How Can NRN Invest in Nepal?

What sectors can NRN invest in Nepal?

Non-Resident Nepalis (NRN) have numerous investment opportunities across various sectors in Nepal. The Government of Nepal welcomes foreign investment, including from NRN, in most industries. Key sectors open for NRN investment include:

• Manufacturing and production
• Energy and hydropower
• Tourism and hospitality
• Information technology and business process outsourcing
• Agriculture and agro-processing
• Infrastructure development
• Healthcare and education
• Financial services

The Foreign Investment and Technology Transfer Act (FITTA) 2019 provides the legal framework for foreign investment in Nepal. However, certain sectors remain restricted or prohibited for foreign investment, such as poultry farming, real estate (housing), and primary agriculture. NRNs should consult the latest negative list issued by the Nepal government for up-to-date information on restricted sectors.

Can NRNs own businesses in Nepal?

Yes, NRNs can own businesses in Nepal. The Foreign Investment and Technology Transfer Act (FITTA) 2019 and the Non-Resident Nepali Act 2008 provide the legal basis for NRN business ownership. NRNs can:

• Establish wholly-owned subsidiaries
• Form joint ventures with Nepali partners
• Acquire shares in existing Nepali companies

NRNs enjoy certain privileges in business ownership compared to other foreign investors. They can own up to 100% equity in most sectors, except those restricted by law. The Non-Resident Nepali Act 2008 grants NRNs the right to invest and conduct business activities in Nepal on par with resident Nepalis, subject to specific regulations.

Are there restrictions on NRN investments?

While Nepal generally welcomes NRN investments, some restrictions apply:

• Sector-specific limitations: Certain sectors are closed or partially restricted for foreign investment, including NRNs.
• Minimum investment threshold: FITTA 2019 stipulates a minimum foreign investment amount, which also applies to NRNs.
• Approval requirements: Investments in specific sectors or above certain thresholds may require prior approval from relevant government agencies.
• Land ownership restrictions: NRNs face limitations on direct land ownership for business purposes.
• Repatriation regulations: There are rules governing the repatriation of profits and dividends from NRN investments.

NRNs should consult the Department of Industry and the Nepal Investment Board for the most current information on investment restrictions and requirements.

What are the legal requirements for NRN investment?

NRNs must comply with several legal requirements to invest in Nepal:

1. NRN certification: Obtain an NRN card from a Nepali embassy or consulate.
2. Company registration: Register the business entity with the Company Registrar’s Office.
3. Foreign investment approval: Obtain approval from the Department of Industry or Investment Board Nepal, depending on the investment size.
4. Industry-specific licenses: Acquire necessary permits and licenses for the specific sector of operation.
5. Tax registration: Register for a Permanent Account Number (PAN) with the Inland Revenue Department.
6. Labor regulations: Comply with Nepal’s labor laws and obtain work permits for foreign employees.
7. Environmental clearance: Obtain environmental impact assessments if required for the project.
8. Foreign currency regulations: Adhere to Nepal Rastra Bank’s foreign exchange regulations for investment inflows and outflows.

NRNs should engage legal counsel to ensure full compliance with all applicable laws and regulations.

Can NRNs invest in real estate in Nepal?

NRNs have limited options for investing in real estate in Nepal:

• Residential property: NRNs can purchase up to two residential properties in their own name for personal use.
• Commercial property: Direct ownership of commercial real estate by NRNs is restricted.
• Real estate companies: NRNs can invest in real estate development companies, subject to foreign investment regulations.
• Land for business: NRNs can lease land for business purposes but face restrictions on direct land ownership.

The Non-Resident Nepali Act 2008 and the Lands Act 2021 govern real estate investments by NRNs. It’s advisable to consult with legal experts and relevant government authorities for the most up-to-date regulations on real estate investments.

Is a local partner required for NRN investments?

In most cases, NRNs are not required to have a local partner for investments in Nepal. The Foreign Investment and Technology Transfer Act (FITTA) 2019 allows 100% foreign ownership in many sectors. However, there are some considerations:

• Certain sectors may require a minimum percentage of local ownership.
• Joint ventures with local partners can provide valuable local knowledge and connections.
• Some government contracts and tenders may favor companies with local participation.
• A local partner might be beneficial for navigating bureaucratic processes and cultural nuances.

While not mandatory in most cases, partnering with a reputable local entity can often facilitate smoother business operations and market entry for NRNs investing in Nepal.

What documents are needed for NRN investment?

NRNs need to prepare and submit various documents for investment in Nepal:

• NRN card or proof of NRN status
• Passport and visa (if applicable)
• Business proposal or feasibility study
• Company registration documents (for existing companies)
• Bank statements or proof of funds
• Tax clearance certificates from the country of residence
• Curriculum vitae of key personnel
• Environmental impact assessment (if required)
• Land ownership or lease documents (if applicable)
• Industry-specific licenses and permits
• Foreign investment approval application
• Company incorporation documents (for new companies)

The specific documents required may vary depending on the sector, investment size, and type of business entity. It’s advisable to consult with the Department of Industry or Investment Board Nepal for a comprehensive list of required documents.

Are there tax benefits for NRN investors?

Nepal offers several tax incentives to attract foreign investment, including from NRNs:

• Income tax exemptions or reductions for investments in priority sectors
• Customs duty exemptions on imported machinery and equipment
• Value Added Tax (VAT) exemptions on certain goods and services
• Accelerated depreciation allowances for specific industries
• Tax holidays for investments in remote or underdeveloped areas
• Double taxation avoidance agreements with several countries

The Income Tax Act 2058 (2002) and various finance acts provide the legal basis for these tax benefits. However, tax incentives are subject to change, and NRNs should consult with tax experts and the Inland Revenue Department for the most current information on available tax benefits and eligibility criteria.

