Opening a hotel in Nepal looks straightforward from the outside. The sector is open to foreign investment, tourism is a national priority, and the demand for well-run accommodation is steady. What first-time investors underestimate is the number of separate approvals a hotel needs, and the fact that they sit with different authorities. The result is that an investment can be approved and still not be ready to open.
This guide sets out the approvals a hotel needs, in the order they should be secured, so your opening date is a plan rather than a hope.
Quick answer
This guide covers the complete process of registering a hotel in Nepal through foreign investment, including the legal framework (Tourism Act 2035, Hotel Lodge Restaurant Bar Rules 2038, FITTA 2019, FITTR 2021, IEA 2020), why hotels are open to 100% foreign ownership (unlike travel agencies), the 8 hotel classification categories (General Tourist Standard through 5-Star Deluxe), minimum FDI threshold (NPR 20 million), the full 10-step process from DOI FDI approval through DoT hotel classification, the Standard Fixation Committee’s role, hotel construction standards, star classification criteria and fees (NPR 5,000 to NPR 60,000), the 5-year classification renewal requirement, NRB investment recording and profit repatriation rules, post-registration compliance obligations including semi-annual reporting, tax incentives for hotel investment, and 12 FAQs. Researched and verified against 2025 regulations by the Pluto Associates legal team, Kathmandu.
Introduction: Why Nepal’s Hotel Sector Is One of Its Best Foreign Investment Opportunities
Nepal’s tourism industry is one of the country’s most strategically important economic sectors. With over 1.2 million tourists visiting annually, a landscape that includes eight of the world’s ten highest mountains, world-heritage listed cities, ancient Buddhist and Hindu pilgrimage sites, and national parks of extraordinary biodiversity, Nepal has the natural and cultural raw material to sustain a hospitality industry of far greater scale than currently exists.
The good news for foreign investors: Unlike travel agencies and trekking companies, which are on FITTA’s Negative List and closed to foreign ownership, hotels are explicitly open to foreign direct investment. A foreign national or foreign company can own 100% of a hotel in Nepal without requiring a Nepali joint venture partner. This is a significant distinction that makes the hospitality sector one of the most accessible for international capital in Nepal’s entire economy.
The process of establishing a foreign-invested hotel in Nepal is a multi-stage regulatory journey that spans the Department of Industry (for FDI approval), the Office of Company Registrar (for company incorporation), Nepal Rastra Bank (for capital recording and foreign exchange compliance), and the Department of Tourism (for hotel registration and star classification). Each stage has its own documents, timelines, and requirements. This guide walks through every step.
Legal Framework: Laws Governing Hotel Investment and Registration in Nepal
A foreign-invested hotel in Nepal sits at the intersection of investment law, tourism law, and company law. Understanding each layer is essential before committing capital or approaching any government office.
Law / Instrument | Year | Relevance to Hotel Registration |
|---|---|---|
Tourism Act (Paryatan Ain) | 2035 (1978) | Primary tourism legislation. Section 10 governs hotel registration. Section 11 establishes the Standard Fixation Committee for hotel classification. Section 47 requires semi-annual reporting by registered hotels. Defines the legal basis for all hotel licensing in Nepal. |
Hotel, Lodge, Restaurant, Bar and Tourist Guide Rules (HLRB Rules) | 2038 (1981) | Detailed operational rules implementing the Tourism Act for the hospitality sector. Rule 3 sets out the hotel registration application procedure. Rule 5 requires star hotels to adhere to standards fixed by the Standard Fixation Committee. Defines minimum facility requirements for each hotel category. |
Hotel Standard (Hotelको Maan) | 2077 (2020) | Updated classification criteria for all hotel categories. Specifies the exact minimum standards, room count, bathroom ratios, food service, safety facilities, accessibility, for each star category from General Tourist Standard through 5-Star Deluxe. |
Tourism Industry Service Delivery Directory | 2070 (2013) | Section 83 requires star-rated hotels to renew their DoT classification every 5 years. Section 83(2) mandates renewal application before expiry. |
Foreign Investment and Technology Transfer Act (FITTA) | 2019 (2076 BS) | Primary FDI law. Hotels are NOT on the Negative List, foreign investment in hotels is permitted, including 100% foreign ownership. Governs FDI approval process, minimum investment threshold (NPR 20 million), investor rights, and repatriation of profits. |
Foreign Investment and Technology Transfer Rules (FITTR) | 2021 (2077 BS) | Implements FITTA. Provides procedural details on FDI application, document requirements, the investment schedule (three-stage capital injection timeline), and automatic approval route for investments up to NPR 500 million. |
Industrial Enterprises Act (IEA) | 2076 (2020) | Requires industry registration after company incorporation. Hotels qualify as service industries under the IEA and must be registered at the Department of Industry. Operations must commence within 1 year of industry registration. |
Companies Act (Kampani Ain) | 2063 (2006) | Governs company incorporation at the OCR. All hotel businesses must be incorporated as companies before approaching any other regulatory authority. |
Nepal Rastra Bank Act + FERA | 2058 / 2019 | Nepal Rastra Bank regulates foreign currency transactions. All FDI capital must be remitted through official banking channels and recorded with NRB within 6 months of injection. Profit repatriation requires NRB approval and tax clearance. |
Income Tax Act | 2058 (2002) | Hotel income is subject to corporate income tax. Special tax incentives apply for hotels in certain geographic areas. PAN registration and annual tax filing are mandatory. |
⚖️ Key Distinction from Travel Agencies: The FITTA 2019 Negative List explicitly includes travel agencies, trekking agencies, and tour operators, these are closed to foreign investment. Hotels are NOT on this Negative List. A foreign investor can own 100% of a hotel company in Nepal without a Nepali partner. This is the single most important legal fact for any foreign investor evaluating Nepal’s hospitality sector.
