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Foreign Investment and One-window Policy, 1992

1. Background:

The wave of change in the world economic order has affected all
nations, big and small. In the process of adjusting the economy in line
with these changes, neighboring countries have also adapted an open
and liberal policy for strengthening their economic system. Accordingly,
it is necessary for Nepal to introduce timely changes and reforms in
various sectors of its economy to introduce dynamism in the process of
economic development. In this context, it is opportune for us to make
foreign investment attractive by framing a timely, liberal and open
policy. The elected government has expressed strong commitment to
this goal from the very beginning. Accordingly, this policy document
clearly explains the objectives of foreign investment, the forms of such
investment, their procedural aspects, the facilities and concessions to be
provided to them, the speedy and efficient administrative and
institutional services to be made available through an one window
system and such other aspects with the belief that implementation of this
policy will lead to the import of capital, modern technology,
management, technical skills, access to international markets,
development of competitive attitudes and awareness about increasing
productivity, and their help in the development of an industrial culture in
the private sector.

2. Objective:

2.1 To build a strong and dynamic economy by generating additional

opportunities for income and employment through expanding
productive activities.

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2.2 To increase private sector participation in the process of

industrialization.

2.3 To increase productivity by mobilizing internal resources and

materials in productive sectors and by importing foreign capital,
modern technology management and technical skills

2.4 To increase the competitiveness of Nepalese industries in

international markets.

3. Forms of Foreign Investment:

3. 1 Equity investment made by foreign investors in the form of

foreign currencies of capital assets and reinvestment of the
income there-from.

3.2 Loans obtained in the form of foreign currencies of capital assets.

3.3 Use of rights, specialization, formulae processes and patents

relating to any technology of foreign origin.

3.4 Use of foreign owned trademarks, goodwill.

3.5 Use of foreign technical, consultancy, management and

marketing services.

4. Permission for Industries to be Established Under Foreign

Investment:

4.1 Foreign investment in the industries classified as prohibitive (as

specified in schedule-1) shall not be permitted. In case of other
industries, permission for foreign investment should be obtained.

4.2 Foreign investment shall be permitted up to 100% in large and

medium scale industries.

4.3 Technology transfer will be permitted in the cottage and small

scale industries.

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If an application is made for an investment, the Department shall,

for the industries with a fixed asset up to five hundred million
rupees, grant permission itself. However, in the case of industries
exceeding above-mentioned limit, in accordance with the
decision of the Board, grant permission within thirty days from
the date of application. The department will communicate the
decisions so made to the applicant. ?

5. Provision for Repatriation

Foreign investors who have received permission to invest in convertible

currency can repatriate the following amounts outside Nepal at the
prevailing rate of exchange:-

5.1 The amount received by sale of the whole or any part of the
equity investment.

5.2 The amount received as benefits or dividends from foreign

investment.

5.3 The amount received as payment of principal and interest on

foreign loans.

5.4 The amount received under an agreement for the transfer of

technology.

5.5 The amount received as compensation for the acquisition of any

property.

5.6 Foreign experts, working in Nepalese Industries with prior

approval from countries where convertible currencies are in
circulation, shall be permitted to repatriate in convertible
currency up to 75% of the amount received by them as salaries,
allowances, etc.

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6. Facilities and Concessions:

The following facilities shall be granted to industries established with

foreign investment, without prejudice, to avail the additional facilities if
any, available under the industrial Enterprises Act:-

6.1 Interest income on foreign loans shall be taxed at a rate of 15%

only.

6.2 Royalties, technical and management fees shall be taxed at a rate

of 15% only.

6.3 No income tax shall be lived on the income earned from exports.

Income tax will be levied at 15% on the income earned from

exports.

6.4 Industries established with foreign investment are entitled to

enjoy all the facilities and incentives including income tax
facilities provided to the industries established with local
investment under the industrial Enterprises Act.

7. Other Facilities:

7.1 Facilities on Electricity-industries shall be given priority in the

supply of electricity. No fee shall be charged if an industry
generates electricity for its own use.

7.2 Relief from Double Taxation- For the purpose of avoiding double
taxation on incomes of foreign investors Government of Nepal
shall take necessary action to conclude agreements for the
avoidance of double taxation with the countries of the concerned
foreign investors.

7.3 Custom duty, excise duty and sales taxes levied on raw materials
and auxiliary raw materials of export oriented industries shall be
reimbursed to the exporters on the basis of the quantum of

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exports within 60 days from the receipt of the application for

such reimbursement.