Can NRNs invest in the stock market in Nepal?

Yes, NRNs can invest in the Nepali stock market. The Securities Board of Nepal (SEBON) has established guidelines for NRN participation in the capital markets:

• NRNs can open demat accounts for electronic trading of securities.
• They can invest in shares, bonds, and mutual funds listed on the Nepal Stock Exchange (NEPSE).
• NRNs must obtain a taxpayer identification number (PAN) for stock market transactions.
• Investments are subject to applicable capital gains taxes and dividend withholding taxes.
• Repatriation of profits is allowed, subject to Nepal Rastra Bank regulations.

NRNs should engage with registered brokers and comply with Know Your Customer (KYC) requirements to participate in the Nepali stock market. It’s advisable to seek guidance from SEBON or licensed financial advisors for detailed information on stock market investments.

How to register a company as an NRN in Nepal?

Registering a company as an NRN in Nepal involves several steps:

1. Obtain NRN certification from a Nepali embassy or consulate.
2. Choose a unique company name and check its availability with the Company Registrar’s Office.
3. Prepare the company’s Memorandum and Articles of Association.
4. Open a bank account in Nepal for capital deposit.
5. Submit the registration application to the Company Registrar’s Office along with required documents.
6. Obtain the Certificate of Incorporation from the Company Registrar’s Office.
7. Register for a Permanent Account Number (PAN) with the Inland Revenue Department.
8. Apply for foreign investment approval from the Department of Industry or Investment Board Nepal.
9. Obtain necessary industry-specific licenses and permits.
10. Register with the Social Security Fund and other relevant authorities.

The Company Act 2063 (2006) governs the company registration process in Nepal. NRNs should consider engaging legal counsel to ensure compliance with all registration requirements and procedures.

Are investment visas available for NRNs?

Nepal does not have a specific “investment visa” category for NRNs. However, NRNs can obtain various types of visas to facilitate their investment activities:

• Non-Tourist Visa: For NRNs engaged in business, investment, or employment in Nepal.
• Business Visa: For NRNs conducting business activities or exploring investment opportunities.
• Residential Visa: Available for NRNs who invest a specified amount in Nepal.

The Department of Immigration handles visa matters for NRNs. Visa requirements and durations may vary based on the nature and size of the investment. NRNs should consult with Nepali embassies or the Department of Immigration for the most up-to-date information on visa options and requirements for investors.

How to repatriate profits from investments in Nepal?

NRNs can repatriate profits from their investments in Nepal, subject to certain regulations:

1. Obtain approval from the Department of Industry or Investment Board Nepal for profit repatriation.
2. Comply with tax obligations and obtain tax clearance certificates.
3. Submit audited financial statements and board resolutions approving profit distribution.
4. Apply to Nepal Rastra Bank (NRB) for foreign exchange approval.
5. Transfer funds through authorized banking channels.

The Foreign Exchange Regulation Act 1962 and NRB directives govern the repatriation process. Repatriation is generally allowed for:

• Dividends from equity investments
• Interest on loans
• Technology transfer fees
• Capital gains from divestment

NRNs should maintain proper documentation of their investments and consult with financial advisors to ensure compliance with repatriation regulations.

FAQs

1. Are all sectors open for NRNs?

No, not all sectors are open for NRN investment. While Nepal welcomes foreign investment in most industries, some sectors are restricted or prohibited. The government maintains a negative list of sectors closed to foreign investment, which applies to NRNs as well. Restricted sectors may include primary agriculture, real estate trading, and certain small-scale industries. NRNs should consult the latest negative list published by the government for up-to-date information on sector restrictions.

2. Can NRNs invest in agriculture?

NRNs face some restrictions on direct investment in primary agriculture. However, they can invest in agro-processing, commercial farming, and agriculture-related industries. The Foreign Investment and Technology Transfer Act (FITTA) 2019 allows foreign investment in commercial agriculture, subject to certain conditions. NRNs interested in agricultural investments should explore opportunities in value-added agriculture, agro-technology, and agribusiness sectors, which are generally open for foreign investment.

3. Are investments tax-free?

No, investments in Nepal are not entirely tax-free. However, the government offers various tax incentives to attract foreign investment, including from NRNs. These may include income tax exemptions or reductions for specific sectors, customs duty waivers on imported equipment, and tax holidays for investments in priority industries or underdeveloped regions. The exact tax benefits depend on the nature and location of the investment. NRNs should consult with tax experts and review the latest fiscal policies to understand the applicable tax implications for their specific investments.

4. Is dual citizenship allowed?

Nepal does not currently allow dual citizenship. The Constitution of Nepal 2015 and the Nepal Citizenship Act 2063 (2006) do not provide for dual citizenship. NRNs who have acquired foreign citizenship must renounce their Nepali citizenship. However, the Non-Resident Nepali Act 2008 grants certain rights and privileges to NRNs, including the ability to invest and conduct business in Nepal. While dual citizenship is not allowed, NRNs can obtain an NRN card, which facilitates their economic activities in Nepal.

5. Can NRNs lease land?

Yes, NRNs can lease land in Nepal for business purposes. While there are restrictions on direct land ownership by foreign nationals, including NRNs, leasing land is permitted. The Land Act 2021 and the Foreign Investment and Technology Transfer Act (FITTA) 2019 provide the legal framework for land leasing by foreign investors. NRNs can lease land for industrial, commercial, or agricultural purposes, subject to specific regulations and approval processes. The lease duration and terms may vary depending on the nature of the business and the location of the land. NRNs should consult with legal experts and relevant government authorities for detailed information on land leasing procedures and requirements.