Foreign investors in Nepal are permitted to repatriate their investment funds, dividend payments, royalty fees, loan repayments, and other approved gains abroad, subject to compliance with Nepal’s foreign exchange laws, taxation requirements, and investment regulations.
The repatriation process requires adherence to the applicable legal framework, approval procedures, documentation requirements, and regulatory requirements. This article explains the legal provisions, required documents, approval authorities, process, limitations, and applicable taxes related to the repatriation of foreign investment and dividends from Nepal.
Legal Framework for Foreign Investment Repatriation from Nepal
The repatriation of foreign investment and related returns from Nepal is governed by various laws and regulations, including:
- Foreign Investment and Technology Transfer act, 2019
- Foreign Investment and Technology Transfer Rules, 2021
- Nepal Rastra Bank,2002
- Foreign Exchange Regulation Act, 1962
- Foreign Exchange Rules, 1963
- Companies Act, 2063
- Income Tax Act,2002
- Income Tax Rules,2003
- Industrial Enterprises Act,2020
As per the Foreign Investment and Technology Transfer Act, 2019, a foreign investor making investment in foreign currency shall be entitled to repatriate the following amounts outside Nepal:
a) The amount received by the sale of the share of foreign investment as a whole or any part thereof.
b) The amount received as profit or dividend from foreign investment.
c) The amount received as payment of principal and interest on any foreign loan.
d) The foreign investor or a foreign technology supplier is also entitled to repatriate the amount received under the agreement for technology transfer in such currency as set forth in the concerned agreement approved by the Department of Industry.
A foreign national working in any industry with prior approval of the Department of Labour and who is from a country where convertible foreign currency is in circulation may repatriate his/her salaries, allowances, emoluments, etc. in convertible foreign currency in an amount not exceeding seventy-five percent of such salaries, allowances, and emoluments.
Authorities Responsible for Foreign Investment Repatriation Approval
| Governing Authority | Details |
| Investment Board of Nepal or Department of Industry | Provides approval/recommendation for repatriation |
| Nepal Rastra Bank | Provides final approval for repatriation |
Documents Required for Repatriation of Foreign Investment from Nepal
1. Repatriation of Sales of Shares
For the repatriation of proceeds from the sale of shares of a foreign investor, the investor or concerned company must apply to the Department of Industry for recommendation to the central bank along with the following documents:
a) Proof of investment made and number of shares owned. The proof of investment could be a certificate from the commercial bank through which the investment was brought into Nepal.
b) Letter from the company stating completion of transfer of related shares duly certified by the Company Registrar’s Office or such competent body.
c) Prior approval of the Department of Industry, if the share was transferred to any foreign national.
d) Tax clearance certificate.
e) Custom declaration form and approval letter if the investment was made in the form of plant, machinery, and equipment.
f) Copy of the Board of Directors’ resolution.
2. Repatriation of Dividend
Any foreign investor wishing to repatriate dividends from investment as per the Foreign Investment and Technology Transfer Act, 2019 has to obtain a recommendation from the Department of Industry.
The foreign investor or company must apply to the Department of Industry with the following documents:
a) Documentary proof of investment made issued by the commercial bank. This document is required only for the first time and again when further investment is made by the investor.
b) Custom declaration certificate of the import of plant, machinery, and equipment if the investment by the foreign investor has been made in the form of capital equipment.
c) Auditor’s report including balance sheet and profit and loss account.
d) Tax clearance certificate.
e) Proof of dividend declaration.
3. Repatriation of Loan and Interest
The industrial unit with foreign loan must apply to the Department of Industry for sending out the principal and interest on foreign loans obtained with the approval of the Department of Industry along with the following documents:
a) Certificate from the commercial bank regarding the transfer of the loan amount into Nepal.
b) Custom declaration certificate and invoice of plant machinery if the loan was obtained in the form of machinery.
c) Letter of approval of the loan agreement.
d) Tax clearance certificate.
Note: Income tax on interest on foreign loans should be deducted at source as per prevailing law and deposited at the Tax Office.
4. Repatriation of Technology Transfer Fees
The industrial unit with an approved technology transfer agreement, trademark license agreement, management agreement, or technical assistance agreement can apply to the Department of Industry for transfer of fees as per the agreement.
The company has to submit the calculation of the amount due to the foreign technology supplier certified by the auditor along with the certificate of payment of income tax on royalty as per the prevailing tax rate.
Timeline for Foreign Investment Repatriation from Nepal
The process of repatriation from Nepal to an international location normally takes around 1 to 2 months, depending upon various factors such as:
- Type of transaction
- Complete documentation
- Tax clearance
- Bank approvals
Steps for Repatriation of Foreign Direct Investment in Nepal
The following steps are generally followed for repatriation of foreign direct investment:
- Submission of an application to the approval authority.
- Obtaining an approval letter for repatriation.
- Submission of an application to Nepal Rastra Bank.
- Obtaining final approval from Nepal Rastra Bank for the repatriation.
Repatriation Limitations
Investors who wish to invest foreign currency in Nepal cannot normally repatriate the investment amount in the first year after the investment is made.
Nepal Rastra Bank may attach certain conditions or restrictions when approving the investment and repatriation. Investors are required to follow the terms and conditions set forth by Nepal Rastra Bank for investment or return on investment repatriation.
Taxes Applicable on Repatriated Amounts
Foreign investors allowed to return the amount of their investment must pay the following applicable taxes:
| Category | Tax Rate |
|---|---|
| Aircraft Lease | 10% |
| Dividends | 5% |
| Share sale proceeds | 5% |
| Service Fees | 15% |
Frequently Asked Questions
Can foreign investors repatriate dividends from Nepal?
Yes. Foreign investors can repatriate dividend payments from their investment in Nepal after obtaining the required recommendation from the Department of Industry and completing the required documentation process.
Which authority provides final approval for foreign investment repatriation in Nepal?
The Investment Board of Nepal or the Department of Industry provides approval/recommendation for repatriation, while Nepal Rastra Bank provides the final approval.
How long does the foreign investment repatriation process take in Nepal?
The process normally takes around 1 to 2 months depending on the transaction type, documentation completeness, tax clearance, and bank approvals.
What documents are required for dividend repatriation?
Required documents include proof of investment, custom declaration certificate where applicable, auditor’s report, tax clearance certificate, and proof of dividend declaration.
Conclusion
The repatriation of foreign investment and dividends from Nepal to abroad can be completed by obtaining the necessary approvals while complying with applicable investment, foreign exchange, and taxation regulations.
At Prime Law Associates, we assist foreign investors in managing the repatriation process from the initial application stage through completion, ensuring compliance with applicable legal requirements.
Source: Department of Industry, Government of Nepal