Repatriation of Funds from Nepal (2026): FDI Profits, Capital & Royalties

The most asked question at a foreign investor's due-diligence stage in Nepal is not "can I bring the money in" — that is the FITTA question, answered yes for most sectors above the threshold. It is "can I take the money out". Repatriation of funds from Nepal is the second half of every FDI engagement: dividends declared on the foreign equity, capital gains on share sales, royalties and technical-service fees under approved technology-transfer contracts, and the original capital on company exit. The framework is permissive, but conditional — every outbound rupee crosses two checkpoints: tax compliance at the Inland Revenue Department and foreign-exchange approval at Nepal Rastra Bank.

This 2026 (2083 BS) practitioner's guide is the file every FDI repatriation engagement begins from: the FITTA 2075 Section 20 statutory base, the NRB Foreign Investment and Foreign Loan Management Bylaw 2078 (amended in December 2025), the four repatriation categories DOI recognises, the withholding-tax stack on dividends / royalties / interest / capital gains, the DTAA optimisation for treaty-country investors, the documentation chain from entry to exit, the licensed-bank route for outbound transfer, the timeline expectations, and the common compliance gaps that block repatriation at exit. Whether you are running a dividend cycle, exiting a Nepal investment, or planning entry with exit in mind, this is the architecture your money moves through.

Alpine Law Associates — Nepal Bar Council-registered corporate-law team handling FDI structuring, FITTA approval, repatriation under NRB Bylaw 2078, and DTAA-optimised exit planning for foreign investors across IT, manufacturing, hospitality and finance.

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What is FDI repatriation under Nepali law?

FDI repatriation is the outbound transfer of foreign-investment-related funds from Nepal to the foreign investor's home jurisdiction through the formal banking system, under approvals from the tax and foreign-exchange authorities. The right to repatriate is a statutory right of the foreign investor under FITTA 2075 Section 20 — Nepal's foreign-investment regime is explicitly an "open, repatriable" regime, not a "trapped capital" regime. What FITTA grants is the right; what NRB administers is the mechanics through the Foreign Investment and Foreign Loan Management Bylaw 2078.

The right covers four principal categories. First, dividends declared on FDI equity from after-tax profits. Second, capital gains and sale proceeds from the transfer of FDI shares, whether to a Nepali buyer or to another foreign buyer. Third, royalties, technical-service fees, lease fees and management fees paid to the foreign investor or affiliated foreign entity under approved technology-transfer or service contracts. Fourth, the original capital on company exit through buyback, liquidation or capital reduction. Interest on approved foreign loans is repatriated under a parallel but distinct framework also administered by NRB.

FITTA 2075 Section 20 — the statutory right to repatriate

FITTA 2075 Section 20 codifies the repatriation right that earlier had been a matter of regulatory practice rather than statute. The Section grants foreign investors the right to repatriate in convertible foreign currency the amounts they are entitled to under their FDI approval — dividends, sale proceeds, royalties, and capital on exit — subject to compliance with the Act and the prevailing foreign-exchange framework. Crucially, Section 20 makes repatriation a statutory entitlement, not a discretionary administrative concession; NRB's role is to administer the mechanics within the framework, not to decide whether repatriation is permitted at all.

The statutory entitlement is conditioned on four things: the investment was approved under FITTA at DOI or IBN; the capital was brought in through banking channels and reported at entry; applicable taxes have been paid with IRD clearance evidenced; and the investor's FITTA-side compliance (annual reports, no breach of approval conditions) is current. With these met, NRB's role becomes administrative — verifying documentation and approving the outbound transfer through a licensed bank.

The four repatriation categories DOI recognises

The Department of Industry's repatriation recommendation framework classifies outbound flows into four categories, each with its own documentation set:

1. Sale of shares (capital and gain). Where the foreign investor sells FDI shares — to a Nepali buyer, another foreign investor, or back to the company in a buyback — the sale proceeds (capital and any gain) are repatriable. Documentation includes the share-transfer deed, OCR record of the transfer, IRD capital-gains tax payment evidence, DOI amendment to the FDI approval reflecting the transfer, and NRB application with the source-of-entry trace.
2. Dividend on FDI equity. Dividends declared and approved by the board are repatriable after withholding tax (5% default, DTAA rates may apply). Documentation includes the audited financials supporting the dividend, board and shareholder resolutions, IRD withholding-tax payment evidence, DOI confirmation of the dividend amount, and NRB application with the licensed bank.
3. Loan repayment (principal and interest). Where the foreign investor or an affiliated foreign lender has provided an approved foreign loan to the Nepal company, the repayment of principal and interest is repatriable subject to the loan having been approved by NRB at entry and the interest rate being within NRB's permitted range. Documentation includes the loan agreement, NRB approval at entry, repayment schedule, IRD withholding on interest, and amortisation evidence.
4. Royalties and technology-transfer fees. Royalties under DOI-approved technology-transfer contracts, technical-service fees, management fees and franchise fees are repatriable. Documentation includes the approved technology-transfer contract, the invoice and supporting evidence of services rendered or technology used, IRD withholding on the fee (15% default), and NRB application.

