Welcome to Foreign Direct Investment (FDI) Legal Help Desk, FDI Lawyers Guide. At Lawin & Partners, our FDI Legal Help Desk is dedicated to guiding multinational corporations, private equity firms, and Non-Resident Nepalis (NRNs) through the complexities of the Nepali market entry. This guide serves as your comprehensive legal roadmap for investing in Nepal in 2026.

1. Introduction to Foreign Direct Investment in Nepal
The FDI Legal Help Desk at Lawin & Partners bridges the gap between international business standards and local regulatory requirements, ensuring your business entry into Nepal is legally sound and commercially viable.

2. Legal Framework Governing FDI in Nepal
-Foreign Investment and Technology Transfer Act (FITTA), 2074 (2019):
      The primary law governing FDI, recently amended in 2025 to ease equity transfers and repatriation.
-Industrial Enterprises Act (IEA), 2076 (2020): 
      Provides for the "One-Stop Service Center" and various fiscal incentives.
-Companies Act, 2063: 
     Governs the incorporation and internal management of foreign-invested companies.
-Investment Board Act, 2068: 
      Established the Investment Board of Nepal (IBN) for large-scale infrastructure projects.
-NRB Foreign Investment and Foreign Loan Management Bylaws, 2021 (with 2024 Amendments): 
      The central bank's regulations on currency inflows and outflows.

3. Eligible Investors and Nature of FDI

Under Nepali law, a "Foreign Investor" includes foreign individuals, firms, companies, governments, and international agencies.
Investment Vehicles:

• 100% Foreign-Owned Subsidiary: Permitted in most sectors.
• Joint Venture (JV): Collaboration with Nepali citizens or companies.
• Technology Transfer Agreement (TTA): Licensing of patents, trademarks, or technical know-how.
• Lease Financing: Permitted for aircraft, ships, and heavy machinery.
• Venture Capital Funds: Foreign investors can now invest in units of specialized investment funds.
• NRN Privilege: 

Non-Resident Nepalis (NRNs) holding an NRN identity card enjoy special status, often treated similarly to domestic investors in specific sectors, with eased repatriation of their initial investment and earnings.

4. Sectors Open and Restricted for FDI
Nepal follows a "Negative List" approach. Unless a sector is specifically prohibited, it is open to FDI.

The Negative List (Prohibited Foreign Investment Sectors):

• Primary Agriculture: Poultry, bee-keeping, fisheries, and dairy (unless 75% of products are exported).
• Small and Cottage Industries: Reserved for local entrepreneurs.
• Mass Media: Print, radio, and television (online news is also restricted).
• Sensitive Services: Real estate (brokerage), retail business, and domestic courier services.
• Consultancy Services: Foreigners cannot own more than 51% equity in legal, accounting, or engineering consultancies.

5. Minimum Investment Threshold & Capital Structure
As of 2026, the minimum investment threshold for FDI in Nepal stands at NPR 20 million (approx. USD 150,000) per investor.

Capital Threshold Exceptions

• Information Technology (IT): For IT-based industries using the Automatic Route, the minimum threshold is waived to encourage the digital economy.
• Large Projects: Projects exceeding NPR 6 billion (approx. USD 45 million) fall under the jurisdiction of the Investment Board of Nepal (IBN).

6. Most Common Foreign Direct Investment Establishment Practiced in Nepal: 
 1. Registration of Branch Office in Nepal:
    Foreign Company or individual can conduct business in Nepal by registering branch office in Nepal. 
  2.  Registration of Liaison Office in Nepal:
    No government approvals required for liaison office establishment, not allowed to generate income or marketing activities. It’s a contact point to communicate and coordinate with local parties. 
  3. Trading for Foreign Companies in Nepal:
    No trading business is permitted in Nepal so no subsidiary company can be established. Thus, foreign investors can appoint local agent to distribute its products in Nepal through agency distributorship agreements.

