What is IBN?
Investment Board Nepal (IBN) is a high-level government agency established to facilitate public-private partnership and private investments, particularly foreign direct investment (FDI) in Nepal. It was established through the Investment Board Act, 2011 and was reconstituted by introducing the Private Public Partnership and Investment Act (PPPIA) in 2019. The IBN is responsible for approving investment of NPR 6 billion or above for infrastructure development and provides hand holding facilities to investors in Nepal.
What is the structure of IBN?
Right Honorable Prime Minister heads the IBN board as its Chairperson and the Honorable Minister for Finance is its Vice-Chairperson. The Chief Executive Officer (CEO) is the board’s member secretary and is appointed by cabinet through a competitive process for a tenure of four years. Click here to know the composition of the board.
What are the IBN’s mandates?
The PPPIA provides two broad mandates to IBN: (a) To act as the national investment promotion and facilitation agency, providing ‘one-stop service’ for private sector investors, (b) To approve FDI of NPR 6 billion (Approx. USD 60 million) or above, carry out project studies, develop and manage (both solicited and unsolicited) projects under the public-private partnership (PPP) or private investment model as per the prevailing Act. The IBN also approves investments for the development of energy projects with a capacity of 200 MW or above.
What is OIBN?
The Office of the Investment Board Nepal is the secretariat for the Investment Board Nepal (IBN), and is headed by its Chief Executive Officer (CEO) who is appointed through a competitive process for a period of four years. The OIBN has a team of people who are assigned for specialized services to investors. The OIBN has separate units for looking after private public partnerships (PPP), investment promotion, stakeholder engagement, and environmental and social compliance, among others.
What are the projects being handled by IBN?
Click here to know the key PPP and private investment projects being handled by IBN at present.
What are the hydropower projects that are under IBN jurisdiction?
Following are the hydropower projects, being handled by OIBN:
- Arun- 3 Hydropower
- Upper Karnali Hydropower
- Upper Marsyangdhi-2 Hydropower
- Tamor Hydropower
- Lower Arun Hydropower
- West Seti + SR 6 Hydropower
How much FDI has been approved by IBN till now?
For information on the total amount of FDI approved by IBN, click here.
How does the FDI approval process work at IBN?
Click here to see the FDI approval process at IBN.
Does IBN provide one-stop service to investors?
Yes. IBN facilitates one-stop-service for investors. It has set up a separate one-stop service unit to provide the following activities:
- To carry out activities regarding registration, approval, establishment of the company, renewal, transaction approval, etc. through the development of one-stop-service to facilitate investors
- Issue recommendation letter to the relevant agency for project development
- To provide Permanent Account Number (PAN) to investor
- To recommend and facilitate FDI approval and repatriation based on prevailing laws
- To facilitate for necessary industrial infrastructure required for project development
- To facilitate foreign investor and foreign workers for obtaining visa and work permit as per existing law
- To provide investment-related notices and information through the establishment and operation of an investment portal
- To conduct/facilitate/recommend activities such as capital increment, the addition of objectives, change in objective, ownership transfer and relocation of a company established under existing law for project development
- To recommend and facilitate all activities essential in relation to project development and management
- To provide service to investors through development on one-stop-service
- To carry out activities as assigned by IBN
Do investors have to pay for the one-stop service facilities?
No, IBN does not charge investors for one-stop service facilities.
Who qualifies for the one-stop service facility at IBN?
IBN provides one-stop service to any foreign/national investors who are willing to investment in Nepal.
How can I access the one-stop service?
In order to access the one-stop service from IBN, any national/international investors can either write to IBN Office at firstname.lastname@example.org or visit the IBN Office.
How can I apply for investment at IBN?
Any potential investor is required to submit a project investment application at IBN. Following is the process of application at IBN. IBN also manages solicited projects, for which there is a standard procurement process, and the investors have to participate in the process. Click here for the process for solicited projects.
Do I have to physically be present to apply at IBN?
