CLASS NOTES ONLY: FOR CAP III & CA MEMBERSHIP EXAMINATION: FITTA

FOREIGN INVESTMENT AND TECHNOLOGY TRANSFER

 "Foreign investment" means the following investment made by a foreign investor in an industry or a company:
a) Share investment made in foreign currency;
b) Reinvestment of the dividend received from foreign currency or share in an industry;
c) Lease financing;
d) Investment made in venture capital fund;
e) Investment made in listed securities through secondary securities market;
f) Investment made by acquiring share or assets of a company incorporated in Nepal;
g) Investment received through banking channel after issue of securities in foreign capital market by an industry or a company incorporated in Nepal;
h) Investment made through technology transfer; or
i) Investment maintained by establishing and expanding an industry in Nepal.
 "Technology transfer" means the transfer of technology to be made under an agreement, on the following matters, between an industry and a foreign investor:
a) Patent, design, trademark, goodwill, technological specialization, formula or process;
b) User's license, know-how sharing or franchise;
c) Providing foreign technical consultancy, management and marketing services, or other technical skill or knowledge.
 The Government of Nepal may make necessary arrangements for providing exemptions, facilities, concessions or services to be provided to the foreign investor under
this Act or prevailing law from One-Point Service Center and the necessary arrangements shall be made for providing the following services respectively:
(a) Registration of industry and its administration;
(b) Approval of foreign investment and loan;
(c) Registration of company and its administration
(d) Labor approval;
(e) Visa facility;
(f) Measurement and control of quality of goods produced from an industry;
(g) Approval of environmental study report;
(h) Energy and infrastructure development and coordination necessary for such development and focal point for other bodies;
(i) Other exemptions and facilities to be enjoyed by industries;
(j) Act of providing permanent account number;
(k) Approval for foreign exchange;
(l) Any service related with other acts to be done for industries under this Act and Rules framed under this Act
 No foreign investment shall be made in an industry mentioned in Annex from profit made by an industry operated from foreign investment or in any other manner.
Provided that, technology transfer may be made, with the approval of Department, to an industry established in Nepalese investment mentioned in Annex.
Annex: Industry or business not opened to foreign investment
 Business of animal or bird husbandry, fishery, bee keeping, fruit, vegetable, oil seeds (telhan), pulse seed (dalhan), dairy, and other sectors of primary agriculture
produce;
 Micro and cottage entrepreneurship;
 Personal service business (such as haircutting, tailoring, driving, etc.);
 Industry producing arms and ammunitions, bullets and shell, gunpower, explosive materials, nuclear, biological and chemical (N.B.C.) weapon, atomic energy,
radio-active materials;

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 CLASS NOTES ONLY: FOR CAP III & CA MEMBERSHIP EXAMINATION: FITTA

 Real estate business (other than construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service;
 Travel agency involved in tourism; guide, trekking and mountaineering guide, rural tourism including homestay;
 Business of mass communication media (newspaper, radio, television and online news), motion picture of national language;
 Management, accounting, engineering, legal consultancy service, and language training, music training, computer training; and
 Consultancy services with foreign investment of more than 51 percent.
 A foreign investor may make foreign investment by establishing an industry either singly, or jointly, or jointly with an industry established in Nepal or with a
Nepalese citizen.
 A foreign investor may make foreign investment by acquiring assets or, up to the prescribed percentage of, shares of an industry established in Nepal.
 A foreign investor may make lease financing on aircraft, ship, machinery and equipment, construction apparatus, or similar other apparatus, subject to the prescribed
conditions.
 A foreign investor may make foreign investment in an industry established in Nepal through technology transfer and the terms of the technology transfer to be made
shall be as mentioned in the agreement for technology transfer concluded between the concerned industry and the foreign investor.
 An industry incorporated abroad may make foreign investment by establishing or expanding its branch industry in Nepal.
 An incorporated foreign investor may, for the purpose of making equity investment in any industry, establish a venture capital fund, by incorporating a company
under prevailing law and obtaining approval of the Securities Board. An incorporated foreign investor which has established a venture capital shall be registered with
the Securities Board for carrying out securities transaction and it may, through secondary market, carry out the transaction of securities of an industry in which the
foreign investment may be made under the Act.
 A public limited company incorporated in Nepal or a body corporate authorized to issue securities under prevailing law may, with the approval of Nepal Rastra Bank
and Securities Board, obtain loan or foreign currency by issuing loan instrument, debenture or other securities in foreign capital market and a company
incorporated in Nepal with foreign investment may, subject to prevailing law on securities, obtain loan by issuing securities within Nepal with a condition that Loan or
foreign currency obtained by issuing securities as above shall be invested in Nepal.
 An industry with foreign investment may, with the recommendation of Ministry and approval of Nepal Rastra Bank, obtain loan from a foreign financial institution
by entering into project loan or project financing agreement, in accordance with prevailing Nepalese law.
 A foreign investor making investment under this Act may, for the purpose of activities relating to investment made by him in Nepal, enter into an escrow agreement
with his partner investor or other foreign investor and a commercial bank or infrastructure development bank approved by NRB and the bank entering into an escrow
agreement shall act as an agent of the parties to such agreement.
 Maximum limit of amount and proportion of investment that may be invested by a foreign investor willing to invest in Nepal shall not be prescribed. However, in the
case of service industry limit of investment to be made in securities and maximum limit of equity of foreign investment may be prescribed in a manner that it shall not
be less than the commitment made by Nepal, in relation to the concerned sector or sub-sector, at the time of obtaining membership of the World Trade Organization.

