Foreign Direct Investment in Nepal | FDI in Nepal 2025

Foreign direct investment is the investment by a corporation or individual from one country into business interests located in another. In Nepal, FDI usually involves establishing operations or acquiring physical assets like property or manufacturing facilities.

Legal framework for foreign investment

Primary laws and regulations governing FDI in Nepal include:

• Foreign Investment and Technology Transfer Act, 2019

• Foreign Investment and Technology Transfer Regulations, 2021

• Industrial Enterprises Act, 2020

• Company Act, 2063 (2006)

• Public and Private Partnership and Investment Act, 2019

Government authorities involved:

• Investment Board Nepal (IBN): handles investments above NPR 6 billion

• Department of Industry (DoI): processes investments below NPR 6 billion

• Office of the Company Registrar (OCR): company incorporation

• Nepal Rastra Bank (NRB): regulates foreign currency and capital inflow/outflow

Requirements and sector restrictions for FDI

Eligible projects must not be listed in the negative list and must qualify as “industry” under the Industrial Enterprises Act.

Sectors Restricted from FDI

• Cottage and traditional industries (unless export-oriented)

• Personal service businesses (hair parlors, tailoring, driving schools)

• Bidi, tobacco, and alcohol production (except for exports)

• Real estate (except qualified development firms)

• Retail trading (unless part of major foreign chains)

• Weapons, ammunition, radioactive materials

• Security services, gambling, money laundering, criminal enterprises

Sectors with Ownership Caps or Special Approvals

Recent trends in FDI and investment policy

Nepal has seen a notable rise in FDI commitments:

• As of June 14, 2025, pledged FDI reached NPR 60.6 billion, a 36% year-on-year increase from NPR 44.4 billion in the previous fiscal period, covering 717 projects and 17,255 projected jobs, primarily in ICT, tourism, and service sectors 

• Policy reforms have accelerated investment via the automatic route, especially in small-scale industries and ICT, with approval now possible within a day or two 

• The 2025‑26 budget aims to develop Nepal as a prime FDI destination by simplifying approval procedures, creating special economic zones, and funding industrial infrastructure, including the migration of polluting industries out of Kathmandu Valley

Step-by-step process for investing in Nepal

1. Initial approval

   • For investments over NPR 6 billion: apply to IBN

   • For investments below that, apply to DoI via the OSSC / DOI portal

2. Company incorporation

   • Reserve a name and register the company with the OCR

   • Submit MOA, AOA, promoter details

3. Tax and sector licensing

   • Register for PAN/VAT with the Inland Revenue Department

   • Obtain sector-specific approvals (e.g., environmental, telecom)

4. Currency exchange and capital injection

   • Open a foreign currency account in a local bank

   • Transfer funds and obtain a remittance certificate

   • Minimum NPR 20 million for general investments (except in IT)

5. Foreign investment inflow approval

   • File an application with NRB (within OSSC)

   • Capital recorded and repatriation rights initiated

6. Business commencement

   • Acquire environmental approval (if needed)

   • Construct and start industrial operations

   • Inform authorities and commence monitoring

Typical timeline: FDI approval within 5–7 working days, company registration 3–5 days, NRB approval 2–3 days, industry registration 5–7 days. Environmental clearance, if needed, may take 45–60 days

Incentives and investment environment

The government provides fiscal and non-fiscal incentives to prioritize sectors, including infrastructure, manufacturing, hydropower, tourism, and exports:

• Tax exemptions: 40% infrastructure, 20% manufacturing, regional concessions (up to 90%), tourism, and power projects get full or partial holidays

• Customs duty exemptions

• Simplified visa processes and land access

• Protection from nationalization and supportive post-investment compliance via OSSC and sectoral authorities

Outlook for FDI in Nepal

Nepal’s improved legal framework, investment growth, and streamlined approval processes reflect a strong impetus to attract foreign capital, especially in high-priority sectors like ICT, energy, tourism, and manufacturing. While challenges remain in closing the gap between pledges and actual inflows, improved transparency, institutional efficiency, and investor safeguards make Nepal an increasingly attractive investment destination.