or other fees for Trademark

In case a foreign investor has entered into multiple agreements for royalty and technical and management fees, the ceiling for total royalty and fees that can be repatriated shall not exceed the amount mentioned in (a) above. However, royalty or any fee against technology transfer agreement relating to preparatory work for starting the operation of an industry shall be as per the agreement between two parties.

Reinvestment of Earnings from foreign investment (Rule 22)

A Foreign investor can invest, out of its earnings, in same industry or other industry where foreign investment is allowed. For such re-investment, the minimum threshold shall be adjusted as below.

Reanda Biz Serve Comments

Specific provision has been made in the new FITTA regulation regarding the timeline for bringing foreign investment into Nepal. According to the new regulation, the foreign investors can bring their money within a period of two years depending upon the size of their investment. Previously, there was no such timeline and it was not clear that by when the investor has to bring his money into Nepal. The new regulation has now made it clear and it has given some flexible timeline.

The new regulation has also specified the limit for royalty and technology transfer fee that can be repatriated. The limits are based on the percentage of sales or net profit. This provision has removed the ambiguities relating to the maximum amount of royalty or technology transfer fee that can be repatriated.

The new regulation has made it clear that if a foreign investor wants to reinvest his earnings out of his previous investment in the same industry, then the threshold shall be only 10 % of the prevalent threshold amount. This will encourage reinvestment over repatriation to some extent. However, reinvestment in other industries still requires fulfillment of 100% of threshold. This provision may need slight relaxation to encourage further reinvestment in future.

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