APPLICATION TO BE MADE FOR APPROVAL OF MAKING FOREIGN INVESTMENT

 A foreign investor willing to make foreign investment under this Act shall, for approval of making foreign investment, make an application, in the prescribed format, to
the body approving foreign investment, disclosing the particulars that include time schedule of bringing foreign investment in Nepal and action plan for investment in
an industry, and other prescribed particulars.
 Body approving foreign investment is:
Amount of foreign investment Body approving
Up-to 6 arba The Department

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 CLASS NOTES ONLY: FOR CAP III & CA MEMBERSHIP EXAMINATION: FITTA

Above 6 arba The Investment board

 Approval or refusal shall be provided, in prescribed format, within 7 days of receipt of application.
 No re-approval of foreign investment shall be required if an industry having obtained approval is willing to invest, out of the profit earned, in the same industry, or any
other industry other than an industry mentioned in Annex.
 A foreign investor shall, after obtaining approval for foreign investment inform NRB, in writing, together with the written declaration that the amount to be invested
was procured from legal source and he may bring such amount of investment after providing such information in convertible foreign currency through banking channel.
Provided that, an Indian investor may invest the amount of such investment in Indian currency through banking channel.
 The foreign investor shall invest the amount approved for foreign investment completely within the prescribed period and if such investment is not done in prescribed
time such approval shall, ipso facto, be deemed to be ineffective in the following circumstances:
(a) If bringing foreign investment in Nepal is not commenced within 2 years from the date of approval of such investment without any reasonable reasons;
(b) If, consequent to the sale of shares of an industry registered after approval of foreign investment, 100% ownership of such industry with foreign investment is
transferred to Nepalese investors;
(c) If the registration of foreign investment approved industry or of the company which established such industry is cancelled for any reason.
 A foreign investor or an industry with foreign investment may carry out transaction by opening account of Nepalese currency in any commercial bank, infrastructure
development bank or financial institution of Nepal, or by opening account of foreign currency in any bank or financial institution licensed to carry out transaction of
convertible foreign currency under prevailing law. Provided that, approval of NRB shall be obtained for carrying out transaction by opening account of convertible
foreign currency.

INFORMATION OF SALE OR TRANSFER OF SHARE SHALL BE PROVIDED

If structure of ownership or underlying ownership of assets, properties, shares or any other type of financial instruments created in Nepal from foreign investment is changed
due to sale or transfer of shares within or outside Nepal, or in any other manner, the concerned company shall provide information to the body approving foreign investment,
accompanied by evidence document thereof, within 30 days of the transaction and get such information recorded as prescribed.
If ownership of an industry in Nepal with foreign investment is changed due to transfer of assets, properties or shares or any other financial instrument of a holding company,
the liability of providing information shall be of concerned branch industry or unit of industry established in Nepal.
Where a transaction as mentioned above has been carried out, no information shall be recorded until and unless the concerned industry pays tax under prevailing law after
disclosing the amount of transaction.

