The legal framework governing Non-Resident Nepali NRN investment in Nepal is primarily structured around the Non-Resident Nepali Act 2064 (2008) and the Foreign Investment and Technology Transfer Act 2075 (2019).
The Non-Resident Nepali Act defines two categories of NRNs:
- Foreign citizens of Nepali origin: This category includes individuals whose father, mother, grandfather, or grandmother was a Nepali citizen at any point in time and who have subsequently acquired citizenship of a foreign country. It’s worth noting that this definition excludes citizens of South Asian Association for Regional Cooperation (SAARC) countries.
- Nepali citizens residing abroad: This group comprises Nepali citizens who have been residing in a foreign country for a minimum of two years, engaged in profession, occupation, business, or employment. Again, this excludes those residing in SAARC countries.
The Foreign Investment and Technology Transfer Act 2075 (2019) further complements the NRN Act by providing a structure for foreign investment, which includes investments by NRNs choosing to invest as foreign entities. This act outlines the procedures for bringing foreign direct investment (FDI) into Nepal, including minimum investment thresholds, approval processes, and sectors open for foreign investment.
Can NRN Invest in Nepal?
Yes, NRNs are not only permitted but actively encouraged to invest in Nepal. The Nepali government has created specific provisions to facilitate NRN investment. NRNs have the flexibility to invest in a wide range of sectors in the Nepali economy. However, this right to invest comes with certain responsibilities and is subject to specific regulations. The government’s proactive stance towards NRN investment is reflected in various policies and initiatives aimed at simplifying the investment process for NRNs.
Eligibility for Investing in Nepal as a NRN
The Eligibility Criteria for Non-Resident Nepali to invest in Nepal are:
- Qualify as a Non-Resident Nepali with a Foreign Citizenship
- Investment must be made in Convertible Foreign Currency
- Proposed Investment mustn’t fall within negative list of prohibited sectors
- Minimum Investment Amount of NPR 20 Million
What is the minimum Investment amount for NRNs?
Investment as a Nepali Citizen: When NRNs choose to invest as Nepali citizens, there is no specific minimum investment amount mandated by law. They are treated on par with resident Nepali citizens in terms of investment requirements.
Investment as a Foreigner through FDI Route: For NRNs opting to invest as foreign entities, the Foreign Investment and Technology Transfer Act 2019 stipulates a minimum investment threshold of NPR 20 million (approximately USD 153,000).
Methods of NRN Investment in Nepal
NRNs have two primary methods of investing in Nepal: Investment as a Nepali & Investment as a Foreigner.
NRN Investment as a Nepali
This method allows NRNs to invest in Nepal as regular Nepali citizens. The key features of this approach include no minimum investment threshold, a simpler registration process, and no need for FDI approval. Investors are treated on par with resident Nepali citizens, but they are unable to repatriate earnings to foreign countries. This method is particularly suitable for NRNs who maintain their Nepali citizenship and wish to invest smaller amounts or in sectors where foreign investment is restricted.
Process of NRN Investment as a Nepali Citizen
Step 1: Business Registration
The first step is to register the business with the Office of Company Registrar (OCR). This process involves selecting a unique company name, preparing the Memorandum of Association and Articles of Association, submitting the application along with required documents, and paying the registration fee, which varies based on the company’s authorized capital. The OCR typically processes the application within 3-5 working days if all documents are in order.
Step 2: PAN Registration
After company registration, the next step is to obtain a Permanent Account Number (PAN) from the Inland Revenue Department. This is crucial for tax purposes and is required for all business transactions. The process involves submitting an application form, providing company registration documents, submitting photographs of company directors, and paying the required fee. PAN registration is usually completed within 1-2 working days.
Step 3: Industry Registration
Depending on the nature and scale of the business, registration with the Department of Small Industry may be required.
Step 4: Local Registration
The business must be registered with the local municipality or rural municipality where it will operate. This process typically involves submitting an application form, providing company and tax registration documents, and paying local registration fees. Local registration is usually completed within 3-5 working days.
Step 5: Additional Permits
Depending on the specific business activity, additional sector-specific licenses or permits may be required. For example, tourism businesses may need permits from the Department of Tourism, educational institutions require approval from the Ministry of Education, and financial services companies need licensing from Nepal Rastra Bank. The timeline for these additional permits varies widely based on the sector and specific requirements.