7.4 Industries exporting 90% or more of its total production are

entitled to enjoy the same facilities provided to industries
established in the Export Processing Zone. The bonded
warehouse facilities shall also be continued.

7.5 In case an industry sells its product within the country in foreign
currency, the excise duty levied on the quantity of sold and the
custom duty, excise and sales taxes levied on the raw materials
used in such products shall be reimbursed to such industry within
60 days upon the receipt of application of such reimbursement.

7.6 Custom duty, excise duty and sales taxes levied on the production
of intermediate goods used in the production of exportable goods
and sales tax levied on the production shall be reimbursed to the
exporter on the basis of the quantity of goods exported within 60
days from the receipt of the application for such reimbursement.

7.7 Priority shall given to arrange infrastructure facilities required for

the establishment of industries.

7.8 Government land and land within the industrial districts shall be
made available to industries for the establishment of industries on
priority basis.

7.9 No intervention shall be made in fixing price of the products of

the industry.

7.10 No taxes shall be levied on machinery and equipment, raw

materials and finished exportable products of industries
established within the Export Processing Zone.

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8. Visa Arrangement:

8.1 A non-tourist visa will be granted to a foreign investor or his

authorized representative as well as their dependents to stay in
Nepal for the period during which a foreign investor maintains
his/her investment.

8.2 A non-tourist visa up to a period of six months shall be granted to

any foreign investor who has come to Nepal to undertake
research and study with the purpose of investing in Nepal.

8.3 If any foreign investor makes a lump sum investment equivalent

to more than US$ 200,000 in convertible foreign currency, the
investor and his/her dependants shall be granted permanent
resident visa for the period he/she maintains his/her investment in
the industry. No industries shall be nationalized.

9. Not to be nationalized: Industries not to be nationalized

10. Arbitration:

10.1 If the foreign investor, the concerned industry and the

Department of industry fail to settle among them any dispute
concerning foreign investment, it shall be settled by arbitration.

10.2 Arbitration shall be held according to the prevalent Arbitration

rules of the United Nations Commission for International Trade
Law (UNICITRAL).

10.3 The arbitration shall be held in Kathmandu.

10.4 Notwithstanding anything contained in sub-section 10.1, 10.2 and

10.3, disputes arising on a foreign investment with a specified
investment may be settled as mentioned in foreign investment
agreement.

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11. Arrangements Relating to the One-window System:

The following arrangements will be made to provide services through

an “One window” system to industries operating under foreign
investment:

11.1.1 In order to provide in a quick and effective way the approvals,

facilities and other administrative service to industries to be
established under foreign investment of technology transfer
agreement and in order to establish effective co-ordination among
various agencies, the department of industries will be designated
as the one window servicing agency with the industrial promotion
Board as a focal point as spelt out in the industrial Enterprises
Act.

11.1.2 The following One-Window Committee will be formed to

provide infrastructure facilities such as registration, land
electricity, water and facilities a taxation, etc, under an one
window system for industries to be established with foreign
investment.

One-Window Committee

Convener -The Director General, the Department of

Industries

Member -Joint Secretary, the Ministry of Industries

Member -Joint Secretary, the Ministry of Finance

Member -Joint Secretary, the Ministry of Commerce

Member - The Chief Controller, Nepal Rastra Bank

11.1.3 The Department of industries will inform the application

of the decision of the Board on foreign investment and
technology transform within 30 years from receipt of the
application.

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11.1.4 A license shall contain information as to facilities and

concessions to which an industry is entitled.

11.15 Application for the registration of an industry should be

submitted to the Department of industries within 35 years
from the date of receipt of approval for foreign
investment. The industry will be registered within 21 days
from the date of receipt of the application.

11.2 Institutional Arrangements

11.2.1 The Department of industries will be reorganized and

expanded with the objective of promoting foreign
investment, granting approval and providing facilities and
administrative service through the one window system.
The Department will be upgraded and the statues of the
director General will be made equivalent to the position of
an Additional Secretary.

11.2.2 The powers relating to the facilities and services provided

by agencies such as the Ministry of Finance and its
Departments, the department of Commerce, the Nepal
Rastra Bank, and the Department of Immigration etc. will
be delegated to the one window committee.

11.3 Other Arrangements

11.3.1 Industries established under this policy will continue to
enjoy all time-bound facilities to which they are entitled
even if any subsequent change is made in this policy.
Industries prohibited for grant of Approval under Foreign
Investment.
1 Defence related industries, which manufacture arms
and ammunitions.
2. Cigarettes and Bidi.
Alcohol (excluding 100% export oriented.

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