WITHDRAWAL OF INVESTMENT AND EARNED AMOUNT

A foreign investor may, make an application to the One-Point Service Center, if he desires to withdraw his investment from Nepal by selling, fully or partially, shares or
industry of his investment in the same foreign currency in which the investor made investment or, with the approval of NRB, in convertible foreign currency, after getting
converted at prevailing exchange rate, after fulfilling the liability relating to tax under prevailing laws:
(a) Amount received from sale of shares of foreign investment;
(b) Amount in respect of profit or dividend received from foreign investment;
(c) In the event of dissolution or liquidation of industry or company, residual amount after payment of all liabilities;
(d) Amount in respect of royalty received under agreement for technology transfer; Provided that, the royalty or fee for the use of trademark under technology transfer
in a liquor industry, other than a liquor industry exporting 100% of liquor, shall not exceed five percent of total selling price excluding prevailing tax.
(e) Amount of lease rent under lease financing;
(f) Amount in respect of compensation or damages from the final settlement of dispute, arbitration or any other legal proceedings;

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 CLASS NOTES ONLY: FOR CAP III & CA MEMBERSHIP EXAMINATION: FITTA

(g) Amount that may be taken back under prevailing law.

(h) In the event of withdrawal of investment after selling, fully or partially, an industry with foreign investment or because of cancellation of registration of such
industry or company for any reason, residual amount may be withdrawn only after payment or settlement of all liabilities including tax.

FUNCTIONS, DUTIES AND POWERS OF BOARD

 To advise the Government of Nepal for policy-related, organizational and procedural reform to be adopted for attracting foreign investment on industrial and
infrastructure development;
 To determine strategy and program necessary for increasing attraction of foreign investment in Nepal and for its promotion and protection;
 To provide approval for the establishment of industry and infrastructure based on foreign investment and to promote foreign investment;
 To provide facilitation to foreign investment by increasing, expanding and protecting foreign investment;
 To maintain coordination at policy and implementation level of foreign investment;
 To assist in the implementation of policy and law relating to foreign investment;
 To make arrangements for providing services from one-point service center to foreign investors;
 To direct concerned body after obtaining information on whether or not the acts and actions of approval and service flow of foreign investment are being operated
appropriately;
 To facilitate if any difficulty appears in relation to withdrawal of foreign investment or amount derived therefrom, or in the implementation of this Act or the Rules
framed under this Act;
 To perform or cause to be performed other duties as prescribed.

FUNCTIONS, DUTIES AND POWERS OF DEPARTMENT

 To create friendly environment for establishment and operation of industries to be established on foreign investment;
 To provide facilitation to foreign investor for obtaining any approval or license under prevailing law including initial environmental examination and environmental
impact assessment;
 To maintain up-to-date record of foreign investment approved or licensed under this Act or prevailing law and of technology transferred in Nepal, to update the same
and publish periodically;
 To provide approval to foreign investor and foreign specialist, technician or managerial employee working in an industry with foreign investment for withdrawal of
investment and remuneration;
 To frame and implement standard operating procedure for making foreign investment transparent and for procedural simplification;
 To provide recommendation for visa for foreign investor and his authorized agent, specialist, technician or managerial employee working in an industry with foreign
investment and infant member of their family, and to provide facilitation for the same;
 To carry out regular supervision and inspection as to whether or not an industry with foreign investment has misused any facilities provided under this Act;
 To provide facilitation for establishment of an industry with foreign investment in industrial zone or special economic zone;
 To perform or cause to be performed other duties as prescribed.

FACILITIES, PROTECTIONS AND REPATRIATION

 An industry with foreign investment shall be provided exemptions, facilities or concessions available under prevailing Industrial Enterprises Act and other prevailing
law as well, in addition to the exemptions, facilities, concessions or protection under this Act, except facility to be enjoyed by sick industry under prevailing law.

