FDI In Nepal

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Nepal has almost 100% FDI in almost all sectors excluding Alcohol and Tobacco related industries. Recently, the Govt. has announced up to 70% FDI in the poultry industry. Every foreign investment has to get an FDI approval to invest in projects or any industries (manufacturing, services, tourism etc). The FDI approval takes almost 40-45 days of time and the FDI is approved by the Department of Industries which comes under the Ministry of Industry of the Govt. Of Nepal.

However, for projects worth or over Nrs. 1000 crores (or $125 million), the Govt. of Nepal has the Investment Board which is under the PM's Office to look after which looks after the whole project. The Inve3stment Board consists of 5 members for the management function and 6 ministers including the Prime Minister of Nepal, Ministry of Industries, Environment Ministry, Land Reforms Ministry, Commerce Ministry.

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FDI In Nepal

  1. 1. The Foreign Investments in Nepal is regulated and administered by ForeignInvestment and Technology Transfer Act (FITTA) 1992 and Industrial EnterprisesAct (IEA) 1992. The Department of Industries (DOI) is the sole agency foradministration and implementation of Foreign Investment and TechnologyTransfer Act in Nepal.Foreign Investment in Nepal can be made by a foreign investor in anyindustry in the following form:a) Investment in Share (Equity),b) Reinvestment of the earnings derived from the clause (a) above,c) Investment made in the form of loan or loan facilities andd) Investment in kinds, e.g., machineries and equipment.However, as per the current practice of the DOI, any proposal involving ForeignInvestment below NRs. 5,000,000 per investor is not considered for approval.Areas not allowed for Foreign Investment:i. Cottage Industries (Except industries using electricity more than 5 kW)ii. Personal Service Businesses (Businesses such as hair cutting, beauty parlor,tailoring, driving training, etc)iii. Arms and Ammunition Industriesiv. Gunpowder and Explosivesv. Industries related to Radio-Active Materialsvi. Real Estate Business (excluding construction industries)vii. Film Industries (National Languages and other recognized languages of Nation)viii. Security Printingix. Bank Notes and Coinsx. Retail Business (excluding international chain retail business with its business inat least two countries)xi. Bidi (excluding more than 90% exportable)xii. Internal Courier Servicexiii. Atomic Energyxiv. Poultryxv. Fisheriesxvi. Bee Keepingxvii. Consultancy Services such as Management, Accounting, Engineering, LegalServices (Maximum 51% foreign investment is allowed)xviii. Beauty Parlorxix. Processing of Food Grains on Rentxx. Local Catering Servicesxxi. Rural Tourism
  2. 2. Foreign Equity Investment in a New IndustryDocuments Required: Project Report – 3 copies JVA, in case of more than one investor – 3 copies Citizenship certificate of local party or Certificate of Incorporation includingMemorandum of Association and Articles of Association, if the local party is acompany – 1 copy Copy of passport of foreign party or Certificate of Incorporation includingMemorandum of Association and Articles of Association, if the party is acompany – 1 copy Bio-data / Company Profile of the foreign party – 1 copy Financial Credibility Certificate (FCC) of the Foreign Investor provided by ahome country bank or domiciled country bank – 1 copy Authority letter from the concerned companies or individuals to carry out anynecessary work on their behalf, if applicableDeposits and Fees:The amount to be deposited at the time of Foreign Investment Approval,refundable after the operation of industry are as follows:Range of Fixed Asset Deposit (Amount NRs.)Fixed Assets ≤ 2,500,000 40002,500,000 < Fixed Assets ≤ 5,000,000 70005,000,000 < Fixed Assets ≤ 10,000,000 10,00010,000,000 < Fixed Assets 20,000Note: The amount shall be deposited at the Nepal Rastra Bank Account Number SA.A. 131232The non-refundable fees for the Company Registration are as given below:Range of Authorized Capital Fee500,000 < Authorized Capital ≤ 2,500,000 95002,500,000 < Authorized Capital ≤ 10,000,000 16,00010,000,000 < Authorized Capital ≤ 20,000,000 19,000Similarly, the additional fee will be calculated at the rate of Rs. 30 per Rs. 100,000 ofAuthorized Capital.
  3. 3. Foreign Investment in an Existing Industry by Share TransferDocuments Required:a) Request from the Share Transferorb) Request from the Share Transfereec) Share Transfer Agreement – 3 copiesd) Copy of the Board Meeting of Nepalese company regarding inclusion of foreigninvestor into the company – 1 copye) Copy of minute of Board Meeting, Certificate of Incorporation and CompanyProfile of the foreign party if the party is a company – 1 copyf) Copy of Passport and Bio-data of foreign party, if party is an individual – 1 copyg) Financial Credibility Certificate of the Foreign Investor provided by a bank – 1copyh) Current Share Holder’s List as certified by the Company Registrar’s Office – 1copyi) Auditor’s Report – 1 copyj) Tax clearance certificate – 1 copyk) Authority Letter(s) from the companies concerned to sign on behalf of thecompanies – 1 copyLoan Investment in an Existing Nepalese IndustryDocuments Required:a) Loan Agreement – 3 copiesb) Certificate of Incorporation, including Memorandum of Association and Articlesof Association of the lending agency – 1 copyc) Company Profile of the lending agency – 1 copyd) Industry Registration Certificate – 1 copye) Copy of the minute of the Board of the