No, any investors can apply online at email@example.com with the specified fee. Click here for the processes for solicited and unsolicited application at IBN.
What are the necessary documents that I am required to produce for an unsolicited projects?
For an unsolicited project, investors are requested to submit:
- Company profile including a financial statement for the last 5 years,
- Project concept and plan,
- Technical details and specification,
- Details of project feasibility/survey/detailed design,
- Project economic/technical/environmental feasibility,
- Project implementation method and work schedule,
- Business plan and basic financial statement,
- Source of investment and financial arrangement,
- Social/economic contribution of the project, and
- Other relevant information (if any)
What is an unsolicited project?
Unsolicited projects refer to investment projects conceptualized and developed solely by the private sectors. Private projects can be fully owned by private parties in Nepal.
How does IBN negotiate projects?
IBN has a standard process for negotiating projects. First, all conditions are mentioned in the EOI and RFP documents and project negotiations follow them. IBN signs a Project Development Agreement (PDA) for PPP projects and a Project Investment Agreement (PIA) for private investment projects. The PDA negotiation team comprises up of:
- Joint Secretary, Investment Board Nepal: Coordinator
- Project Manager assigned by Investment Board Nepal: Member
- Under Secretary- Technical, Investment Board Nepal: Member
- Under Secretary (Legal), Investment Board Nepal: Member
- Officer, Investment Board Nepal: Member Secretary
How does IBN collaborate with provincial and local bodies?
IBN coordinates with provincial and local governments on various issues including the development of potential PPPs and private projects, promoting such projects, and managing the stakeholders in such projects in the provincial and local units they are located in. Apart from these, IBN collaborates with provincial and local governments to build their capacity.
What are the promotion initiatives that IBN has carried out so far?
IBN has organized two highly successful investment promotion summits in 2017 and 2019 with significant participation from global and national investors. Over a period, IBN has coordinated with diplomatic missions and various multi-lateral agencies to organize various investment promotion events at home and abroad. Besides, IBN has provided technical support for investment promotion activities at the local level to attract investment.
How does IBN promote investment in Nepal?
IBN organizes investment summits normally two years interval and supports other government agencies as well as the private sector in their investment promotion initiatives.
- Nepal Investment Summit 2017
- Nepal Investment Summit 2019
- Nepal Infrastructure Summit 2017
- Nepal Infrastructure Summit 2019
- Tilottama Investment Summit 2019
Foreign Direct Investment
What are the key acts/laws concerning FDI in Nepal?
- Foreign Investment and Technology Transfer Act 2019
- Public-Private Partnership and Investment Act 2019
- Industrial Enterprises Act
What is the legal framework for ensuring equal treatment for investors in Nepal?
As per clause 45 and sub-clause (5) of the Public-Private Partnership and Investment Act 2019, foreign investment projects shall be treated equally as any domestic industry in Nepal.
Are foreign investors allowed to own a company in Nepal?
Yes. A foreign investor can own a company based on his/her equity investment. The ceiling of share ownership differs depending on the sector s/he wants to invest in.
What are the visa provisions for foreign investor to reside in Nepal?
As per clause 52 of the Public-Private Partnership and Investment Act 2019, a non-tourist visa shall be provided for 6 months for foreign citizens to study, research and survey any approved foreign investment. Similarly, the foreign investor or one authorized representative and their family members shall be provided business visas to stay as long as investments continue in Nepal. Foreign employees of the project acquiring labour permits shall also be allowed to stay during their period of investment in Nepal.
What are the corporate income tax rates in Nepal?
Corporate tax rates in Nepal depends upon the nature of the business entity and generally ranges from 25-30%. The normal rate for entities is 25%; rates for life insurance companies is also 25%, but rates for banks and financial institutions, general insurance, and enterprises involved in the petroleum business is 30%. Special industries, enterprises operating roads, bridges, railways hydropower stations, transmission lines, etc. on a BOOT basis are given a special rate of 20%.
What is the legal framework that guarantees project security in Nepal?
