Foreign Direct Investment (FDI) in Nepal (2026): FITTA, Threshold & Approval

Foreign direct investment in Nepal moved into a more open, more procedural framework in 2019 (2075 BS) when the Foreign Investment and Technology Transfer Act (FITTA) 2075 replaced the older 1992 Act. The minimum threshold was first revised, then reduced sharply — sitting today at NPR 20 million (roughly USD 150,000) for most sectors, and zero for information technology industries on the automatic route. The approval architecture is split: the Department of Industry handles foreign investment up to NPR 6 billion, and the Investment Board of Nepal handles investments above that bar. The result for foreign investors in 2026 is a clearer rulebook than ever before — but one in which the negative list, the repatriation regime at Nepal Rastra Bank, and the post-approval compliance stack still catch first-time investors. See Alpine's business-law practice area for related matters.

This guide is the 2026 (2083 BS) practitioner's view of FDI in Nepal: the FITTA 2075 architecture, the threshold and IT exemption, the negative-list of restricted sectors, the DOI versus IBN approval split, the step-by-step approval process, the repatriation rules under the Nepal Rastra Bank's foreign-exchange framework, and the post-approval compliance stack at the Office of Company Registrar and Inland Revenue Department. Whether you are a foreign investor planning entry, a Nepali partner structuring an inbound joint venture, or counsel running an FDI file, this is the file your work begins from.

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What is foreign direct investment in Nepal in 2026?

Foreign direct investment in Nepal is the inflow of capital, technology, or know-how from a foreign person or corporate entity into an industry or business operating in Nepal, structured to give the foreign investor an equity or contractual stake. The legal framework that governs this flow is the Foreign Investment and Technology Transfer Act (FITTA) 2075 (2019), which replaced the older 1992 Act and brought the investment regime closer to international practice. Foreign investment in Nepal can take three principal forms: equity investment in a Nepal-incorporated company, technology transfer arrangements (licensing, technical assistance, management agreements), and reinvestment of profits earned in Nepal.

The 2075 Act and its companion Rules tightened the rulebook on three fronts that mattered to investors. First, the minimum capital threshold was made explicit (initially NPR 50 million, later reduced to NPR 20 million in most sectors and zero for IT). Second, the negative list of sectors closed to FDI was set out in a Schedule, removing the case-by-case discretion of earlier years. Third, the approval timeline was codified — automatic-route approvals targeting one to two weeks and standard-route approvals targeting one to one-and-a-half months. For investors evaluating Nepal in 2026, the regime is open and predictable for most sectors, with technology and tourism leading inbound interest.

What is the minimum FDI threshold in Nepal?

The minimum foreign investment threshold under FITTA 2075 sits at NPR 20 million (approximately USD 150,000) for most permitted sectors. This threshold was reduced from the earlier NPR 50 million by sixty percent — a deliberate policy move to attract small-to-mid foreign entrants in services, tourism, and education sectors. The threshold applies per investor; multiple foreign investors in the same Nepal company each meet the threshold separately, or one investor may aggregate the threshold across several Nepali subsidiaries.

Information technology industries are the major exception. Under the automatic route introduced through the 2022 amendment to FITTA, IT-based industries face no minimum threshold — a foreign investor can put in any amount, including small seed capital, into a Nepal-registered IT company. This carve-out has been the largest single driver of new FDI files at the Department of Industry since 2023, with software development, fintech, e-commerce platforms, and digital services dominating the IT-route applications. Where an investor is not sure whether the proposed business qualifies as IT, counsel typically secures a pre-application clarification from DOI.

The negative list — sectors closed to foreign investment

Schedule of FITTA 2075 lists sectors fully closed to foreign investment. An investor proposing a business in any negative-list sector cannot route the project through DOI or IBN; either the structure must be modified to fit a permitted category, or the investment proceeds without foreign equity. The principal closed categories are:

• Primary agriculture: fish farming, animal husbandry, horticulture, dairy, beekeeping, poultry — primary production at farm level. Processing and value-add downstream is typically permitted.
• Small and cottage enterprises: categories defined under the Industrial Enterprise Act 2076 as small or cottage are reserved for Nepali investment.
• Personal services: hair salons, tailoring, driving, beauty parlours, photography studios — closed to FDI.
• Real estate: retail real estate trading is closed; construction is permitted as an industrial activity.
• Retail business: retail trade for individual consumers is closed to FDI; wholesale and distribution are open subject to threshold.
• Travel and tourism services: travel agency, trekking agency, homestay, rural tourism, local catering services — generally closed to FDI; hotels and resorts above defined size thresholds are open.
• Remittance services: the regulated remittance business is closed to direct FDI.
• Arms, ammunition, biological weapons, gunpowder, radioactive materials, atomic energy.
• Gambling and certain regulated entertainment.