NRB Foreign Investment and Foreign Loan Management Bylaw 2078 — the operative framework

The NRB Foreign Investment and Foreign Loan Management Bylaw 2078 is the operational framework administered by the NRB Foreign Exchange Management Department for all FDI-related foreign-exchange flows — capital entry reporting, repatriation approvals, royalty payments, and outward investment by Nepal residents (a separate framework). The Bylaw was issued in 2078 BS (2021 AD) and has been amended multiple times since; the 5th amendment in December 2025 tightened documentation requirements while expanding the approval delegation to A-class commercial banks for routine flows.

Under the 5th amendment, repatriation approval for clean dividend files within defined limits has been delegated to the licensed A-class bank executing the transfer — NRB centrally approves only the larger, more sensitive or first-time files. The delegation has compressed the approval cycle for the high-volume routine flows; first-time repatriations from a new FDI entity and capital-exit repatriations continue to route through NRB central approval. Counsel structures the file at entry to maximise the routine-flow path at exit.

Withholding tax on outbound payments — the IRR-impact rates

The withholding-tax stack on repatriation flows is the single most material factor in a foreign investor's IRR modelling. The default rates under the Income Tax Act 2058 are:

• Dividends paid to foreign shareholders: 5% withholding under standard rate. Dividends are paid from after-tax profits — the 5% sits on top of the 25% / 20% / 15% corporate income tax on the underlying profit.
• Royalties: 15% withholding on royalty payments to non-residents for IP licensing, brand licence, franchise fees and similar.
• Technical-service fees: 15% withholding on technical and management service fees paid to non-residents.
• Interest on foreign loans: 15% withholding (subject to specific exemptions for certain multilateral and concessional lenders).
• Capital gains on share transfer: 5% to 25% depending on holding period, listed/unlisted status, and whether the seller is corporate or individual non-resident. The Income Tax Act differentiates short-term and long-term gains.
• Branch profit remittance: A foreign branch in Nepal pays branch profit remittance tax in addition to corporate tax; the combined effective rate is higher than a subsidiary structure.

Withholding is at the time of payment by the Nepal payer; the foreign investor receives the net amount. IRD issues a tax-clearance certificate confirming the withholding has been paid — this certificate is part of the NRB repatriation file.

DTAA optimisation — when treaty rates apply

Nepal has signed Double Taxation Avoidance Agreements with India, China, Mauritius, Singapore, South Korea, Sri Lanka, Thailand, Norway, Pakistan, Qatar, Austria and a small number of other jurisdictions. Where the foreign investor is tax-resident in a DTAA country, the DTAA-specified rate may apply to dividends, interest and royalties — frequently lower than the domestic withholding rate. For example, the Nepal-India DTAA has provisions for reduced rates on dividends and interest that can materially improve net repatriation.

Claiming DTAA rates requires the foreign investor to produce a tax-residency certificate from the home tax authority for the year of the payment, sometimes accompanied by a beneficial-owner declaration and additional substantiation. The IRD reviews DTAA claims at the time of withholding; structuring through a treaty jurisdiction is a legitimate planning step subject to substance and beneficial-ownership requirements. The 5th amendment to NRB Bylaw 2078 confirms the DTAA workflow for NRB approval, allowing the licensed bank to apply the DTAA-rate withholding upon production of the tax-residency certificate at the file.

The four-stage repatriation process — IRD to NRB to bank

1. Stage 1: IRD tax clearance and withholding. The Nepal entity computes the applicable withholding (dividend 5%, royalty/interest 15%, technical service 15%, capital gain by holding period), pays the withholding to IRD, and obtains a tax-clearance certificate evidencing the payment. For DTAA-claimed reduced rates, the tax-residency certificate from the home jurisdiction is filed at this stage.
2. Stage 2: DOI or IBN recommendation. The Nepal entity files the repatriation recommendation request with DOI (or IBN if the FDI was approved at IBN). DOI reviews the FITTA approval, the foreign-equity proportion, the annual report compliance, and the supporting documents (audited financials for dividends; share-transfer documents for sale proceeds; technology-transfer contract for royalties) and issues a recommendation letter to NRB.
3. Stage 3: NRB approval (or A-class bank approval under delegation). The Nepal entity submits the NRB application with the FITTA approval, capital-entry NRB acknowledgment, DOI recommendation letter, IRD tax-clearance, supporting documents and bank application form. NRB Foreign Exchange Management Department approves — or, under the 5th amendment delegation, the A-class licensed bank approves for routine flows within delegated limits.
4. Stage 4: Licensed-bank outbound transfer. The licensed A-class commercial bank executes the outbound transfer in convertible foreign currency to the foreign investor's account in the home jurisdiction. The bank applies the prevailing exchange rate, deducts the applicable bank fees, and issues a foreign-exchange remittance advice confirming the transfer.

