Establishing an industry as a foreigner is one of the more involved routes into Nepal, and one of the most rewarding when it is done properly. The country wants manufacturing and industrial investment, and the legal framework reflects that. What the framework also reflects, with equal clarity, is that industrial activity touches land, environment, labour and foreign exchange all at once, and each of those sits with a different authority.
This guide explains the full route in plain language, from the first approval to the day your plant is operating, so you can plan with realistic expectations rather than guesswork.
Quick answer
This guide covers everything a foreigner needs to know about establishing an industry in Nepal in 2025, including the legal framework (FITTA 2019, FITTR 2021, IEA 2020, Companies Act 2063), the nine forms of foreign investment, who qualifies as a foreign investor, the FITTA Negative List, the IEA classification of industries, the Automatic and Standard approval routes, company and industry registration steps, capital injection rules, government fees, tax incentives, investor protections, profit repatriation and post-registration compliance. Researched and verified against 2025 regulations.
Introduction: Why Nepal Is Attracting More Foreign Industrialists Than Ever
Something has genuinely shifted in Nepal’s investment story. In the first nine months of fiscal year 2024/25, Nepal recorded approximately NPR 58 billion in foreign investment commitments, with a remarkable 97% of those commitments flowing through the Automatic Route that the government introduced in 2023.
What does 'establishing an industry' mean in Nepal’s legal framework? It means more than opening a consulting office or a retail shop. In Nepal, an 'industry' is a specific category of business as defined by the Industrial Enterprises Act (IEA) 2020, one that produces goods, provides services, or engages in any activity classified as an industrial enterprise under the Act. This classification is the prerequisite for foreign investment: FITTA 2019 is explicit that foreign investment can only be made in businesses that qualify as an industry under the IEA. If your proposed activity does not meet the IEA’s definition, FDI approval cannot be granted.
The Legal Framework: Laws That Govern Foreign Industry Establishment in Nepal
Nepal’s foreign investment framework is built on four primary laws that work together.
Law | Year | What It Governs for Foreign Investors |
|---|---|---|
Foreign Investment and Technology Transfer Act (FITTA) | 2019 (2076 BS) | The cornerstone legislation. Defines foreign investment in nine distinct forms, eligible sectors, minimum thresholds, the Automatic and Standard approval routes, investor protections (national treatment, repatriation guarantee, dispute resolution), profit repatriation rules, and technology transfer provisions. Amended January 2025 to allow investment through venture capital funds registered with SEBON. |
Foreign Investment and Technology Transfer Regulations (FITTR) | 2021 (2077 BS) | Implements FITTA procedurally. Provides document requirements, the critical 3-stage investment injection schedule under Rule 9, timelines for each stage, royalty payment limits for technology transfer agreements (capped at 5% of net annual sales), and operational guidance for the Automatic Route. |
Industrial Enterprises Act (IEA) | 2020 (2076 BS) | Defines what constitutes an 'industry' eligible for foreign investment. Classifies industries by fixed asset size (micro/cottage/small/medium/large) and by type (manufacturing/service/infrastructure/agro-processing/energy/mining). Foreign investment can ONLY be made in businesses that qualify as industries under this Act. Also provides the tax incentive framework by industry category and location. |
Companies Act (Kampani Ain) | 2063 (2006) | Governs company incorporation at the Office of the Company Registrar (OCR). All foreign-invested industries must be incorporated as Private Limited or Public Limited companies. Company registration follows FDI approval and precedes industry registration. The CAMIS portal (camis.ocr.gov.np) is the online interface. |
Income Tax Act | 2058 (2002) | Corporate income tax at 25% standard rate. Specific reduced rates and multi-year full exemptions for certain industry types and geographic locations. PAN registration mandatory before any commercial operations. |
Foreign Exchange Regulation Act (FERA) | 2019 BS (1962) | All FDI capital must enter Nepal through official banking channels (SWIFT). No cash investments permitted. Each foreign currency injection must be recorded with Nepal Rastra Bank (NRB) within 6 months of receipt. Governs profit repatriation. |
Special Economic Zone Act | 2073 (2016) | Governs investment in Nepal’s SEZs (Bhairahawa, Simara, and others). Investors in SEZs receive enhanced incentives: 10-year full income tax exemption, duty-free import of raw materials, and dividend tax exemption for first 5 years. Key destination for export-oriented manufacturers. |
⚖️ The One Stop Service Centre (OSSC): The OSSC at the Department of Industry (DoI), Tripureshwor, Kathmandu, is the primary interface for all FDI registration activities. It brings together the DoI, OCR, IRD, NRB, Department of Immigration, and other agencies under one roof. Online portal: imis.doind.gov.np. Office hours: Sunday, Friday, 10:00 AM, 5:00 PM. For investments above NPR 6 billion, approach the Investment Board Nepal (IBN) at Singha Durbar instead.