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 CLASS NOTES ONLY: FOR CAP III & CA MEMBERSHIP EXAMINATION: FITTA

 An industry with foreign investment may, after obtaining approval of NRB on the recommendation of body approving foreign investment, obtain the facility of foreign
currency for the amount needed for following purposes:
(a) To pay remuneration of foreign specialist, technician or managerial employee engaged in the industry
(A foreign specialist, technician or managerial employee engaged in an industry may repatriate to his country his remaining remuneration, in convertible foreign
currency, after paying income tax in Nepal under prevailing law);
(b) To pay principal or interest of debt instrument or debenture issued;
(c) To withdraw foreign investment or earned amount;
(d) To pay or utilize the approved amount out of foreign currency kept in account.
 A foreign investor making investment in foreign currency shall be entitled to repatriate the following amounts outside the 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 the 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 the technology transfer in such
currency as set forth in the concerned agreement as approved by the Department of Industries.
 After the commencement of this Act, national treatment shall be provided, after the foreign investment made by a foreigner subject to this Act and prevailing law is
brought into Nepal and until such investment is retained in Nepal, in a manner that the terms applicable on management, maintenance, utilization, transfer or sale of
such investment shall not be less favorable than the terms applicable on management, maintenance, utilization, transfer or sale of investment made by Nepalese person.
 An industry with foreign investment shall obtain following protections:
(a) An industry or business with foreign investment shall be treated in the manner same as an industry of same nature with investment of Nepalese citizens.
(b) An industry or business with foreign investment shall be free to determine the price of goods and services, subject to prevailing law.
(c) An industry or business with foreign investment shall not be prohibited to operate trade as prescribed within the limit of its industry.
(d) An industry or business with foreign investment shall not be prohibited to repatriate profit, withdraw investment, pay interest and repay principal of loan.
 National treatment shall not be applicable on the following matters:
(a) Matters prescribed for compulsory licensing on creation, limits, transfer of rights or usage of intellectual property mentioned in agreement concluded under World
Trade Organization;
(b) Matters of exemption or facility, if any, provided to domestic industry or goods under prevailing Nepalese law relating to public procurement;
(c) Matters of subsidy or concession to be provided by the Government of Nepal;
(d) Matters of non-commercial services to be provided by the Government of Nepal;
(e) Measures relating to financial services adopted or managed by the Governmental of Nepal for the protection of investors, participants of securities market, insurance
policy holder or insurance policy claimant, or matters relating to financial institutions undertaking the liability of protecting financial interest of any person, or
matters of maintaining soundness, morality or financial responsibility of financial institutions;
(f) Matters on which the Government of Nepal has the responsibility of providing special treatment because of being a party to any regional or multisectoral
economic, monetary or similar organization of which the Government of Nepal is or going to be a party;
(g) Matters relating to terms prescribed by regulatory body under prevailing law on withdrawal of investment, payment of loan (including principal, interest and
fee) or payment of service fee outside Nepal;
(h) Matters of protection of public health, animals, plant or environment.
 No industry with foreign investment under this Act shall be nationalized and also no industry shall be expropriated (confiscated) directly or indirectly, except for public
purpose. Appropriate procedure under prevailing law shall be followed where expropriation is needed for public purpose.

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 CLASS NOTES ONLY: FOR CAP III & CA MEMBERSHIP EXAMINATION: FITTA

VISA
Visa Type Purpose Period
Non-tourist Visa Carrying out the Feasibility Study 6 months
Non-tourist visa Expatriates 5 years on annual renewal basis
Business Visa - Until the minimum foreign investment is retained.
(A foreign investor or his one authorized representative and family member (spouse,
parents and infant children) of such investor or representative shall, for staying in Nepal.
Resident Visa Investment: > 1,000,000.00 USD at one time in Resident period on annual renewal basis
convertible foreign currency

COMPLAINT MANAGEMENT
 A foreign investor or an industry may, if he has any complaint in respect of any act done or action taken by an official carrying out registration, regulation or supervision
of industry under prevailing law, or by an official of One-Point Service Center, for hearing, apply to the Department disclosing details thereof.
 A foreign investor may, if he has any complaint in respect of any act done or action taken by the Department or One-Point Service Center, for hearing, apply to the
Ministry disclosing the details thereof.

SETTLEMENT OF DISPUTES
 1st: Through mutual discussion or conversation of concerned parties (Facilitation by the department).
 2nd: If the parties to the dispute have entered into a joint investment agreement or agreement relating to settlement of dispute, the dispute shall be settled as provided
for in such agreement.
 3rd: If the parties to the dispute have not entered into a joint investment agreement or agreement relating to settlement of dispute, the dispute shall be settled through
Nepalese arbitration law complying with the prevailing rules or procedures of United Nations Commission on International Trade Law (UNCITRAL),

POWER OF ATTORNEY
 A person willing to make foreign investment in Nepal under this Act may give a notarized power of attorney to any person for the purpose of doing and taking any,
some or all acts and actions to be done and taken by him.
 All acts and actions done and taken by the agent in accordance with the power of attorney shall be treated as done and taken by the investor himself.
 The agent shall not be entitled to delegate the authority bestowed on him to another person.

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