To promote foreign direct investment (FDI) and reduce investment risks, the Government of Nepal approved the Hedge Fund Regulations 2019 on February 25, 2019. Similarly, the Public-Private Partnership and Investment Act 2019 has provisions to establish a Viability Gap Fund (VGF) for priority sector projects.
What type of projects are covered by the Hedge Fund Regulations 2019?
- Hydropower projects having a capacity of 100 MW or more
- Transmission lines greater than 30 Km % 200 KVA
- Railways longer than 10 Km and metro or monorail construction
- Fast track constructions longer than 50 Km
- Other projects specified by the Government of Nepal
What are the provisions for avoiding dual taxation in Nepal?
The Government of Nepal has signed different treaties and agreements to avoid dual taxation. For instance, Nepal has signed BIPPAA with five and DTAA with eleven countries.
Can a foreign investor seek loans for project financing through Nepali banks and financial institutions?
In practice, the foreign investor seeks loan from foreign institutions, namely bank and financial institution (BFIs) or multi-lateral lending agencies. Foreign BFIs can form consortiums with Nepali BFIs in such circumstances to finance projects in Nepal.
Does IBN provide visa facilitation for investors?
Yes. Based on clause 52 of PPPIA 2019, IBN shall facilitate foreign investors with visas in coordination with the Department of Immigration (DoI).
What is the provision to settle legal disputes between a native and a foreign investor?
As per clause 65 of PPPIA 2019, the parties shall first try to resolve the dispute through mutual discussion or negotiation. If unable to do so, the dispute can then be resolved through negotiations by the IBN office. In case of failure to resolve the dispute through negotiation through the IBN office, parties can refer to arbitration proceedings as mentioned in the agreement. In the absence of arbitration proceedings being mentioned in the agreement, the dispute shall be settled under the arbitration laws of Nepal. Unless the disputing parties agree otherwise, the settlement of any dispute arising from any foreign investment shall be conducted through arbitration under prevailing regulations and proceedings of the United Nations Commission on International Trade Law (UNCITAL).
PPP and Private Projects
How are PPP projects procured by IBN?
Firstly, IBN calls for an expression of interest (EOI) from potential investors. The EoIs are then screened based on a set of criteria. IBN then issues a request for proposals (RFP) notice to qualified investors for the submission of a detailed project proposal. Finally, IBN conducts a comprehensive review of the proposals received before recommending the most competent investor to the IBN board meeting for final selection.
What are PPP projects being handled by IBN?
IBN has been overseeing various PPP projects. Some major PPP projects in advance stage implementation are:
- Arun-3 Hydropower Project
- Upper Karnali Hydropower Project
What are private projects being handled by IBN?
IBN has been overseeing some private investment projects in advance stage of implementation:
- Hongshi Cement Private Limited
- Huaxin Cement Private Limited
How does IBN identify PPP projects in Nepal?
IBN has developed a project bank for PPP projects in coordination with relevant government agencies and the private sector. Projects are recommended to the IBN board meeting for final approval. The identification and approval of projects are based on the priority sectors envisaged by the PPPIA 2019.
Does IBN solely act as center for public-private partnership?
Yes, PPPIA 2019 has mandated IBN for the development of projects under public-private partnership modality.
How Public-Private Partnership Projects are procured at IBN?
Firstly, IBN calls for Expression of Interest (EOI) from potential investors followed by screening based on set criteria. IBN issues Request for Proposal (RFP) notice to qualified investors for submission of a detailed project proposal. Lastly, IBN conducts a detailed study of proposal received and recommend the most competent investor to IBN Board Committee for assigning investor.
How PPP projects are handed over to the Nepal government after a concession period?
There are different modality to hand over the project to the government.
Project Development and Management
When does IBN sign a MoU?