The negative list is updated periodically. Counsel verifies the current Schedule against the proposed business activity at the structuring stage; mid-application discovery that the business sits on the negative list forces a restructure or withdrawal.

Who approves FDI in Nepal — DOI or IBN?

The approval authority is split by investment size, and this is one of the most-asked questions at intake. Foreign investments up to NPR 6 billion are approved by the Department of Industry (DOI) at doind.gov.np. Investments above NPR 6 billion are approved by the Investment Board of Nepal (IBN) at ibn.gov.np, a higher-level institution chaired by the Prime Minister and dealing with mega-projects, infrastructure, and large industrial entries. The split is by total project size including foreign and domestic equity, not by foreign equity alone.

The DOI route is the more common path. The Department processes the bulk of FDI applications under FITTA 2075 — manufacturing, IT, hospitality, education, services. Within DOI, the FDI section runs an automatic-route track for permitted IT industries (faster, lighter scrutiny) and a standard-route track for all other sectors. The IBN route is reserved for genuinely large projects — hydropower, large hotels and integrated resorts, large infrastructure — and IBN's process involves additional public-interest scrutiny, financial closure planning, and often a project development agreement (PDA) negotiation.

Step-by-step FDI approval process at the Department of Industry

1. Pre-application structuring. Identify the proposed business activity, confirm it is not on the negative list, decide the company structure (private limited, joint venture, subsidiary), set the foreign-equity percentage, and confirm the investment crosses the NPR 20 million threshold (or zero if IT).
2. Apply at DOI through the FDI portal. The application is made online with the project proposal, foreign-investor documentation (passport, certificate of incorporation if corporate, board resolution, source-of-funds proof), proposed equity structure, and project plan. Pay the application fee.
3. DOI scrutiny and FDI approval letter. The Department reviews the application, checks against the negative list, validates the threshold and the source-of-funds, and may issue queries through the portal. On approval, DOI issues an FDI approval letter — the foundational document for everything that follows.
4. Company incorporation at OCR. With the FDI approval letter in hand, the foreign investor and any Nepali partner incorporate the company at the Office of Company Registrar through the CAMIS portal — see our company registration in Nepal guide.
5. Capital injection through banking channel. The foreign investor remits the approved capital amount through banking channels into the company's Nepal account. The remittance must be routed properly (no cash, no third-party routes); NRB tracks foreign-currency inflows for repatriation eligibility later.
6. Capital reporting to NRB. Within the prescribed window, file the capital reporting with Nepal Rastra Bank's Foreign Exchange Management Department. NRB issues an acknowledgment that the capital has been brought in legitimately — this acknowledgment is essential for later repatriation of profits and capital.
7. PAN, VAT and sectoral licences. Register the company for PAN and VAT at the Inland Revenue Department, and obtain any sectoral licence (NRB for finance, NTA for telecom, DOIB for media). Begin operations.
8. Annual compliance and reporting. File annual reports with DOI / IBN on operations, employment, and capital deployed. Audited financial statements are filed with OCR and IRD as part of standard corporate compliance.

The NPR 500 million automatic route — what changed in 2023

In October 2023 the Cabinet introduced an automatic route for FDI applications up to NPR 500 million, intended to compress the approval cycle from weeks to days for clean, sector-permitted files. The route runs at the Department of Industry alongside the standard route — automatic for files that meet defined eligibility (sector permitted, threshold met, source-of-funds clean, no public-interest sensitivity), and standard for everything else. In practice the automatic route is a documentation-pre-check route rather than a true "self-certification" regime; DOI still reviews each application, but it commits to a 7-day decision window on automatic-route files and a 15-day window on standard-route files inside the NPR 6 billion DOI envelope.