Who Qualifies as a Foreign Investor Under Nepal’s Law?
The definition of 'foreign investor' under FITTA 2019 Section 2(h) is deliberately broad. It encompasses far more than just passport-holding foreigners.
Investor Type | Definition Under FITTA 2019 | Key Notes |
|---|---|---|
Foreign individual | Any person who is not a Nepali citizen | Includes foreign nationals of any country with which Nepal has diplomatic relations |
Foreign company / firm | Any company or business entity incorporated outside Nepal | Can be 100% foreign-owned. Must provide authenticated corporate documents. |
Non-Resident Nepali (NRN) | Nepali citizen permanently residing abroad with NRN status | Classified as foreign investor but with some preferential provisions. Can invest in some sectors restricted to other foreigners. |
Foreign government / agency | Sovereign wealth funds, development finance institutions, international agencies | Subject to specific sector restrictions based on Nepal’s bilateral agreements. |
Institutional foreign investor | Foreign investment funds, private equity firms, venture capital funds | From January 2025: venture capital funds registered with SEBON in Nepal can be used as FDI vehicles (new FITTA amendment). |
Nine Forms of Foreign Investment Recognised Under FITTA 2019
Section 2(j) of FITTA 2019 defines foreign investment to include nine distinct forms. The form your investment takes affects the approval process, NRB recording requirements, and applicable repatriation rules. Understanding this from the outset shapes your investment structure correctly.
Investment Form | Description | Key Considerations |
|---|---|---|
Equity investment (shares) | Subscription or purchase of shares in a Nepali company | Most common form. Subject to the FITTR Rule 9 three-stage injection schedule. Ownership proportional to share percentage. |
Convertible bonds / debentures | Investment through bonds convertible into equity shares | Subject to SEBON regulations. Useful for staged entry where investor wants debt-like instrument initially. |
Loans from foreign financial institutions | Project loans from foreign banks or financial institutions | Requires Ministry of Industry recommendation + NRB approval. Cannot be from parent company, must be from a financial institution per FITTA Section 12. |
Technology transfer | Contribution of proprietary technology, know-how, patents, or brand licences in exchange for equity or royalties | Royalties capped at 5% of net annual sales under FITTR. TTA must be registered with DoI. Subject to NRB approval for royalty remittance. |
Lease investment | Investment through leasing of aircraft, ships, machinery, construction equipment | Introduced by FITTA 2019 (not in previous law). Useful for capital-intensive industries needing equipment without purchase capital. |
Reinvestment of earnings | Reinvesting dividends or profits generated in Nepal back into the company | Treated as additional FDI. Counts toward approved investment schedule. Reduces need for further foreign currency injection. |
Venture capital funds | Investment through VC funds or specialized investment funds registered with SEBON | Introduced by January 2025 FITTA amendment. Opens institutional investment pathways not previously available. |
Merger and acquisition | Acquisition of shares or assets of an existing Nepali company | Requires FDI approval even for acquisitions of existing companies. Must respect foreign equity caps where they apply. |
Other approved forms | Any other form approved by DoI or IBN | Requires specific regulatory approval and is assessed case by case. |
What Industries Can Foreigners Invest In? The Open Sectors and the Negative List
FITTA 2019 uses a negative list approach: all sectors are open for foreign investment EXCEPT those specifically listed in the FITTA Schedule as prohibited or restricted. The March 2025 FITTA amendment further expanded the open sectors.