Unsolicited Proposal: The screening committee of IBN prepares the screening report of such proposals which is then submitted to the board of IBN chaired by Honorable Prime Minister of Nepal. The board afterwards decides either for its approval or disapproval related to feasibility study. If the board approves then the IBN negotiates with the developer for MOU. For example; for energy projects such MoU is signed prior to issuance of survey I.e. after approval of feasibility study by board, MoU is signed followed by issuance of survey license. Solicited Proposal: The evaluation committee of IBN prepares the report of such proposals which is then submitted to the board of IBN. It is to be noted that depending up on the criteria set by evaluation committee and also approved by board, the number of developer that fits the criteria is selected and the report is then submitted to board for decision to seek request for proposal (RFP) from those developers. However, if there is single application for a project and the developer also fits the criteria then the board of IBN approves for the feasibility study which is followed by signing of MoU and afterwards survey license is issued if needed.
What nature of agreement does IBN carry out with selected developer?
IBN signs Project Development Agreement (PDA) for Public-Private Partnership Projects and Project Investment Agreement (PIA) for private investment projects.
How does IBN monitor and facilitate the projects?
IBN comprises up of various mechanism to monitor and facilitate the projects namely, Project Monitoring Unit (PMU), Technical Compliance Team and Project Management Team.
How does IBN prepare a project bank?
The project development and management team of IBN conceptualize the probable projects related to energy, Industry, Tourism, Transport, Agriculture, Urban Development, ICT, etc. The concept if approved by board of IBN is proceeded for the pre-feasibility study and the team afterwards executes the study for listing those studied projects in a project bank.
How does IBN manage stakeholders?
For IBN facilitated projects, Stakeholder Engagement and Policy Advocacy Unit coordinates and engages with diverse stakeholders at local, provincial and federal level.
What are the potential models for project development?
As per sub-section 2 of section 17 of PPPI Act, 2019, any project relating to infrastructure may be carried out through the PPP with the following methods;
- Build and Transfer (BT)
- Build, Operate and Transfer (BOT)
- Build, Own, Operate and Transfer (BOOT)
- Build, Transfer and Operation (BTO)
- Lease, Operation and Transfer (LOT)
- Lease, Build, Operate and Transfer (LBOT)
- Development, Operation and Transfer (DOT)
- Management, Operation and Transfer (MOT)
- Rehabilitation, Operation and Transfer (ROT)
- Similar other method
What is the scope of energy generation in Nepal?
Nepal has prioritized hydropower sector given its richness in water resources and due to promising Global Horizontal Irradiation (kWh/m2/day), prospect lies for solar energy generation too. In addition to these, wind energy and biomass are other two sector which can be tapped for energy generation.
How can I evacuate energy produced in Nepal?
The energy produced in Nepal can be either sold to domestic market via Nepal Electricity Authority (NEA) or sold to neighboring countries through cross border transmission lines.
Which agencies are responsible for building industrial infrastructures in Nepal?
The agencies responsible for infrastructure development depends on nature of infrastructure. Few agencies responsible for industrial infrastructure are: Special Economic Zone Authority (SEZA) Industrial District Management Limited (IDML) Department of Industry (DoI) Ministry of Industry, Commerce and Supplies (MoICS) Department of Urban Development and Building Construction (DUDBC)
What is the status of domestic transport connectivity in Nepal?
Transport infrastructure has formed the backbone of Nepal’s development strategy. The National Planning Commission has identified 21 “national pride projects” of which 10 are directly related to transport infrastructure, three aviation-related, one railway-related, one fast-track related and the remaining ones are about building highways. Nepal’s transport infrastructure had mainly focused on roads and aviation until very recently. At the regional level, the Asian Highway routes link Nepal with China and India via two highways: 1027 kilometers long AH2 (Kakarvitta - Mahendranagar) and 297 kilometers long AH42 (Raxaul – Narayanghat – Kathmandu – Kodari). Nepal’s road network comprises of Strategic Road Network (SRN) that is made up of national highway and feeder roads with total length of 13447 kilometers as of FY 2017/18. In addition, total length of other local road network was 60,163 kilometers as of FY 2018/19. Construction of roads along the North-South corridors, a mid-hill highway, a postal highway, the Madan Bhandari highway, and the Kathmandu-Terai fast track are some exciting plans of the Government. In aviation, Nepal has an international airport in Kathmandu, four regional domestic airports, and 28 other domestic airports in operation. Two regional international airports, Gautam Buddha in Lumbini and one in Pokhara are now nearing completion, while preparatory works are underway to develop the Nijgadh International Airport in Bara District.
