The Foreign Investment and Technology Act 2019 (2075), the Patent, Design, and Trademark Act 1965 (2022), and the Foreign Exchange (Regulation) Act 1962 (FERA) are the legal framework and guidelines that companies need to adhere to when running franchise businesses in the country.
The Foreign Investment and Technology Transfer Act of 2019 authorizes the Department of Industry, which operates under the Ministry of Industry, Commerce, and Supplies, to approve franchise establishment in Nepal. To ensure trademark protection in the country, foreign trademarks and brand names must be registered under Nepal’s Patent, Design, and Trademark Act of 1965. The registration process is carried out by the Department of Industry, aiming to prevent any potential infringements.
Procedures of Franchising of International Brand
- Registering the trademark of a foreign brand with the Department of Industry is essential.
- Franchise agreements between foreign and local companies require approval from the Department of Industry.
Trademark registration in Nepal can take 12 to 15 months.Department of Industry approval for a franchise agreement is contingent on theregistration of the foreign brand’s trademark.Without local trademark registration, the trademark’s legitimacy and protection are not considered.The original foreign trademark must be registered in its home jurisdiction.
Document Required for Franchising Process
- Original copy of application of licensing of foreign brand
- A notary certified copy of Foreign Registration Certificate of Licensor or Passport of Foreign partner including Memorandum and Articles of Association of the foreign company.
- Two copies of the Franchise Agreement or other related agreement if any exist.
- A copy of the certificate of incorporation including MOA and AOA of local company
- Certificate of incorporation or Citizenship certificate of local partner, including MOA if the local party is a company.
- Bio- data of foreign investor or company profile
- Industry registration certificate of a local company along with authorized representative in Nepal.
- Copy of minute of board of local company and foreign company
- Notary certified copy of Current Audit Report and Tax Clearance Certificate.
- Notary certified copy of power of attorney
DOI permits trademark licensing for a period of 5 years and can be renewed upon request for the same period of time by issuing an application. Foreign Investment and Technology Transfer Rules, 2020 under its Schedule 1 prescribes up to 5% of total sales and 10% of total exports for reparation of royalty. The specific royalty rates are:
Royalty amount or other fees for all types of Technology Transfer for Industry
| Royalty | Local Sales | Exports Sales |
| Total amountor total salesamount | up to 5 % oftotal salesexcluding VAT | up to 10%of total salesexcluding VAT |
| If the royalty isbased on netprofits | up to 15 % ofnet profits | up to 20% of netprofits |
Royalty amount or other fees for used by trademark
| Local Sales | Exports Sales |
| up to 2% of total salesexcluding VAT for alcoholand tobacco industry | up to 5% of total salesexcluding VAT for alcoholand tobacco industry |
| up to 3 % of total salesexcluding VAT for otherindustries | up to 6 % of total salesexcluding VAT for otherindustries |
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