Nepal actively courts foreign capital, but the legal spine of an investment — approval, recording, taxation, repatriation — is procedural, and shortcuts taken at entry surface as blockages at exit. The governing statute is the Foreign Investment and Technology Transfer Act, 2019 (FITTA), supported by the Industrial Enterprises Act, foreign exchange regulation administered by Nepal Rastra Bank (NRB), and the Income Tax Act, 2058.
Approval: who signs off, and for what
Foreign investment — equity in a new or existing Nepali company, reinvestment of earnings, or technology transfer — requires prior approval from the Department of Industry, with very large projects routed through Investment Board Nepal. A minimum investment threshold per foreign investor applies (currently NPR 20 million, a figure the government revises from time to time), and FITTA's negative list closes certain sectors to foreign investment entirely — including several small-business, retail and personal-service categories reserved for domestic investors.
Approval in hand, the investor incorporates or acquires shares through the Office of the Company Registrar in the ordinary way, and the industry registration follows with the Department of Industry.
The step investors skip at their peril: NRB recording
Foreign currency must enter Nepal through banking channels, and the investment must be recorded with Nepal Rastra Bank. This recording is not bureaucratic decoration — it is the evidentiary basis on which NRB later approves repatriation of dividends, sale proceeds and liquidation surpluses. Investments injected informally, or without contemporaneous recording, create genuine difficulty when the investor eventually wants money out.
Tax treatment of the investment lifecycle
- Corporate profits are taxed at the standard corporate rate applicable to the sector.
- Dividends distributed to shareholders bear a final withholding tax at distribution.
- Royalties, technical and management service fees paid abroad carry withholding tax, with rates modified where a double tax avoidance agreement applies — Nepal has treaties with India, China and several other states.
- Capital gains on the sale of shares are taxable in Nepal, with withholding mechanics that the buyer and seller must handle correctly at the transaction.
Repatriation: the exit sequence
To repatriate dividends, an investor needs audited financial statements, evidence of tax paid, board and shareholder resolutions, and NRB approval referencing the recorded investment. Done in order, repatriation is routine. The common failure modes are historic: unaudited years, unpaid dividend tax, or an investment that was never properly recorded. A feasibility study and a clean compliance calendar at entry are cheaper than remediation at exit.
We support foreign investors across this lifecycle — feasibility studies, FITTA and NRB processes, incorporation, ongoing audit and tax compliance, and repatriation. The consistent lesson from practice: the investments that exit smoothly are the ones that entered carefully.
Frequently asked questions
- What is the minimum foreign investment in Nepal?
- FITTA prescribes a minimum investment per foreign investor — currently NPR 20 million, subject to periodic revision by the government. Certain sectors on the negative list are closed to foreign investment regardless of amount.
- Can profits be freely repatriated from Nepal?
- Yes, provided the investment was approved and recorded with Nepal Rastra Bank, taxes have been paid, and the audited accounts support the distribution. Repatriation flows through NRB approval and banking channels.
- Does Nepal have double tax treaties?
- Nepal has double tax avoidance agreements with India, China and a number of other countries, which can reduce withholding rates on dividends, royalties and service fees.
This note is general information prepared by A. Adhikari & Associates, Chartered Accountants, and is not professional advice for any specific situation. Rates, thresholds and procedures change through annual Finance Acts and regulatory updates — please consult our team before acting.