What are the cash incentives FDI projects get?
According to section 44 of PPPI Act, 2019, in case any developer completes the construction of the development project before the time specified in the agreement or completes the project in less costs than the estimated costs of the project or the quality of the project is higher or Government of Nepal may get more benefits with the use of modern technology, the Board may provide more financial or non-financial incentives to such developer.
What is the sectorial opportunity in transportation?
Nepal has embarked on a plan to construct a 945-kilometers long East-West Electrified Railway with rail links with India. There has also been talk about the development of Kathmandu–Kerung, Birgunj–Kathmandu, and Kathmandu-Pokhara-Lumbini railway routes for interstate transportation, and metro and monorails in Kathmandu Valley for intra city transport. Further, Nepal also has plans to develop water transport on the Koshi, Gandaki and Karnali rivers. With the success of ropeways such as Manakamana, Chandragiri and Kalinchowk Cable Cars, feasibility studies of ropeways in other areas such as Muktinath and Swargadwari are also being undertaken. If properly planned, Nepal can become a transit route connecting India and China and developing a proper transportation network will be important to make this possible.
What is the sectorial opportunity in tourism?
Nepal offers a unique comparative advantage for profitable investment in diverse areas of tourism, namely, adventure, cultural, religious, and MICE (meetings, international conferences and events). Nepal has seen consistent growth rates in the incoming tourists due to booming outbound market of emerging and neighboring economies. There lies tremendous potential to cater high end tourists and promote organized mass tourism. In addition, Nepal is celebrating VISIT NEPAL YEAR 2020 to attract 2 million tourist by the year and promote large scale tourism activities in future as well. Private sector has huge opportunity to fill in the infrastructure gap essential for tourism development.
What is the sectorial opportunity in mining & minerals?
Altogether 63 mineral commodities are available in Nepal which includes 21 commodities of the metallic mineral group (Antimony, Arsenic, Cobalt, Copper, Gold, Iron, Silver, Tin, Titanium, Zinc, etc.) 23 commodities of chemical, fertilizer, insulator, ceramic, refractory and abrasive mineral group (Calcite, Clay minerals, Corundum, Dolomite, Graphite, Magnesite, Silica Sand, etc.) 6 commodities of the gem mineral group (Aquamarine, Beryl, Kyanite, Quartz, Ruby and Sapphire, Tourmaline) 10 commodities of construction materials group (Granite, Gpysum, Limestone, Marble, Slate, etc.) and 4 commodities of fuel mineral (Coal, Natural Methane Gas, Petroleum and Natural Gas) and geothermal spring group.
What is the sectorial opportunity in manufacturing?
Nepal’s manufacturing sector is rich in potential, both for large-scale projects and innovative small-scale projects. The government is enhancing manufacturing base prioritizing industrial sector through promotion of domestic and foreign investment. Industrial Districts and Special Economic Zones have been created to ensure a competitive and investment friendly environment and to simplify administrative procedures. Some main areas of investment are: FMCGs, garments, cement, pharmaceuticals, and metal and metal products. Nepal has potential to tap regional market with high population concentration in major cities.
What is the sectorial opportunity in ICT?
Nepal’s ICT sector is one of the fastest emerging sector in the country and has been prioritized for foreign direct investment. The Government of Nepal (GoN) has given special emphasis to Information Technology (IT) and Business Process Outsourcing (BPO) due to its high export potential. Owing to its large, young, skilled and low wage English speaking labor force, Nepal has a huge potential for BPO. Each year, approximately 5500 Nepalese graduates enter into the IT sector. In addition, the continual improvement in telecommunications and internet infrastructures acts a sector catalyst for investment in ICT. For the development and promotion of Information Technology and Services in the country, an IT park has been established in two different places covering an area of 257 ropani land which can accommodate 150 computer engineers to work within the periphery.