4. Foreign Investment Business through Franchise Agreement
Foreign business has to enter into franchise agreement in Nepal. There is no permissibility restrictions by registration of trademark in Department of Industries, execute franchise agreement with foreign company and local company, franchise agreement approval in DOI. 
 

7.  The Procedures of Foreign Investment Approval is mentioned below:
 Step 1: Obtaining the Foreign Investment Approval from DOI or IBN
Step 2: Registration of company at Office of the Company   Register
Step 3: Tax Registration at Inland Revenue Office
Step 4: Business Registration at Local Ward  Office
Step 5: Obtaining the recommendation letter from the Local Ward Office for Industry Registration
Step 6: Registration of industry before the Department of Industry.
Step 7: Obtaining the "non-black certificate" from the Credit Information Bureau
Step 8: Opening the local bank account of the company
Step 9: Recording the investment amount before NRB

8. Step-by-Step FDI Approval Procedure

• Preliminary Assessment: Due diligence on the sector and partner.
• FDI Approval: Apply to the DOI (for projects < NPR 6bn) or IBN (for projects > NPR 6bn). Under FITTA, approval should be granted within 7 days of a complete application.
• Company Incorporation: Registration at the Office of Company Registrar (OCR).
• Industry Registration: Finalizing registration with the DOI.
• NRB Recording: Informing Nepal Rastra Bank (NRB) of the inward remittance. Note: As of 2026, prior approval for the first installment is often replaced by simple notification.
• Tax Registration: Obtaining PAN/VAT from the Inland Revenue Office.

9. Repatriation of Capital, Profit, and Royalties
One of the most significant 2025-2026 legal reforms involves the Repatriation Process.
Current Repatriation Rights:

• Foreign investors can repatriate:
• Dividends/Profits.
• Proceeds from the sale of shares.
• Royalties from Technology Transfer Agreements.
• Liquidated assets.

New 2026 Procedure: Note
 For dividends and profits, investors can now apply directly to their commercial banks for foreign exchange facility, bypassing the lengthy prior-approval requirement from NRB, provided they have a recommendation from the DOI/IBN and have cleared all tax liabilities.

10. Employment and Labor Compliance
      Foreign companies are liable for encouraged to hire locals experts, but they can employ foreign nationals for technical or managerial roles where local expertise is unavailable.

11. Business Visa for Foreign Investors in Nepal:
     Once Foreign Investment is registered in Nepal, Investors gets business visa in Nepal. Obtaining business visa by investors in FDI in Nepal takes time of month and Lawin and Partners as top FDI law firm in Nepal assist you with all legal process to get business visa in Nepal. 

12. Intellectual Property Protection of your business: 
    Advisory services on securing and enforcing intellectual property rights within Nepal, ensuring legal protection under copy right, patent and trademark laws. 

13. Repatriation of Foreign Investment from Nepal:

Foreign investors are permitted to repatriate 
1.  Earnings and Profit through dividend, sales, investment in shares
2. Compensation and Indemnity
3. Sale Proceeds form Share Transfer
4.  Return of capital at the time of Liquidation
5. Royalty, technology transfer fee, license fee
6. Lease rent

14. Taxation and Fiscal Incentives
Nepal offers a competitive tax regime for foreign-invested Companies

• Corporate Income Tax (CIT): Standard rate is 25% (20% for manufacturing/priority sectors).
• Dividend Tax: 5% withholding tax.
• Export Incentives: Significant tax holidays and reduced CIT for industries exporting more than 50% of their production.
• IT Sector: Special exemptions for BPO and software development centers.

15. Role of an FDI Lawyer in Nepal
Navigating a foreign legal system requires local expertise. A specialized FDI lawyer at Lawin & Partners provides:

• Structuring: Choosing between a JV or a 100% subsidiary.
• Due Diligence: Checking the legal status of local partners or land titles.
• Regulatory Liaison: Coordinating with DOI, IBN, and NRB.
• Drafting: Crafting Joint Venture Agreements (JVA) and Technology Transfer Agreements (TTA) that comply with Nepali law while protecting international interests.