recipient company regarding the loan to beacquired – 1 copyf) Authority letter from the concerned companies or individuals to carry out anynecessary work on their behalf, if applicableTechnology Transfer:Technology transfer is possible even in areas where foreign investment is notallowed. Following are the terms of “Technology Transfer” to be made under anagreement between an industry and a foreign investor:a) Use of any technological right, specialization, formula, process, patent ortechnical know-how of foreign origin,b) Use of any trademark of foreign ownership,c) Acquiring any technical consultancy, management and marketing service.Documents Required: Technology Transfer Agreement (TTA) – 3 copies Citizenship certificate of local party or Certificate of Incorporation includingMemorandum of Association and Articles of Association, if local party is acompany – 1 copy
  4. 4.  Copy of passport of foreign party/or Certificate of Incorporation, includingMemorandum of Association and Articles of Association, if party is a company –1 copy Bio-data / Company profile of the foreign party – 1 copy Industry Registration Certificate – 1 copy Copy of the minute of the Board of the recipient company – 1 copy Authority letter from the concerned companies or individuals to carry out anynecessary work on their behalf, if applicableRepatriation:Following amounts are entitled to be repatriated.a) The amount received by the sale of the share of foreign investment as a whole orany part thereof,b) The amount received as profit or dividend from foreign investment,c) The amount received as the payment of principal and interest on any foreign loan.d) The foreign investor or a foreign technology supplier is also entitled to repatriatethe amount received under the agreement for the technology transfer in suchcurrency as set forth in the concerned agreement as approved by the DOI.e) Foreign national, working in any industry with prior approval of the Departmentof Labor and who is from a country where convertible foreign currency is incirculation, may repatriate his/her salaries, allowances, emoluments etc. inconvertible currency in an amount not exceeding seventy five percent of suchsalaries, allowances and emoluments.Provisions Related to Dispute Settlement:For industries with fixed assets investment of upto NRs. 500 millions, if thedispute cannot be settled by mutual consultations in the presence of the DOI, itshall be settled by arbitration in accordance with the prevailing arbitration rules ofthe United Nations Commission on International Trade Law (UNCITRAL). Thearbitration should be held in Kathmandu, Nepal. The laws of Nepal shall beapplicable in arbitration. For industries with fixed assets investment of above NRs.500 millions, disputes may be settled as mentioned in the JVA/SPA.
  5. 5. VISA Arrangements1. Non-tourist Visa for carrying out the Feasibility studyDocuments required at the DOI:a) Bio-data of the applicantb) Photocopy of the passport with the last visac) Brief description of the project in which research and study will beundertakend) Photocopy of the citizenship certificate of the Nepalese investor, if theproposed industry is going to be established as a joint venture.2. Non-tourist Visa for ExpatriatesExpatriate personnel working in the industries will be granted a non-touristvisa for duration of one year at a time on recommendation of DOI andDepartment of Labor:Documents required at DOI:a) Copy of the Agreement between the industry and expatriateb) Progress report of the industryc) Bio-data of the expatriate personnel (mainly describing the experience inthe related industry) and academic certificatesd) Photocopy of the passport with the last visae) Name list of Nepalese workers who will be trained from the expatriatef) Industry registration certificateg) Copy of vacancy announcement advertised in National Daily3. Business Visa:Foreign Investors or his/her authorized representative and their dependents willbe granted a business visa for up to a period of five years at a time onrecommendation of DOI.Documents required at DOI:a) Photocopy of the passport with last visab) Proof showing investment made in the companyc) Industry registration certificated) Progress report of the industrye) Certificate of relationship with the dependentsf) In case of an authorized representative, a letter authorizing representationof the foreign investor and the photocopy of passport. Verification isrequired.g) Contact address and telephone number of the investor
  6. 6. 4. Residential Visa:Foreign Investor making an investment equivalent to more than one hundredthousand US Dollars, at one time and in convertible foreign currency, will begranted a residential visa on recommendation of DOI.Documents required a DOI:a) Photocopy of the passport with the last visab) Proof showing investment made: equivalent to more than one hundredthousand US Dollars in one time in convertible foreign currency.c) Industry registration certificated) Progress report of the industry including the current statuse) Certificate of relationship with the dependents.Compliance with Environmental RegulationsAny industry (including capacity expansion or diversification scheme of existingindustry) may have to get approval on the environmental assessment reports suchas Initial Environmental Examination (IEE) or Environmental Impact Assessment(EIA) prior to industry registration as per Environmental Protection Act (EPA)1997 and Environmental Protection Regulation (EPR) 1997.Further Queries @ Avdesh Mandal (avdlink@gmail.com)

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