Foreign direct investment in Nepal is regulated mainly by the Foreign Investment and Technology Transfer Act, 2075 (2019), commonly called FITTA, and the Foreign Investment and Technology Transfer Regulation, 2077 (2021). A foreign investor cannot simply send money to Nepal and start a business. The investor must first obtain foreign investment approval, then register a company, register the industry, register for tax, and notify Nepal Rastra Bank before the funds arrive. This article explains the FDI process in Nepal with latest updates in plain language. It covers the legal requirements, the approving authorities, the step-by-step procedure, the documents, the capital injection timeline, post-approval compliance, and repatriation. 1. What Is Foreign Direct Investment in Nepal Under FITTA 2019? FITTA defines foreign investment as investment made by a foreign investor in an industry or company in Nepal. Section 2 of FITTA defines a foreign investor to include a foreign individual, foreign firm, foreign company, non-resident Nepali, foreign government, international agency and any other foreign entity permitted to invest. Section 3 of FITTA lists the forms in which foreign investment may be made. The main forms are set out below. Form of Foreign Investment How It Is Made Equity investment Incorporating a new company, or subscribing to or purchasing shares of an existing Nepali company Reinvestment Reinvesting dividends or other earnings from an approved foreign investment Lease financing Leasing aircraft, ships, machinery, construction equipment or similar assets Technology transfer Licensing patents, trademarks, know-how, franchise rights, or providing technical and management services under an approved agreement Loan investment Loans from foreign banks or financial institutions under a loan or project finance agreement, subject to NRB approval Branch industry Establishing or expanding a branch of a foreign industry in Nepal Investment in funds Purchasing units of venture capital funds or specialized investment funds registered with the Securities Board of Nepal, as introduced by later amendment FITTA permits foreign investment only in activities that qualify as an industry under the Industrial Enterprises Act, 2076 (2020). Pure trading, that is importing finished goods and reselling them in Nepal, is not treated as an industry and is not open to foreign investment. Investment in banks, financial institutions and insurance companies follows separate approval regimes of Nepal Rastra Bank and the Nepal Insurance Authority. 2. Which Laws and Authorities Govern the FDI Process in Nepal? The FDI process involves several laws and several government offices. Each office handles a distinct part of the process. Authority Governing Law Role in the FDI Process Department of Industry (DOI) FITTA, 2075 and Industrial Enterprises Act, 2076 Grants foreign investment approval and registers the industry Investment Board Nepal (IBN) Public Private Partnership and Investment Act, 2075 Approves investment in projects of NPR 6 billion or above and hydropower projects above 200 MW Office of the Company Registrar (OCR) Companies Act, 2063 Incorporates the company and certifies the shareholder register Nepal Rastra Bank (NRB) Nepal Rastra Bank Act, 2058 and Foreign Investment and Foreign Loan Management Bylaws Receives prior notification, approves share purchases that change shareholding, and records the investment Inland Revenue Department (IRD) Income Tax Act, 2058 and Value Added Tax Act, 2052 Issues PAN, collects income tax and VAT, issues tax clearance Local level (ward or municipality) Local Government Operation Act, 2074 Local business registration and local business tax Section 17 of FITTA identifies the foreign investment approving body. Following the 2024 amendment to FITTA, the Department of Industry is the approving body for foreign investment under the FITTA regime. The Investment Board Nepal continues to approve large projects under its own Act. The official websites of the Department of Industry, the Office of the Company Registrar and Nepal Rastra Bank publish the current forms, notices and directives. FITTA also provides for a one-stop service centre at the Department of Industry so that approvals, registrations and recommendations can be coordinated from one place. In practice, investors still deal with each office for its specific function. 3. What Are the Requirements Before Applying for FDI Approval in Nepal? Before filing an application, a foreign investor should confirm four things: that the sector is open, that the activity is an industry, that the investment meets the minimum threshold, and that any sector-specific cap is respected. 3.1. Sectors Prohibited from Investment in Nepal Section 50 of FITTA, read with its schedule, lists sectors where foreign investment is not permitted. The schedule has been amended several times, most recently by the 2025 amendment. The current list includes, among others: 3.2. Industry classification The Industrial Enterprises Act, 2076 classifies industries into energy, agriculture and forest, infrastructure, tourism, information technology, service, manufacturing, and mines and minerals. The proposed business must fit within one of these categories. 3.3. Minimum investment threshold Section 3 of FITTA allows the Government of Nepal to set a minimum foreign investment amount through a Gazette notification. The current notified minimum is NPR 20 million per foreign investor. Under the automatic route notice, this minimum does not apply to foreign investment in information technology industries made through that route. The threshold is a notified amount, not a fixed provision of the Act, so it can be revised. 3.4. Is 100 percent foreign ownership allowed in Nepal? In most permitted industries, yes. FITTA does not require a Nepali partner. However, sector laws and Gazette notices impose ownership caps in certain areas, such as telecommunications, aviation, banking, insurance, payment services, consultancy and ride sharing. A joint venture with a Nepali shareholder is optional in other sectors and is a commercial choice, not a legal requirement. 4. What Is the Step-by-Step FDI Process in Nepal? The process below applies to setting up a new company with foreign investment. Investment into an existing company by share purchase follows a shorter version with an added NRB approval step. Step 1: Preparing the Project Proposal, Joint Venture Agreement and Filing at DOI The investor prepares a project proposal describing the business, capital structure, proposed investment amount and employment plan. If there is more than one investor, a joint venture agreement … Continue reading Foreign Direct Investment (FDI) Process in Nepal