For foreign investors the practical takeaway is that the route is decided not just by file size but by file quality. A clean NPR 30 million IT investment with complete documents and no negative-list overlap will move through automatic-route in days; the same investment with a missing board resolution or an unclear source-of-funds will get pushed to standard scrutiny. Counsel structures the file to maximise automatic-route eligibility — pre-clearing negative-list overlap, ensuring source-of-funds is independently documentable, and avoiding sectoral overlaps that bring in NRB Banking Department or NTA pre-approvals.

FITTA Section 17 — one-stop service at the Department of Industry

FITTA 2075 Section 17 establishes a one-stop service centre at the Department of Industry — a single window meant to deliver FDI approval, company incorporation referral, visa support for investor and key foreign employees, foreign-exchange facilitation, and post-approval coordination through a single counter. The one-stop service is the single most important investor-facing reform in the 2075 Act; in operation, the centre coordinates approvals across DOI, Office of Company Registrar, Inland Revenue Department, Department of Immigration, and Nepal Rastra Bank for FDI-approved entities. Visa categories supported include the business visa, non-tourist visa for senior foreign employees, and dependent visas for accompanying family.

The practical limit of the one-stop service is that it sequences and coordinates — it does not collapse — the underlying agency approvals. The investor still needs to file at OCR for incorporation, at IRD for PAN, and at sectoral regulators for licences. What the one-stop service eliminates is the need to identify the right agency, the right form, and the right officer for each step. For first-time inbound investors without local counsel, the centre is a meaningful efficiency gain; for repeat investors with established counsel, the gain is at the margin.

Capital in kind, equipment imports and other non-cash contributions

FITTA 2075 recognises that foreign investment can come in forms other than direct cash. Capital-in-kind contributions include imported machinery and equipment, technology and IP licensed at fair market value, working capital lines made available to the Nepal entity, and reinvested profits of an existing Nepal company. For machinery and equipment imports as capital contribution, DOI requires the equipment to be valued by an independent valuer, supported by commercial invoices, customs declarations and the foreign exporter's documentation. The valuation must be defensible to NRB at capital reporting; under-stated values cannot be repatriated and over-stated values trigger anti-avoidance scrutiny.

Software, IP and brand-licence contributions are accepted as capital contribution where supported by an independent valuation and a formal licence agreement; the licence agreement is also reviewed by DOI's technology-transfer team to set the royalty terms going forward. Reinvested profits earned in Nepal can be treated as fresh FDI under a streamlined procedure that retains the original entry-channel acknowledgment, simplifying repatriation later.

Sectoral equity caps — where 100% FDI is not allowed

While FITTA 2075 permits 100% foreign equity in standard permitted sectors, sectoral statutes impose caps in regulated industries. Banking is the most restrictive — a foreign bank's commercial bank presence in Nepal is permitted only as a joint venture with capped foreign equity (typically 20% to 30%) under the Bank and Financial Institutions Act 2073 and Nepal Rastra Bank's licensing policy. Insurance under the Insurance Act 2079 permits foreign equity up to 75% in life and non-life insurers, with Nepal Insurance Authority approval. Telecom under the Telecommunications Act and NTA licensing has sectoral conditions on foreign equity in carrier-class licences. Capital markets (merchant banking, brokerage) and pension fund management have SEBON-level conditions. Media and publishing under the National Broadcasting Act have caps that meaningfully restrict foreign equity in print and broadcast.

For investors structuring inbound deals into regulated sectors, the FITTA approval is necessary but not sufficient — the sectoral regulator's pre-clearance and licensing condition must be confirmed before the FDI structure is finalised. Counsel typically runs a parallel diligence — DOI/IBN for FITTA, sectoral regulator for the cap and licensing — at the structuring stage so that both clear together.

Repatriation of profits and capital — the NRB framework

The most-asked question at investor due-diligence stage is "can I take my money out". The answer under FITTA 2075 read with the Nepal Rastra Bank's foreign-exchange management framework is yes — subject to compliance. Repatriable amounts include dividends declared on FDI equity, capital gains on the sale of FDI shares, royalties under approved technology-transfer agreements, lease and management fees, and the original foreign capital on company exit.