5.1 Prohibited and Restricted Sectors (The Negative List)
⚠️ These Sectors Cannot Accept Foreign Investment: Investing in any Negative List sector results in FDI approval denial. Attempting to circumvent these restrictions through nominee arrangements or mislabelled business activities constitutes fraud and carries criminal liability under Nepal’s laws.
Prohibited / Restricted Sector | Notes |
|---|---|
Primary agriculture: animal husbandry, fish farming, beekeeping, fruits, vegetables, oilseeds, pulses, dairy, primary farming | Prohibited EXCEPT for large-scale agritech/mechanization that exports at least 75% of output |
Cottage and traditional handicraft industries | Completely prohibited |
Personal services: domestic work, personal care, hair salons, personal security | Completely prohibited |
Arms, ammunition, gunpowder, explosives, NBC weapons manufacturing | Completely prohibited (national security) |
Real estate trading (buying and selling of land) | Prohibited, NOTE: Hotel development, construction companies, and building projects are PERMITTED; only land trading is restricted |
Retail business and domestic trading (below prescribed scale) | Prohibited |
Internal courier services, local catering, money changing, remittance services | Completely prohibited |
Travel agencies, tour guides, trekking companies, mountaineering guides, rural tourism, homestays | Completely prohibited, this is the key distinction from hotel investment (hotels ARE open) |
Mass communication media in Nepali language (newspapers, radio, TV, online news) | Completely prohibited |
Production of Nepali-language films | Completely prohibited |
Ride-sharing services | Maximum 70% foreign ownership |
Banking and financial institutions | Maximum 49-65% (sector-specific, NRB-regulated) |
Telecommunications services | Maximum 80% foreign ownership |
Domestic airlines | Maximum 49% foreign ownership |
Consultancy services (management, legal, accounting, engineering) | Maximum 51% foreign ownership |
IEA 2020 Industry Classification: Where Does Your Business Fit?
6.1 Classification by Fixed Assets (Capital Size)
Category | Fixed Assets (NPR) | Administering Authority |
|---|---|---|
Micro Industry | Up to NPR 20 lakhs (2,000,000) | Local municipality / ward office |
Cottage Industry | Up to NPR 50 lakhs (5,000,000) | District offices |
Small Industry | NPR 50 lakhs to NPR 1.5 crore (150,000,000) | Department of Cottage and Small Industries |
Medium Industry | NPR 1.5 crore to NPR 5 crore (500,000,000) | Department of Industry (DoI) |
Large Industry | Above NPR 5 crore (500,000,000) | Department of Industry (DoI) or Investment Board Nepal |
📌 Minimum FDI vs Industry Category: The NPR 20 million minimum FDI threshold places most foreign-invested businesses squarely in the Medium or Large category administered by the DoI. Micro, cottage, and small industries with fixed assets below NPR 5 million are generally inaccessible to foreign investors because they fall below the FITTA minimum threshold.
