The Nepal Rastra Bank has recently issued a circular providing that, pursuant to the Foreign Direct Investment and Technology Transfer Act, 2075 (FITTA, 2075), repatriation of earnings may be carried out upon approval of the concerned local bank. The prior requirement of obtaining approval from the Nepal Rastra Bank for repatriation has been removed. Under the revised framework, the Nepal Rastra Bank shall function as a regulatory and supervisory authority rather than an approving authority for repatriation of earnings from Nepal.
1. Permitted Conditions for Repatriation as Per the New Directives
Licensed commercial banks may provide foreign exchange approval to repatriate the following foreign investment related amounts, in line with FITTA, 2019 (Sections 20 & 26):
- Income from sale of foreign-invested shares
- Profits or dividends earned from foreign investment
- Remaining amount after company/industry liquidation, once all liabilities are settled
- Royalty/fees earned under technology transfer agreements (Exception: Trademark royalty/fees for liquor industries (other than 100% export-oriented liquor industries) must comply with FITTR, 2020)
- Lease rental payments under lease investment
- Compensation or damages received through final court, arbitration, or legal settlement
- Any other amount legally allowed to be repatriated
- Income from sale of units of a Specialized Investment Fund (as prescribed by NRB)
- Profits earned from units of a Specialized Investment Fund.
2. Revised Procedure with Required Documents
The foreign investor or the foreign-invested company/industry must apply to its account-holding commercial bank. Application must include following documents;
a. Where approval for repatriation of foreign investment and earnings is required to be issued only in the form of a recommendation pursuant to prevailing law, a recommendation issued by the authority competent to approve foreign investment;
b. A certified copy of the resolution of the General Meeting, Board of Directors, or an authorized officer of the foreign investment company/industry regarding obtaining foreign exchange approval for repatriation of the investment and accrued earnings;
c. A copy of evidence certifying that the foreign investment has been recorded with the Nepal Rastra Bank;
d. Provision removed.
e. A copy of evidence of the most recent tax payment or submission of a tax return; and, where the fiscal year relating to the profits, dividends, or share sale for which repatriation is sought differs from the relevant fiscal year, a tax clearance certificate for such fiscal year.
f. A certificate issued by the Credit Information Center confirming that the branch office is not blacklisted (provided that no more than six months have elapsed from the date of submission of the complete application along with all required documents);
g. A self-declaration by the applicant stating that:
- there is no overdue loan from any Nepali bank or financial institution,
- there has been no misuse and there will be no misuse of foreign currency,
- there are no outstanding tax liabilities of any kind,
- compliance has been and will be maintained with prevailing national and international laws relating to anti–money laundering and combating the financing of terrorism, and
- all applicable prevailing laws have been and will be complied with;
h. In the case of earnings derived from technology transfer, a copy of details certified by a recognized auditor confirming the amount payable under the technology transfer agreement, together with invoices/bills issued by the concerned investor;
i. In the case of the sale of shares of an entity not listed on the securities market, a certified copy of a Fair Market Value, Specific Value or Range ( not more than 10% of the lower end price) issued by an auditor who is a member of the Institute of Chartered Accountants of Nepal, or, an Investment Banking related institution licensed by the Securities Board of Nepal to conduct valuation-related services;
j. Proof of payment of advance income tax, value added tax, capital gains tax, and any other taxes applicable to the amount being repatriated, as required under prevailing law.
Important Notes:
i. The applicant must be an authorized officer.
ii. In the case of repatriation of foreign investment of a branch office/company/industry listed in Securities Market resulting from the sale of shares through the securities market, in accordance with prevailing law, submission of documents evidencing such sale shall suffice, and the documents referred to in items b, c, d, and e above shall not be required for such listed branch office/company/industry.
3. Basis of Approval for Repatriation
Repatriation must generally be based on approval or recommendation from the authority that approved the foreign investment (or relevant authority). If such approval/recommendation is not applicable or unavailable (e.g., branch offices or certain transactions), NRB may grant approval directly based on evidence and justification under Schedule–9A
4. Timeline
The commercial bank must decide and notify the applicant within 15 working days from receipt of a complete application.
5. Destination of Funds
Funds must normally be repatriated:
- To the same foreign investor
- To the same country from which the investment originated
- To a bank account in the investor’s own name
Repatriation to a different country is allowed only with prior NRB approval under Schedule–9B.
Application must include following documents;
a. An application, submitted on behalf of both the foreign-invested company/industry and the foreign investor, enclosing the necessary details, reasons, and justification, with supporting documents/evidence (originals or certified copies), for remitting foreign investment, dividends, or other forms of revenue to a country other than the country of origin.
b. A certified copy of the decision of the Board of Directors, or, in cases where there is no Board of Directors, the authorized officer, approving the remittance of foreign investment, dividends, or other earned income to a different country, submitted on behalf of both the foreign-invested company/industry and the foreign investor.
c. A certified copy of a self-declaration made by the Board of Directors, or, where there is no Board of Directors, by the authorized officer, confirming compliance with prevailing national and international legal frameworks relating to the prevention of money laundering and financing of terrorist activities, as well as compliance with all other applicable laws, submitted on behalf of both the foreign-invested company/industry and the foreign investor.
d. A certified copy of a self-declaration by the Board of Directors, or, where there is no Board of Directors, by the authorized officer, assuming responsibility for and undertaking to bear any additional tax, revenue, or debt liabilities that may arise in Nepal or in any other country as a result of remitting foreign investment, dividends, or other earned income to a different country, submitted on behalf of both the foreign-invested company/industry and the foreign investor.
e. Evidence demonstrating that foreign investments, dividends or other forms of revenue have previously been remitted to the country for which remittance is currently being requested.
f. Evidence confirming that the country to which remittance is requested is not included in the Financial Action Task Force (FATF)’s most recent list of High-Risk Jurisdictions subject to a Call for Action or Jurisdictions under Increased Monitoring.
COMPARISON BETWEEN PREVIOUS PRACTICE AND NEW PRACTICE ON REPATRIATION
| Issue | FITTA, 2019 | Latest NRB Circular |
| Primary Approval Authority | Foreign Investment Approving Body (Department of Industry or Investment Board Nepal) | Licensed Commercial Banks (under NRB supervision) |
| Role of NRB | Provides foreign exchange facility after approval by approving body | Regulates framework; supervises banks; grants approval directly in limited cases |
| Right to Repatriate | Statutory right subject to compliance with law and taxes | Recognized and implemented through banking procedures |
| Application Recipient | Foreign Investment Approving Body | Account-holding commercial bank |
| Approval Basis | Approval by foreign investment authority | Bank approval based on authority recommendation or NRB guidelines |
| Tax Compliance Requirement | Mandatory settlement of all taxes and liabilities | Proof of tax payment and tax clearance required |
| Timeline for Decision | Approval within 15 days | Bank decision within 15 working days |
| Destination of Funds | Not expressly restricted | Generally same investor, same country of origin, same account |
| Repatriation to Third Country | Not specifically regulated | Allowed only with prior NRB approval |
| Appeal / Review | Review by Ministry if dissatisfied with approval decision | No specific appeal mechanism under Circular |
Disclaimer: The above content is provided for general informational purposes only and does not constitute legal advice. Axion Partners is engaged in the practice of repatriation and has issued this circular for the benefit of businesses and investors. Readers are advised to seek independent legal advice or obtain a formal legal opinion from Axion Partners or other qualified legal counsel before acting on the information contained herein.
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