Foreign Direct Investment in Nepal: FDI Approval Guide 2026

Foreign direct investment in Nepal

Foreign direct investment in Nepal is governed principally by the Foreign Investment and Technology Transfer Act, 2075 (2019), the Industrial Enterprises Act, 2076 (2020), the Public-Private Partnership and Investment Act, 2075 (2019), company law and Nepal Rastra Bank foreign-exchange rules. A foreign investor should confirm sector eligibility and the correct approval authority before incorporating a company or transferring money.

Foreign investment is permitted in many industries, and full foreign ownership may be possible where no sector-specific restriction or ownership cap applies. Approval is not automatic merely because a business can be registered at the Office of the Company Registrar. The investment, industry, banking and licensing steps must be completed in the correct sequence.

Quick overview of the FDI process

The usual process is to identify the proposed activity, screen it against the negative list and sector rules, select a subsidiary or joint-venture structure, prepare the foreign-investment application and project documents, obtain approval from the Department of Industry or Investment Board Nepal, incorporate or update the Nepali company, register the industry, bring the approved capital through the prescribed banking channel, record the investment and complete tax and operating licences.

The sequence varies for an investment in a new industry, acquisition of shares in an existing company, reinvestment of earnings, technology transfer, a large infrastructure project or a regulated sector. Investors should not rely on a single generic checklist for every transaction.

Who qualifies as a foreign investor?

FITTA recognizes foreign individuals, foreign companies or corporate bodies and non-resident Nepalis as foreign investors within the statutory framework. The investor's identity, incorporation, ownership, authority and financial capacity must be documented in the form required for the application.

A foreign corporate investor typically needs its certificate of incorporation, constitutional documents, board or shareholder approval for the investment, authority for its representative, corporate profile and financial credibility evidence. Documents issued abroad may require notarisation, authentication and translation depending on current procedure.

Forms of foreign investment

Foreign investment may be structured through subscription for shares in a new Nepali company, purchase of shares in an existing company, reinvestment of eligible earnings, lease financing or other forms recognized by FITTA. Technology transfer can include arrangements involving intellectual property, technical knowledge, management or technical services, subject to approval and applicable royalty rules.

The commercial documents must match the approved structure. A joint-venture agreement, shareholders' agreement, share-purchase agreement or technology-transfer agreement should clearly address conditions precedent, governance, funding, reserved matters, transfer restrictions, intellectual property, dispute resolution and exit rights.

Minimum foreign investment threshold

The Department of Industry's current foreign-investment guidance states a minimum foreign investment threshold of NPR 20 million in a project and no general upper cap. Because government notices, sector rules and special regimes can change, the applicable threshold should be reconfirmed immediately before filing.

Do not divide one genuine investment artificially to avoid an approval route or minimum requirement. Each investor's commitment, the project cost, capital structure and funding schedule should be commercially supportable and consistent across the application, project report and company documents.

Sectors restricted for foreign investment

FITTA contains a schedule of industries and businesses in which foreign investment is restricted. The official negative-list analysis must be performed against the investor's precise activity, not merely the proposed company name or a broad industry label.

Restricted areas include specified cottage and personal-service businesses and sensitive activities, while some industries permit foreign ownership only up to a prescribed percentage or require a local partner and sector-regulator approval. The list and sector conditions can be amended, so old summaries should not be treated as a filing decision.

If a proposed business combines several activities, each revenue-generating activity should be screened separately. An open principal activity does not automatically make every secondary objective eligible for foreign investment.

Department of Industry or Investment Board Nepal?

Approval authority depends on the nature and scale of the project. Current Investment Board materials describe the Department of Industry route for projects below NPR 6 billion and the Investment Board Nepal route for projects with a cost of NPR 6 billion or more. Energy projects and projects governed by the Public-Private Partnership and Investment Act can have additional jurisdictional rules.

The amount is not the only consideration. Project type, energy capacity, public-private partnership structure, land, environmental approval and sector legislation may affect jurisdiction. Confirm the authority before paying fees or finalising documents.

Documents for an FDI application

A new-industry application generally requires the prescribed application, project report, investor profile or biodata, financial credibility certificate, passport or corporate registration documents, investment decision, representative authority and proposed ownership and capital details. A joint venture also requires the negotiated joint-venture arrangements and information concerning the Nepali partner.