Hotel Classification in Nepal: What Category Will Your Hotel Fall Into?
Before beginning any registration process, the foreign investor must understand Nepal’s hotel classification system. Your hotel’s category determines which specific construction standards apply, what facilities are mandatory, what fees you pay at the Department of Tourism, and how you will be marketed to incoming tourists.
Nepal’s Department of Tourism, through its Standard Fixation Committee, classifies hotels into the following categories as per the Hotel Standard 2077 and the HLRB Rules 2038:
Classification | Min. Rooms | Key Minimum Facilities | DoT Registration Fee (NPR) | Renewal Cycle |
|---|---|---|---|---|
General Tourist Standard Hotel | 10 bedrooms | Natural light/air in each room. 25% rooms with attached bath. 1:4 common bathroom ratio. Basic food service. | As prescribed (lower tier) | 5 years |
Tourist Resort | Varies by location | Resort-specific location criteria, recreational facilities, natural setting amenities | As prescribed | 5 years |
1-Star Hotel | Minimum 10 rooms | Attached bathrooms in all rooms. Restaurant. Basic front desk 16 hours/day. Simple furnishing standards. | NPR 5,000 | 5 years |
2-Star Hotel | Minimum 10 rooms | Attached bathrooms, improved furnishing, restaurant with full menu, 24-hour front desk, public telephone. | NPR 10,000 | 5 years |
3-Star Hotel | Minimum 20 rooms | All attached baths, room service, restaurant, bar, laundry, 24-hour front desk, conference facility, lift (if 4+ floors). | NPR 20,000 | 5 years |
4-Star Hotel | Minimum 25 rooms | Superior fittings, multiple restaurants, bar, pool or fitness centre, business centre, 24-hour room service, concierge. | NPR 30,000 | 5 years |
5-Star Hotel (General) | Minimum 50 rooms | Luxury fittings throughout, multiple dining outlets, pool, fitness centre, business centre, spa, 24-hour room service, full concierge. | NPR 50,000 | 5 years |
5-Star Deluxe Hotel | Minimum 100 rooms | All 5-Star requirements plus international luxury brand standards, comprehensive leisure facilities, multiple F&B outlets, full concierge services. | NPR 60,000 | 5 years |
📌 Classification Is Mandatory: Every hotel operating in Nepal must obtain a classification from the Department of Tourism’s Standard Fixation Committee before opening to guests. Operating without DoT classification is illegal under the Tourism Act 2035 and attracts penalties and forced closure. The classification also determines your legal right to call your property a “5-Star” or any other rated hotel, using a star rating without DoT classification is a misrepresentation.
3.1 The Standard Fixation Committee
The Standard Fixation Committee is a body established by the Government of Nepal under Section 11 of the Tourism Act 2035. It is responsible for recommending the classification or registration of hotels, lodges, restaurants, resorts, and bars as tourism standards. The Committee inspects proposed or completed hotel properties against the criteria established in the Hotel Standard 2077 and makes classification recommendations to the Department of Tourism.
For a new hotel project, the Standard Fixation Committee inspection typically occurs after construction is complete and the hotel is substantially ready for operation. The investor cannot receive the final hotel classification certificate until this inspection has been conducted and the Committee is satisfied that all applicable standards are met.
Foreign Investment Eligibility: Who Can Invest and How Much Is Required?
4.1 Eligible Foreign Investors
- Foreign nationals: Any foreign national above 18 years of age from a country with which Nepal has diplomatic relations can invest in a hotel in Nepal.
- Foreign companies: Any company registered and operating in a foreign country can invest in a Nepali hotel, subject to FITTA 2019 compliance.
