Foreign Investment in Nepal: Negative List & Minimum Threshold

Nepal welcomes foreign investment across a wide range of sectors. However, under the Foreign Investment and Technology Transfer Act, 2075 (2019) (FITTA), a minimum capital threshold applies for company incorporation, and certain industries are restricted for foreign participation. This newsletter summarizes the minimum investment requirements, including exceptions for IT industries, and the restricted sectors (negative list).

1. Minimum Foreign Investment Threshold

A minimum capital of NPR 20,000,000 (Nepalese Rupees Twenty Million) must be invested by each foreign investor to incorporate a company in Nepal.

Note: The minimum threshold for Non-Resident Nepalis (NRNs) and other foreign investors may be set differently pursuant to Section 3(3) of the Foreign Investment Act.

Exceptions: Industries with No Minimum Threshold

Certain industries under the Information Technology sector are exempt from the minimum investment requirement, as per the Ministry of Industry, Commerce and Supplies notice dated 2080/06/15 (02 October 2023).

Industries where the minimum threshold is not applicable:

2. Sectors Not Permitted for Foreign Investment (Negative List)

The following sectors are restricted for foreign investment under FITTA:

1. Industries or business other than large-scale industry (Industries with fixed capital above NPR 500,000,000), agricultural technology and mechanization related to animal husbandry, fish farming, beekeeping, fruits, vegetables, oilseeds, pulses, dairy, and primary agricultural products that export at least 75% of production;
2. Cottage and small industries;
3. Personal service businesses (e.g., hair cutting, tailoring, driving);
4. Industries manufacturing arms, ammunition, bullets, shell, gunpowder, explosives, nuclear, biological and chemical (NBC) weapons; industries producing atomic energy and radioactive materials;
5. Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service;
6. Travel agencies, guides, trekking and mountaineering guides, rural tourism including homestays;
7. Mass communication media (newspaper, radio, television, online news) and motion picture in the national language;
8. Management, accounting, engineering, legal consultancy, language training, music training, and computer training;
9. Consultancy services with foreign investment over 51%;
10. Ride-sharing businesses with foreign investment over 70%;
11. Aircraft operations, training, repair, maintenance, and passenger service facility providers with foreign investment exceeding the following limits:

• International airline service: 80%
• Domestic airline service: 49%
• Training institutions: 95%
• Repair and maintenance: 95%

Nepal’s foreign investment regime is designed to be investment-friendly, while maintaining protections for strategic, sensitive, and small-scale sectors.

Key points for investors:

1. Most sectors are open to foreign investment;
2. Restricted sectors must be avoided or carefully structured;
3. Minimum investment threshold applies, except for certain IT-related industries; and
4. Legal and regulatory guidance is recommended to ensure compliance and smooth market entry.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice, advertisement, personal communication, solicitation or inducement. No attorney-client relationship is created through this content. Gandhi & Associates assumes no liability for any consequences resulting from actions taken based on information contained herein.

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