Also Read: Non-Resident Nepali NRN Laws in Nepal
Documents required for NRN Investment as a Nepali
- Citizenship certificate or NRN card
- Passport-sized photographs of all company directors
- Proposed company’s Articles of Association and Memorandum of Association
- Proof of office address (rental agreement or property ownership documents)
- Bank statements or proof of investment capital
- Tax clearance certificates (if applicable)
- CV or bio-data of company directors
- No Objection Letters from relevant ministries (for certain sectors)
- Environmental clearance certificates (if required for the specific industry)
The Process of investing as a Nepali Citizen takes 2-4 Weeks based on the nature of the business and document preparation. The Costs include the Government Registration Fees, Local Body Registration Fees, Professional Service Fees and the Sector-Specific Licensing Fees.
Investment as a Foreign Citizen
This method involves investing through the Foreign Direct Investment (FDI) procedure. The main characteristics of this approach are a minimum investment of NPR 50 million required and a more complex approval process involving the Department of Industry or Investment Board Nepal. Investors have the ability to repatriate earnings and capital, and they have access to sectors open for foreign investment. Under Nepali law, they are treated as foreign investors. This method is appropriate for NRNs who wish to make larger investments, require the ability to repatriate earnings, or want to invest in sectors specifically open to foreign investment.
Process of Investing as a Foreign Citizen
Step 1: FDI Approval
The first step is to obtain FDI approval. This involves submitting an application to the Department of Industry (for investments up to NPR 6 billion) or the Investment Board Nepal (for investments exceeding NPR 6 billion). Investors must provide a detailed project proposal or business plan and submit proof of financial credibility. An application fee is also required. The approval process typically takes 3-6 weeks, depending on the complexity of the project.
Step 2: Company Registration
After receiving FDI approval, the company must be registered with the Office of Company Registrar. This process is similar to registering as a Nepali citizen but includes additional steps. Investors must submit the FDI approval letter, provide details of foreign shareholders, and submit a joint venture agreement (if applicable). Company registration for foreign investors usually takes 1-2 weeks.
Step 3: Industry Registration
The next step is to register the industry with the Department of Industry. This involves submitting a detailed application form, providing the approved business plan, and submitting environmental clearance documents (if required). A registration fee must also be paid. Industry registration typically takes 2-4 weeks.
Step 4: Capital Investment
Once all approvals are obtained, the approved investment amount must be transferred through proper banking channels. The concerned bank will issue a certificate of capital investment, which is a crucial document for future repatriation of profits.
Step 5: Additional Registrations
Final steps include obtaining a Permanent Account Number (PAN), registering for Value Added Tax (VAT) if applicable, completing local municipality registration, and obtaining any sector-specific licenses. These additional registrations usually take 1-2 weeks to complete.
Eligible Sector of Investment as a NRN
Eligible Sectors for Investment as a NRN are:
- Manufacturing and production industries
- Energy sector, including hydropower projects
- Hospitality services
- Information technology and communications
- Agriculture and agro-processing industries
- Education and health services
- Infrastructure development projects
- Financial services (subject to central bank regulations)
- Mining and mineral processing
- Construction and real estate (with some restrictions)
Documents Required for NRN Investment as a Foreigner
The following documents are typically required for NRN investment as a foreigner:
- FDI approval application form
- Detailed project proposal or business plan
- Joint venture agreement (if applicable)
- Copy of passport and NRN card
- Financial credibility certificate from a bank
- Company registration documents (for the foreign company, if investing through a company)
- Board resolution authorizing the investment (for company investors)
- CV or bio-data of all promoters
- Commitment letter for minimum investment
- Draft Memorandum and Articles of Association for the proposed company
The entire process of NRN investment as a foreigner typically takes 2-3 months from initial application to final registration. This timeline can vary based on the complexity of the project and the efficiency of the investor in providing required documents.
Laws and Authorities governing NRN Investment
NRN investment in Nepal is governed by a framework of laws and overseen by various authorities:
| No. | Laws | Authorities |
|---|---|---|
| 1 | Non-Resident Nepali Act 2064 (2008) | Ministry of Industry, Commerce and Supplies |
| 2 | Foreign Investment and Technology Transfer Act 2075 (2019) | Department of Industry |
| 3 | Industrial Enterprises Act 2076 (2020) | Investment Board Nepal |
| 4 | Companies Act 2063 (2006) | Nepal Rastra Bank |
| 5 | Nepal Rastra Bank Act 2058 (2002) | Office of Company Registrar |
| Department of Immigration | ||
| Inland Revenue Department |
Contact NRN Lawyer in Nepal
Disclaimer: This material is presented solely for informational purposes, without constituting legal advice, counsel, or solicitation, and no liability shall arise from any actions, omissions, or reliance on its contents, directly or indirectly, in any manner whatsoever, irrespective of the jurisdiction or specific circumstances.