6.2 Classification by Business Type
Industry Type | Examples Relevant to Foreign Investors |
|---|---|
Manufacturing | Food processing, garments, pharmaceuticals, electronics assembly, cement, steel, chemicals, packaging |
Service | IT and software, healthcare, education, BPO/KPO, financial services (where permitted), media production |
Infrastructure | Hydropower, roads, airports, tunnels, water supply, telecommunications networks |
Agro-processing | Food manufacturing, dairy processing, beverages, oil extraction (NOT primary farming) |
Energy | Solar, wind, hydropower, biogas, petroleum storage (downstream) |
Mining | Mineral extraction, stone quarrying, mineral processing |
Construction | Building construction, civil engineering, hotel development, industrial parks |
The Two Approval Routes: Automatic vs Standard
Factor | Automatic Route | Standard Route |
|---|---|---|
Investment size | Up to NPR 500 million (~USD 3.8 million) | Above NPR 500 million; or requiring sector-specific ministry review |
Approval authority | Department of Industry (DoI), FITT Unit at OSSC | DoI for NPR 500M, 6B; Investment Board Nepal (IBN) for above NPR 6B (~USD 45M) |
Statutory processing time | 7 working days under FITTA Section 15(2) | 30-45 working days (DoI); 60-90 days (IBN) |
Application method | Online at imis.doind.gov.np + in-person at OSSC | Online + in-person; may require ministry consultations |
Provincial recommendation | Eliminated in 2025 reforms (no longer required) | May be required for large or sensitive projects |
IT sector minimum | No minimum capital (removed for Automatic Route) | NPR 20 million standard minimum applies |
FY 2024/25 adoption | 97% of all FDI commitments | Only 3% of commitments |
Best suited for | Most manufacturing, service, IT, hospitality investments | Large infrastructure, power, mega projects |
Website: www.plutoassociates.com Email: [email protected] Location: Kathmandu, Nepal
Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. FDI laws, fees, and procedures are subject to change. Readers should consult a qualified legal professional for advice specific to their circumstances. © 2025 Pluto Associates. All rights reserved.
Pluto Associates advises clients on foreign investment and company setup in Nepal. If you would like a clear view of how this applies to your own situation, contact our team for a consultation, message us on WhatsApp, or call +977 9802356987. We will tell you what is possible, what it costs, and how long it takes.
Frequently asked questions
How long does it take to establish an industry in Nepal? Two to three months with a complete file. The Automatic Route at the Department of Industry gives seven working days for investments up to NPR 500 million, while larger standard route projects take 30 to 45 working days.
What is the minimum foreign investment to set up an industry? NPR 20 million under FITTA 2019 for most sectors. The IT sector has no minimum on the Automatic Route, and Investment Board Nepal takes over above NPR 6 billion.
Where do I file the foreign investment application? At the One Stop Service Centre of the Department of Industry in Tripureshwor, Kathmandu, which hosts the Office of the Company Registrar, Inland Revenue Department and Nepal Rastra Bank under one roof. Filing starts online at imis.doind.gov.np.
Can a foreigner own 100% of a Nepali company? Usually yes, because FITTA 2019 works on a negative list basis. Caps still apply in specific sectors, such as 49% in domestic airlines and 80% in telecom, while retail trade and travel agencies stay closed.
How must the investment money enter Nepal? Through official banking channels only, with no cash permitted, and each injection must be recorded with Nepal Rastra Bank within six months under the Foreign Exchange Regulation Act. FITTR 2021 Rule 9 sets a three stage injection schedule.
What tax incentives can my industry claim? Industries in mountain regions can receive a full income tax exemption, and Special Economic Zone investors get a ten year income tax holiday plus duty free raw materials under the SEZ Act 2073. The standard corporate rate is 25%.
Do I need environmental clearance before I start? For manufacturing and other projects with real environmental impact, clearance from the Department of Environment under the Environment Protection Act 2076 sits alongside FDI approval and land acquisition. Sequence it early, because it is on the critical path.
How soon can I take profits out of Nepal? Once the investment is recorded with Nepal Rastra Bank and tax clearance obtained, dividends can be remitted, and FITTA 2019 guarantees repatriation processing within 15 days. Royalties under a technology transfer agreement are capped at 5% of net annual sales.
Do I still need provincial government approval for FDI? Not for Automatic Route applications, since the provincial recommendation requirement was removed in the 2025 reforms. Larger standard route projects may still need ministry or provincial consultation depending on scale and sensitivity.
If you would like to see how this applies to your own plans, Pluto Associates is a law firm in Kathmandu and we are happy to help. Send us a message on WhatsApp at +977 9802356987, call +977 9802356987, or send a note through the contact page, and we will reply with clear next steps.