What is the sectorial opportunity in health?
The Government of Nepal (GoN) has prioritized private sector investment in health infrastructure particularly tertiary hospital and pharmaceutical manufacturing. Nepal has specifically identified the collaboration need between public and private sector for delivery of health services to outperform on its health indicator. Nepal has a relatively large population of 29 million but significant proportion of medicine and health care supply is met by way of imports. There are untapped opportunities for large scale pharmaceutical manufacturers to fill the supply gaps by introducing new technologies and taking the pharmaceutical industry to a higher level. In addition to this, Government of Nepal has also emphasized on promotion of Ayurvedic health care through various herbs and minerals which Nepal abundantly possess. This sector awaits large scale investment for commercialization of Ayurvedic medicines which can promote Nepal as a hub for tradition medical care system of South Asia.
What is the sectorial opportunity in energy?
The largest available renewable energy resource in Nepal is hydropower, which has a theoretical potential of approximately 83,000 MW. While economically viable hydropower capacity stands at 42,000 MW, the current installed capacity is only approximately 1182 MW. In FY 2018/19, NEA’s hydropower plants, including small ones generated a total of 2,548.11 GWh of electricity, and the total power purchased from Independent Power Producers (IPPs) within Nepal was 2,190.05 GWh. In addition to hydropower, Nepal also possesses other renewable resources with significant potential, including solar, wind and biomass. In the case of Solar PV systems, Global Horizontal Irradiation (GHI) (kWh/m2/day) is used as a reference value for comparing geographical conditions. The highest GHI up to 5.5 kWh/m2/day or higher has been identified in the northwest of the country while the average daily GHI values are between 4.4 kWh/m2 and 4.9 kWh/m2 in southern parts of the country. In addition to this, on average Nepal receives more than 300 sunny days per year, much higher as compared to most of the European Countries. According to Global Wind Atlas, Nepal has a mean power density of 608 W/m2 at the height of 50m with average wind speed of 8.94 m/s for the 10% windiest area in the selected regions.
What is the sectorial opportunity in education sector?
In Nepal, investment opportunities lie in the areas of technical and vocational education, education city, and research center. The Government of Nepal is increasingly focused on improving labor productivity and developing skilled labor-force that can meet industry needs, both at home and abroad. The Fifteenth Five Year Periodic Plan also states full and optimum utilization of human resource capital, which opens up an endeavor to invest in education quint-essential for production of skilled and vibrant labor force.
What is the situation urbanization in Nepal?
The constitution of Nepal 2015 created 7 provinces, 77 districts with 6 metropolitan and 11 sub-metropolitan cities, 276 urban and 460 rural municipalities. At present, 58% of the Nepal’s population lives in urban area which was only 17% as per census 2011. The major causes of rapid urbanization are reclassification and migration from rural to urban areas which resulted in urban infrastructure deficit. The key shortcoming of Nepal’s urbanization effort is that the agenda is being implemented through disjointed projects/ activities with inadequate planning or no planning for whole urban area. The ‘Master Plan’ approach generally excludes peri- urban areas and focus only on core area of the city and has little linkages to any financial and operating strategy. And in many cases, Master Plan is used as a regulatory tool instead of being a blueprint for development of planned city.
What are the sectorial opportunities in urban infrastructures sector?
Urban infrastructures include various sectors like health, education, water supply and sanitation, ICT, urban transportation, urban housing etc.
What is the sectorial opportunity in banking and finance?
The Banking and Financial Institutions (BFI) sector in Nepal has played a key role in increasing the growth of Nepal’s services sector. As of April 2018, there have been 28 Commercial Banks, 33 Development Banks, and 25 Finance Companies. Recently, Nepal Infrastructure Bank (NFI) has also been established to finance large scale infrastructure development project. Nepal possess tremendous investment opportunity in Banking and Finance and have been playing crucial role for increased access to finance and enhance digital economy.
