Foreign Direct Investment in Nepal: A Complete Guide

Can a foreigner invest in Nepal? Yes. Foreign direct investment (FDI) in Nepal is open to international investors in most sectors, and in many of them a foreign company can own 100% of the business. The general minimum investment is NPR 20 million (about USD 150,000) per investor, and the investment must be approved by the government and recorded with the central bank. This guide explains who can invest, which sectors are open, the step-by-step procedure, the taxes involved, and how profits can be taken out of the country. It is written for foreign companies and individuals planning to enter the Nepali market.

The Foreign Investment and Technology Transfer Act, 2019 (FITTA) is the main law. It defines what counts as foreign investment, sets the minimum investment amounts, and contains the “negative list” of sectors closed to foreigners. The Industrial Enterprises Act, 2020 covers industry registration and tax incentives. The Companies Act, 2006 governs how the local company is formed and run. The Foreign Exchange (Regulation) Act, 1962, together with NRB rules, controls how money comes into Nepal and how profits go out. Very large infrastructure projects, above NPR 6 billion, follow a separate route through Investment Board Nepal.

Sectors with a foreign ownership cap. In some industries foreigners can invest, but only up to a set percentage, and a Nepali partner must hold the rest:

Aviation maintenance and training: 95%

International airline services: 80%

Telecommunication services: 80%

Ride-sharing and platform transport: 70%

Professional consultancy (management and engineering): 51%

Domestic airline services: 49%

Two recent changes are worth knowing. First, a 2026 notification expanded the “automatic route” to 102 industries, which can be approved through the DOI online portal without a manual review and with no investment ceiling.* Second, IT businesses such as software development, BPO, cloud computing, and web hosting are exempt from the minimum investment rule.

This is the stage where most investors make mistakes. Nepal controls foreign currency closely, so you cannot simply wire money to a Nepali bank account. First, the company sends a formal notice to Nepal Rastra Bank (NRB). After NRB acknowledges it, you can make the transfer through the banking system. The local bank checks the funds and issues an Inflow Certificate, which is your proof that the money entered Nepal legally. The company then updates its shareholder records at the Company Registrar. The last step is the most important. The investment must be recorded with NRB within six months of the money arriving. An Inflow Certificate alone is not enough. If you miss this deadline, you can lose the right to send dividends, royalties, and capital gains out of Nepal. The money must also come in stages. For the smallest investments, at least 25% must arrive within the first year, 70% in total before the business starts commercial operations, and the remaining 30% within two years after operations begin. The percentages for the first year are lower for larger investments.

A foreign-owned Nepali company is taxed in the same way as a Nepali-owned one.

Corporate Income tax (general): 25%

Manufacturing and hydropower: 20%

Telecom and financial institutions: 30%

VAT: 13% (0% on exports)

Withholding tax on dividends: 5%

Withholding tax on royalties and technical fees: 15%

Capital gains tax on unlisted shares: 25%

Some sectors get additional benefits. Industries in Special Economic Zones, manufacturing in less developed areas, and IT service exporters can qualify for tax holidays or reduced rates under the Industrial Enterprises Act.

Under recent changes to the NRB rules, routine payments of dividends, royalties, and capital gains no longer need approval from the central bank. Class ‘A’ commercial banks can approve them, and they are expected to process a complete application within 15 working days. Banks only start this process when the file is complete. You will need audited financial statements, tax clearance from the Inland Revenue Department, your FDI approval letter, and the original NRB recording certificate. There is one more rule to plan for. Profits should be sent back to the same country the investment came from. If you want to send them somewhere else, even to another company in the same group, the bank cannot process it alone and the case goes to NRB for manual review.

Skipping the NRB recording. This is the most common and most costly mistake. Without it, profits can be stuck in Nepal.

Sending money before NRB acknowledges the notice. This can lead to the funds being frozen or questioned.

Choosing the wrong sector classification. A business that falls on the negative list, or exceeds an ownership cap, will be refused approval.

Ignoring where profits will go. Plan the structure of the investment so that future payments can go back to the right country and company.

FDI in Nepal involves several offices and strict deadlines, and each step depends on the one before it. At Pentagon Law Associates, we help foreign investors check their sector, prepare the FDI application, set up the company, and complete the NRB notification and recording on time.

Nepal is open to foreign investment in most sectors, and recent policy changes are especially friendly to IT and larger projects. The rules are still strict on paperwork and timing. Check your sector first, follow the steps in order, bring the money in correctly, and record it with NRB within six months. Doing this protects your right to take your profits out later.

Talk to Pentagon Law Associates about your foreign investment plans. Our team can guide you through approval, registration, and compliance.