Entry discipline — why repatriation starts at the capital-injection stage

The single most common cause of repatriation friction at exit is poor entry discipline at the capital-injection stage. Capital that came in informally, through cash or non-banking routes, or without being reported to NRB, cannot be repatriated through the formal banking channel. The Nepal company holding such capital may report perfectly good profits from operations, but the outbound transfer is blocked at the NRB stage because the entry chain is broken.

The discipline is mechanical: the foreign investor remits the approved capital through licensed banking channels into the Nepal company's account, the receiving bank issues a Foreign Inward Remittance Certificate (FIRC) or equivalent, and the Nepal entity files the capital-entry report with NRB Foreign Exchange Management Department within the prescribed window referencing the FITTA approval letter. NRB acknowledges the entry, and that acknowledgment is the foundation document for every future repatriation request. Investors who plan exit at entry — even five or ten years before the actual exit — pay a significantly lower repatriation cost in time and friction than those who try to retrofit the documentation at exit time.

Common repatriation blockers

• Capital entry not reported at NRB. Capital that came in but was not reported within the prescribed window leaves no entry trail. Resolution requires retrospective reporting with explanation and supporting bank evidence — sometimes possible, sometimes not.
• Informal capital injection. Cash injections, third-party routes or non-banking transfers cannot be regularised. The repatriation right is lost on that capital; resolution requires fresh capital injection through the formal route and reconciliation of the original capital as a separate matter.
• Annual reports overdue. Where the FITTA annual reports to DOI are not current, the DOI recommendation letter is blocked at Stage 2. Resolution is back-filing of the missing reports.
• IRD tax-clearance dispute. Where IRD has open assessments, audit findings or unpaid taxes, the tax-clearance certificate at Stage 1 is not issued. Resolution requires settling the IRD position before repatriation can proceed.
• Source-of-funds challenge at NRB. Where the capital entry came from a jurisdiction or counter-party that triggers NRB AML concerns, repatriation is held while the entry source is verified.
• DTAA documentation gap. DTAA-rate claims without a current-year tax-residency certificate are reverted to domestic withholding rates. The investor may apply for refund of excess withholding subsequently, but the initial outflow is at the higher rate.
• Royalty rate above NRB cap. Royalty fees above NRB's permitted rate range for the sector are not approved for repatriation. Resolution is renegotiation of the underlying technology-transfer contract or splitting the fee across heads.

Exit planning — share sale, buyback and liquidation routes

Repatriation of the original capital at exit takes one of three routes. First, share sale to a Nepali or third-party foreign buyer — the simplest commercially and procedurally. The sale price, after deducting capital-gains tax, is repatriable as sale proceeds under the share-transfer category. Second, buyback by the Nepal company under Companies Act 2063 buyback provisions — the company purchases the foreign investor's shares, reducing its issued capital. Procedurally heavier (court approval is required for certain buyback structures) but useful where no external buyer is identified. Third, voluntary liquidation under the Insolvency Act 2063 — the company is wound up, assets liquidated, creditors paid, and remaining capital distributed to shareholders. Each route has different timeline, tax and procedural implications; counsel structures the exit route based on the investor's specific position.

For all three routes, the precondition is clean entry documentation. The capital that left the foreign investor's account at entry must trace through the NRB capital report into the Nepal company's books and out again at exit. Where the trace is broken, the exit hits the documentation gap discussed above.

How can Alpine Law Associates help with FDI repatriation?

Alpine Law Associates handles repatriation as a continuous engagement from FDI entry through dividend cycles to eventual exit. Our corporate-law and tax team covers entry-stage capital reporting (FITTA-aligned NRB capital report, FIRC reconciliation), ongoing dividend repatriation cycles (IRD withholding, DOI recommendation, NRB approval, A-class bank execution under the 5th amendment delegation), royalty and technology-transfer fee repatriation under approved contracts, DTAA-optimised withholding for treaty-country investors, and capital-exit planning through share sale, buyback or liquidation routes.

For investors planning entry, we set up the entry documentation specifically to enable smooth exit later — the cheapest insurance against repatriation friction. For investors with historical entry-documentation gaps, we run the reconciliation file with NRB and IRD to restore the repatriation chain where possible. As a full-service law firm in Nepal, we coordinate repatriation alongside related FDI, company and tax work in a single counsel relationship. Foreign investors abroad engage remotely through power of attorney for the operational steps.

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Last reviewed: April 2026