The operative framework is the Foreign Investment and Foreign Loan Management Bylaw 2078 administered by NRB's Foreign Exchange Management Department. The Bylaw was amended in December 2025 (5th amendment) to tighten documentation requirements and clarify timelines for repatriation processing. Repatriation requires NRB approval and is conditional on three things. First, the original capital must have been brought in through banking channels and properly reported at the entry stage; capital that came in informally cannot be repatriated through the formal channel. Second, all applicable taxes must be paid — withholding tax on dividends (typically 5%), capital gains tax on share sales, and tax-clearance certificates from IRD. Third, FITTA-side compliance — annual reports filed, no breach of approval conditions — must be current. With the three boxes ticked, NRB issues the foreign-exchange remittance approval and the licensed bank effects the outward transfer. For investors planning exit, the repatriation file should be set up at the entry stage; trying to retrofit reporting at exit time produces material delay.

Withholding-tax rates on outbound payments are key to investor IRR modelling: 5% withholding on dividends to foreign shareholders, 15% on royalties and technical-service fees, 15% on interest, and 5% to 25% on capital gains depending on holding period and share class. Where Nepal has a double taxation avoidance agreement (DTAA) with the investor's home jurisdiction — India, China, Mauritius, Singapore, South Korea, Sri Lanka, Thailand, Norway, Pakistan, Qatar, and others — DTAA rates may apply to dividends, interest and royalties with a tax-residency certificate from the home country.

Common mistakes that derail FDI files in Nepal

• Negative-list mismatch. Investors propose a business activity that turns out to fall on the negative list, discovered mid-application. The fix is restructure (e.g., positioning a "trekking agency" as a "tourism services" non-trekking outfit) or withdraw.
• Threshold under-funded. Bringing in less than NPR 20 million for a non-IT business is rejected at scrutiny. Investors often plan to "top up later" but the initial application must clear the threshold.
• Source-of-funds gap. The foreign investor's source-of-funds documentation is incomplete or inconsistent. DOI scrutinises sourcing for AML compliance; gaps trigger queries that delay the file.
• Wrong company structure. Filing OCR before FDI approval, or filing with a different equity structure than DOI approved, requires re-filing at OCR.
• Capital injection without banking trail. Cash injections, third-party routes, or unreported inflows mean the capital cannot be repatriated later. Discipline at injection is the cheapest insurance.
• Skipping the NRB capital-reporting step. Investors often treat NRB reporting as a back-office formality; missing it means the dividend and exit capital cannot leave Nepal through the formal banking channel.
• Sectoral licence overlooked. Banking, telecom, media, education and pharma have additional sectoral approvals that must be in hand before operations begin; FITTA approval alone is not enough.

Joint ventures, technology transfer and other FDI structures

FITTA 2075 recognises foreign investment in three principal forms beyond direct equity. First, joint ventures with Nepali partners — common in tourism, education, and manufacturing where local market knowledge or regulatory relationships matter. The JV agreement is a critical document covering equity split, board composition, deadlock resolution, exit rights, and dispute resolution. Second, technology transfer arrangements — licensing of IP, technical assistance contracts, management agreements, franchise arrangements. These are approved separately by DOI under FITTA's technology-transfer track, with royalty rates and terms scrutinised. Third, reinvestment of profits — profits already earned in Nepal can be reinvested into a fresh capital injection, with the same approval framework as new FDI.

For larger inbound deals, IBN handles project development agreements (PDAs) for hydropower, large hotels, and industrial parks. PDAs cover land allocation, tax incentives, foreign-currency facility, and government undertakings on infrastructure. Negotiating a PDA is materially different from a standard FDI application — it is contract-style negotiation rather than form-filing.

How can Alpine Law Associates help with FDI in Nepal?

Alpine Law Associates handles FDI as a sequenced engagement that runs from structuring through approval to post-approval compliance and eventual repatriation. Our corporate-law team covers initial structuring (negative-list check, threshold sizing, equity structure, joint-venture vs wholly-owned advisory), the FITTA application at DOI or IBN (project proposal drafting, source-of-funds documentation, query response), company incorporation at OCR through CAMIS calibrated to the FDI approval, capital injection coordination with the receiving bank and NRB capital reporting, PAN / VAT and sectoral licensing, and annual compliance and reporting.

For technology transfer and royalty arrangements, we draft the underlying contracts and obtain DOI approval as a parallel track. For exit planning, we structure the share-transfer or capital-return file with NRB repatriation in mind from the start. As a full-service law firm in Nepal, we run FDI alongside related company registration, tax, and dispute work in a single counsel relationship. Foreign investors abroad can engage remotely through power of attorney with periodic in-Nepal visits for major milestones.

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Last reviewed: April 2026