- 100% foreign ownership: Hotels are fully open to 100% foreign ownership. A Nepali joint venture partner is not legally required, though many foreign investors choose to partner with Nepali investors for local market knowledge and relationship networks.
- No country-specific exclusions: There is no list of excluded countries for hotel investment in Nepal, subject to any applicable government sanctions or orders.
4.2 Minimum Investment Threshold
Under FITTA 2019, the minimum foreign investment in Nepal is NPR 20,000,000 (NPR 20 million, approximately USD 150,000) for most sectors. For hotels, this represents a very low floor relative to the actual cost of establishing any commercially viable hotel property. In practice, even a modest 3-star hotel in Kathmandu requires investment well above the NPR 20 million threshold.
Investment Size (NPR) | Approval Authority | Approval Route |
|---|---|---|
NPR 20 million to NPR 500 million | Department of Industry (DoI), FITT Unit, OSSC | Automatic Route (7-day statutory processing window) |
NPR 500 million to NPR 6 billion | Department of Industry (DoI) | Standard Route (30-45 days) |
Above NPR 6 billion (~USD 45 million) | Investment Board Nepal (IBN) | IBN Standard Route (60-90 days) |
4.3 Forms of Foreign Investment Recognized Under FITTA 2019
Foreign investment in a Nepali hotel can take several forms, all recognized under Section 2(j) of FITTA 2019:
- Equity investment: Purchase of shares in a Nepali hotel company. The most common FDI form.
- Reinvestment of earnings: Reinvesting dividends or profits generated by the hotel back into the business.
- Loan capital: Loans from foreign lenders to the hotel company, subject to NRB approval for foreign borrowing.
- Technology transfer: Contribution of proprietary hotel management systems, brand licenses, or operational know-how in exchange for equity or royalties.
- Franchise arrangements: International hotel brand franchise agreements (e.g. Marriott, Hilton, Hyatt franchise) constitute a form of technology/brand transfer recognized under FITTA.
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. Hotel registration laws, FDI regulations, classification standards, and fees are subject to change. Readers should consult a qualified legal professional for advice specific to their circumstances. © 2025 Pluto Associates. All rights reserved.
A worked example
A foreign investor plans a boutique hotel in Pokhara. Foreign investment approval comes first, followed by incorporation, then the building approval, then the tourism registration, the municipal business registration, the kitchen hygiene permit and the liquor licence for the bar. Each one is modest. Together they decide whether the hotel can open on schedule.
Because the investor mapped the approvals before construction began, the kitchen and bar were compliant on the first day of operation. Had the approvals been sorted after opening, the first inspection would have closed the bar, and the cost of that delay would have exceeded the cost of the licences many times over.
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
Can a foreigner own 100% of a hotel in Nepal? Yes. Hotels are not on the negative list under the Foreign Investment and Technology Transfer Act 2019, unlike travel and trekking agencies, so full foreign ownership needs no Nepali partner. FDI approval from the Department of Industry still comes first.
How long does hotel registration take in Nepal? Allow two to three months for the full sequence. FDI approval through the Automatic Route takes seven working days for investments up to NPR 500 million, and the Department of Tourism classification follows inspection of the finished hotel.
What is the minimum investment for a foreign funded hotel? NPR 20 million under FITTA 2019, which is about USD 150,000. The Department of Industry approves investments up to NPR 6 billion, and larger projects go to Investment Board Nepal.
Who assigns the star rating to a hotel in Nepal? The Standard Fixation Committee, formed under Section 11 of the Tourism Act 2035, inspects the property against the Hotel Standard 2077 and recommends a category to the Department of Tourism. Using a star rating without that classification is a misrepresentation.
What is the correct order of hotel approvals? FDI approval at the Department of Industry, company registration at the Office of the Company Registrar, industry registration under the Industrial Enterprises Act 2020, then hotel registration and classification at the Department of Tourism. Municipal and hygiene permits run alongside.
How much does hotel classification cost? Department of Tourism fees run from NPR 5,000 for a one star hotel to NPR 60,000 for a five star deluxe property. Classification must be renewed every five years under the Tourism Industry Service Delivery Directory 2070.
Can I repatriate profits from my hotel? Yes, once the capital is recorded with Nepal Rastra Bank within six months of injection and tax clearance is obtained. FITTA 2019 allows dividends and returns on investment to be remitted abroad.
What reports must a registered hotel file? Semi annual returns go to the Department of Tourism under Section 47 of the Tourism Act 2035. Annual income tax filings and any VAT obligations with the Inland Revenue Department continue as well.
Is a liquor licence part of hotel registration? No. Building approval from the municipality, kitchen hygiene clearance, fire safety checks and a liquor licence for the bar are separate from the tourism licence. Secure them before opening day.
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.