Nepal’s Foreign Investment Framework at a Glance

Nepal’s foreign investment regime is governed primarily by the Foreign Investment and Technology Transfer Act 2019 (FITTA 2019), which replaced the earlier 1992 Act. The legislation was designed to modernize Nepal’s approach to international capital — expanding open sectors, simplifying approval processes, and guaranteeing investor rights including profit repatriation and protection against arbitrary nationalization.

The core principle: foreign investment is permitted in all sectors except those specifically listed in FITTA’s Negative List. If the sector isn’t on the negative list and qualifies as an “industry” under the Industrial Enterprises Act 2020, foreign investment is generally allowed — in many cases up to 100% foreign ownership.

“Nepal recorded a 36.1% increase in net FDI in FY 2023-24. The 2024 Investment Summit and the introduction of the Automatic Route have made this one of the most accessible periods for foreign capital in Nepal’s history.”

Minimum Investment Threshold

Since November 2022, every foreign investor must invest a minimum of NPR 20 million (approximately USD 150,000) per foreign investor. This threshold applies to all forms of foreign investment.

One important exception: IT sector investments via the Automatic Route have no minimum threshold. This was a deliberate policy choice to attract tech investment and startups.

How Foreign Investment Approval Works

There are two approval routes:

1. Automatic Route (introduced October 2023)

For investments up to approximately NPR 500 million (USD 3.7 million), investors can apply through an online portal and receive preliminary approval rapidly — in many cases within days. This route has been a game-changer: in the first nine months of FY 2024/25, approximately 97% of all FDI commitments went through this channel.

2. Manual Review (Department of Industry or Investment Board Nepal)

Investments below NPR 6 billion go to the Department of Industry (DOI). Investments above NPR 6 billion go to the Investment Board Nepal (IBN). Sensitive sectors, very large projects, and public-private partnerships typically require manual review regardless of size. The FITTA mandates approval within 7 working days of complete document submission, though in practice delays can occur.

After DOI approval, investors must notify the Nepal Rastra Bank (NRB) about the capital remittance — NRB manages all foreign exchange transactions. Previously this required a separate NRB approval; under FITTA 2019 it’s now a notification requirement, which is significantly simpler.

What Sectors Are Open to Foreign Investment

Under FITTA 2019, foreign investors can own up to 100% equity in most sectors, including:

• Manufacturing (all types not on the negative list)
• Energy and infrastructure (hydropower, solar, wind, roads, airports)
• Hotels and tourism (except trekking agencies and rural homestays)
• Financial services (within limits set by sector regulators)
• Information technology and software
• Healthcare and pharmaceuticals
• Education institutions (at university level)
• Contract manufacturing (fully allowed as of 2024 amendments)
• Ride-sharing platforms (up to 70% foreign ownership — clarified in 2024)
• Venture capital funds (permitted via 2025 ordinance amendment)

The Negative List: Sectors Restricted for Foreign Investment

Foreign investment is prohibited or restricted in the following sectors:

• Primary agriculture: Animal husbandry, fish farming, beekeeping, fruits, vegetables, oilseeds, dairy business (unless exporting at least 75% of output)
• Cottage and small industries
• Personal services: Hair salons, tailoring, driving instruction
• Arms, explosives, and radioactive materials
• Real estate trading (note: construction companies are allowed)
• Retail business, remittance services, money changers
• Travel agencies, trekking agencies, homestay and rural tourism
• Mass communication media (newspapers, radio, TV, online news, Nepali-language films)
• Consultancy services (management, accounting, engineering, legal) where foreign ownership exceeds 51%
• Internal courier services, local catering

Note on aviation and banking: Foreign investment is permitted in these sectors but with specific ownership caps and sector regulator requirements beyond FITTA.

Key 2025 Changes Under the Investment Promotion Ordinance

In January 2025, Nepal’s government passed an ordinance amending FITTA with several significant changes:

• Venture capital funds: Foreign investors can now invest in Nepali companies through venture capital or specialized investment funds registered with Nepal’s Securities Board — opening private equity flows into Nepal.
• Project loans from foreign financial institutions: Industries can now obtain project loans from foreign banks or financial institutions for any industry (subject to NRB conditions).
• Province-level approval simplified: For industries registered in provinces, only the industry registration certificate is needed — the previous requirement for a recommendation from the provincial ministry has been removed.
• Tourist visas for families of foreign employees: Families of foreign experts and technical employees of Nepali companies can now receive tourist visas — addressing a practical barrier for foreign talent.
• Expanded technology transfer scope: The definition of technology transfer has been broadened, including recognition of practices like reverse engineering.

Repatriation of Profits and Capital

FITTA 2019 guarantees foreign investors the right to repatriate:

• Dividends from their investment
• Proceeds from the sale of shares or assets
• Principal and interest on approved loans
• Amounts from the sale of specialized investment fund units (new in 2025)

Repatriation requires tax clearance and NRB approval. In practice, this process has historically been slow — the government has committed to streamlining it via a Single Window Service Centre, though implementation is ongoing.

Protection Against Nationalization

FITTA 2019 explicitly prohibits the nationalization of foreign investments, with a carve-out for public purpose. While this carve-out exists, the national treatment principle means foreign investors are treated the same as domestic investors — an important legal guarantee for those concerned about regulatory risk.

What This Means for You

If you’re a foreign individual or company looking to invest in Nepal, the current framework is genuinely more investor-friendly than it was five years ago. The Automatic Route has slashed processing times, the 2025 ordinance has opened new channels, and the government has demonstrated willingness to reform.

The main practical risks remain: repatriation delays, sector-specific restrictions that require careful legal mapping, and the need for coordination across multiple agencies (DOI, NRB, OCR, and potentially sector regulators). Entering with clear legal advice on structure and compliance is not optional — it’s what separates successful market entry from expensive mistakes.