What are the enabling environments to invest in agriculture sector in Nepal?
Agriculture is the mainstay of Nepal's economy and comprises 27.59 % of nation's GDP (2017/2018). Nepal's unique Altitude variation (from 59 meters to 8848 meters) provides diverse climate and topography for cultivation of wide range of agro products. Nepal's Agriculture Development Strategy (2015 – 2035) addresses improved investment climate for agricultural commercialization. OIBN supports to promote and manage public-private partnerships (PPP) and Private Investment for domestic and foreign investments.
What are the Key Potential areas for investment within the Agriculture Sector in Nepal?
Some of the Key potential areas for investment within the Agriculture Sector are:
- Agricultural Inputs Industries (tools/machineries, fertilizer, pesticides, seed/saplings etc.)
- Food Processing and marketing
- Irrigation and other agricultural infrastructure development
- Cold storage and Warehouses
- Non-Timber Forest Products (NTFP) processing
- Meat processing and Leather industries
- Livestock feed industries
Does Government of Nepal provide Viability Gap Funding (VGF) if I invest in priority sectors?
As per sub-section 1 of section 43 under public Private Partnership and Investment Act 2019, Government of Nepal shall establish a Viability Gap Fund for construction, operation and expansion of the projects that yield positive returns in the long run and are important from infrastructure structure but could not yield reasonable financial returns immediately.
Investment Promotion and Related Process
How is the FDI Process in Nepal?
Click here for process of FDI in Nepal.
Do investors need to get approvals from any other government agencies?
Investors need to get approval from other government agencies as well. But, the Government of Nepal has created a one-stop service unit to provide such services to investors. IBN and the Department of Industry has been serving as the one-stop-services in line with their legal mandate.
How long does it take for an investment approval in Nepal?
In the case of investments below NPR 6 billion, the foreign investment approving agency is the DOI. The DOI decides on an application for investment within seven days of submission of it. While the foreign investment approving agency is IBN, in the case of investments above NPR 6 billion. IBN take decision on an application within 15 days from the date of receiving it. IBN’s approval follows a due diligence process carried out by a screening committee at the IBN Office.
Are there documents related to foreign investment approval available online in Nepal?
Nepal Investment Guide 2020 is a comprehensive guidebook on Foreign Investment in Nepal. Followings are the key document to be referred by investors : Foreign Investment and Technology Transfer Act, 2019 Industrial Enterprises Act, 2020 Public-Private Partnership and Investment Act, 2019 Public-Private Partnership and Investment Regulations, 2020
Does IBN help foreign investors in exploring a suitable local partner in Nepal?
IBN does not find local partners for foreign investors. But, it can provide the best advice on the issue. It also organizes events in which foreign investors can meet suitable partners.
Can I establish an industry in a Special Economic Zone (SEZ)?
Yes. To be designated for Special Economic Zones, the industry needs to be an export-oriented – 60% of the manufactured products needs to be exported to other countries starting from the second year of its operation. For more details, please contact visit: Special Economic Zone Authority.
Which sectors are restricted for foreign investment in Nepal?
The Foreign Investment and Technology Transfer Act (FITTA) 2019 has listed the following industries in which foreign investment will not to be granted:
- Livestock farming, fish farming, apiculture (beekeeping), horticulture, oil-bearing crop, lentil, dairy business and other areas of primary agricultural products,
- Micro and cottage enterprise,
- Personal service business (such as hair cutting, tailoring, driving etc.),
- Industries producing arms and ammunition, gunpowder, explosives, nuclear, biological and chemical (NBC) weapons; industries producing atomic energy, radioactive materials,
- Real estate business (excluding construction industry), retail business, domestic courier service, local catering service, money changer, remittance service,
- Travel agency, guide, trekking and mountaineering guide, rural tourism including homestay involved in tourism,
- Media (newspaper/magazine, radio, television and online portals) business, and business-related to motion pictures of a national language,
- Management, accounting, engineering, legal consultancy service and language training, music training, computer training,
What is the minimum threshold for Foreign Direct Investment (FDI) in Nepal?