The exact list differs for an individual and corporate investor, a new and existing industry, and equity and technology-transfer investment. Corporate records should establish the chain of authority from the investor to the person signing and filing in Nepal.

Every investor name, address, registration number, currency, investment amount, percentage and project cost must agree across the application, approval, agreements, company documents and banking records. Inconsistency at this stage can obstruct later investment recording or repatriation.

Preparing the project report

The project report should explain the business activity, market, products or services, project cost, sources of finance, implementation schedule, employment, technology, imports, exports, environmental implications and projected financial performance. Assumptions should be credible and reconcile with the requested investment.

A project report is not merely a formality. It defines the approved activity and funding framework. Material changes after approval may require amendment or further consent, so the report should reflect the business the investor actually intends to operate.

FDI approval and company registration

After foreign-investment approval, the investors ordinarily proceed with company incorporation or the approved share transaction through the Office of the Company Registrar. The memorandum, articles, capital and ownership must match the FDI approval.

For a new subsidiary or joint venture, foreign promoter documents and the approval are submitted with the company-registration documents. An acquisition of an existing company requires coordinated corporate approvals, share-transfer documentation, regulatory consent and updated OCR records.

Company registration does not complete the entire investment process. Industry registration, PAN or VAT registration, local registration, environmental approvals and sector licences may still be required before operations begin.

Bringing foreign capital into Nepal

Approved investment should enter Nepal through the banking channel and in accordance with current Nepal Rastra Bank requirements. The remittance purpose, investor identity, currency, recipient company and amount should correspond with the approval and company records.

Preserve the SWIFT message, bank credit advice, encashment certificate, investment approval, share records and all evidence connecting the remittance to the approved investment. Informal transfers or poorly described payments can create serious difficulties when recording the investment or seeking repatriation.

Nepal Rastra Bank recording and compliance

Nepal Rastra Bank's Foreign Exchange Management Department regulates foreign-exchange aspects of foreign investment and foreign loans. Current bylaws and circulars govern capital inflow, recording, foreign currency facilities and repatriation.

The applicable filing route and documents should be checked against the current bylaw, including its latest amendments. Banking steps should be planned before remittance rather than reconstructed after funds arrive.

Repatriation of dividends and investment

Approved foreign investors may seek repatriation of eligible amounts, including dividends or profits, proceeds from an approved share sale, amounts remaining after liquidation and approved technology-transfer payments. Repatriation is subject to FITTA, tax clearance, the recommendation or approval of the responsible authority where required, and Nepal Rastra Bank foreign-exchange approval and evidence requirements.

The legal right to repatriate does not make the process document-free. The company must maintain audited accounts, tax records, corporate approvals, investment evidence and compliant banking records from the beginning.

Taxes, employment and operating licences

The Nepali company is subject to applicable corporate income tax, withholding tax, VAT and other fiscal requirements. Tax consequences should be reviewed before fixing debt-equity ratios, service fees, royalties, dividends or exit consideration.

Foreign employees, directors and technical personnel may require visas, labour approval or work permits. Incorporation and FDI approval do not replace sector licences, environmental clearance, land approvals, import permissions or local registrations.

Common FDI mistakes

Common errors include relying on an outdated negative list, using the wrong approval authority, submitting inconsistent investment amounts, signing transaction documents before regulatory conditions are understood, remitting funds through an incorrect channel and failing to preserve evidence needed for investment recording.

Other risks include weak joint-venture governance, unclear intellectual-property ownership, inadequate local-partner due diligence, unsupported project assumptions and treating approval as permission to conduct every listed business activity.

Practical pre-filing checklist

Confirm the investor and beneficial ownership. Define each proposed business activity precisely. Check the negative list, ownership caps and sector licence. Confirm the minimum threshold and approving authority. Select the entity and transaction structure. Complete legal and financial due diligence on any local partner or target company.

Then align the application, project report, agreements, capital table, company documents and remittance plan. Build the tax, employment, environmental, licensing and repatriation workstreams into the implementation schedule.

Legal update and caution

This guide was reviewed in July 2026 against official Department of Industry, Investment Board Nepal, Nepal Rastra Bank and Nepal Law Commission materials. FDI rules, thresholds, negative-list entries, approval jurisdiction and banking procedures can change. Obtain transaction-specific advice and confirm the latest official notices before signing or transferring funds.