The FITTA 2019 has set a minimum threshold of NPR 50 million for foreign direct investment (FDI) in Nepal.
Are foreign workers allowed to work in Nepal?
Foreign workers can be recruited in the absence of a required skilled workforce in the local market for specific jobs. Foreigners can obtain various categories of visas such as non-tourist, business and residential visas during their stay in Nepal for official purposes.
What are the tax rates, incentives and duties in Nepal?
The corporate tax rate in Nepal is 25%. But it is 20% in the case of special industries identified by the Industrial Enterprise Act and the Value Added Tax is 13%. Special duty reductions of five or ten percent are provided on imports from the Tibet Autonomous Region of the People’s Republic of China, member countries of the SAARC, and designated most-favoured nations. Companies are subject to fiscal incentives, changes in the import tariffs and other duties, and taxes are generally announced through the annual budget and later to be ratified by the Parliament before it is enforced. Exemptions and other incentives are also provided when industries fulfil certain criteria in terms of investment size, employment, sector etc. On items that are commonly imported, duty is levied on an ad valorem basis i.e in proportionate to the estimated value of the goods or transaction concerned. There are a few exceptions, where duty is based on quantity (volume or weight). The existing rates are 0-80% depending on the products. Most raw materials fall within the 0-10% duty-band, whereas finished goods and consumer items fall within the 5-30% duty-band.
Are foreign investors allowed to repatriate their earnings back to their home country?
Foreign investors can repatriate their earnings once all the taxes are fully paid and all necessary legal obligations are met. Nepal Rastra Bank, the central bank of Nepal, grants approval for repatriation on the basis of recommendations from investment approving authorities.
What incentives do investors receive if they want to invest in export-based projects?
Export-based projects are encouraged to establish themselves in Special Economic Zones (SEZ) because they come with a lot of benefits. Companies can enjoy income tax, customs duty, and dividend tax exemptions after fulfilling certain criteria at SEZs.
Does the Government of Nepal provide viability gap funding in case of investment proposed in priority sectors?
Yes. The provision of viability gap funding (VGF) has been introduced in the PPPIA 2019. A decision on such a fund shall be taken by a committee set up at the Ministry of Finance on the recommendation of the investment approving agency. Such funds are available for construction, operation and expansion of the projects that yield positive returns in the long run and are important infrastructure projects, which seem not to be able to run in profit immediately.
How does a project developer acquire private land in Nepal?
Any project developer can acquire private land in Nepal in two ways:
- The project developer can himself/herself acquire land based on a willing buyer willing seller approach
- The project developer can request the Government of Nepal for the acquisition of private land, where all the acquisition costs are borne by the developer.
How can a project developer lease forest land in Nepal?
For the acquisition of forest land, the project developer will need an approved Environmental Impact Assessment (EIA) report. For IBN projects, the developer requests the Ministry of Forest and Environment through IBN to lease the forest land as per the approved EIA report and/or Detailed Project Report (DPR).
How does IBN facilitate land acquisition for private, forest and government land?
For IBN facilitated projects, developers request IBN for the acquisition and/or leasing of necessary lands and IBN on the behalf of the developer coordinates with relevant agencies to secure approval.
How much land can a project acquire in Nepal?
A project can acquire land as stated in the approved EIA and/or DPR. However, the maximum limit a person (including company) can hold land is defined by The Lands Act 2021. For anything above the ceiling limit, the company needs to request the Ministry of Land Management, Co-operatives and Poverty Alleviation for approval before acquiring land for the project. The current ceiling limits are:
- All Terai (Plain) Regions (including Inner Terai): 68,820 Square Meter
- Kathmandu Valley: 12,718.50 Square Meter
- All Hilly Regions Except Kathmandu Valley: 35,611.80 Square Meter
What are the key acts/ laws governing land acquisition in Nepal?