A foreign investor can now receive an FDI approval certificate in Nepal by email, in a matter of days, for an investment of any size in a listed sector. That same investor can then spend the better part of a year trying to move their first dividend out of the country.

Both statements are true at the same time. That gap — between how quickly capital is allowed in and how carefully it must be structured to come back out — is where most foreign investment in Nepal quietly stalls. And it is almost never a legal problem. It is a documentation, accounting and valuation problem, created on day one and discovered on exit day.

Three reforms have rewritten the entry rulebook in eighteen months

If your understanding of Nepal's foreign investment regime dates from even two years ago, it is out of date on three material points.

1. The Department of Industry can now approve foreign investment of any size. The 2024 amendment to the investment-related Acts removed the earlier arrangement under which the Department of Industry (DoI) handled proposals below NPR 6 billion and Investment Board Nepal (IBN) took everything above it. A practical caveat survives: the Public Private Partnership and Investment Act still vests IBN with authority over projects above NPR 6 billion, so for very large infrastructure, PPP and national-pride projects, IBN remains the body you engage with in practice. Confirm the approving body before you draft a single application.

2. Repatriation approval has moved from the central bank to your commercial bank. Under the Fifth Amendment to Nepal Rastra Bank's Foreign Investment and Foreign Loan Management Bylaws, issued on 30 December 2025, the regime shifted from prior approval to post-transaction supervision. Prior NRB approval is no longer required for foreign equity inflows, including investment into existing companies and share transfers, and repatriation approvals are now processed at bank level. This is a genuine easing — but it moves the burden of proof onto your file. A bank officer, not a central bank desk, now decides whether your paperwork supports the remittance.

3. The automatic route no longer has a ceiling. Until early this year, only investments up to NPR 500 million could use the online automatic route. A Nepal Gazette notification effective 16 February 2026 removed that upper limit for specified sectors, with approval issued by email within seven working days of a complete online application. The minimum investment threshold of NPR 20 million per foreign investor remains, and information technology industries continue to be exempt from any minimum.

Read together, these three changes do something specific: they compress the entry timeline dramatically while leaving the exit timeline dependent entirely on the quality of the record you have built in the meantime.

The number nobody in the announcements mentions

Nepal approved FDI commitments of roughly NPR 58 billion across more than 1,100 projects in FY 2082/83, with information technology recording the highest number of approved projects. Commitments have been rising steadily for three years.

Realised inflow has not followed at the same pace — Nepal's net FDI has repeatedly been reported at a fraction of one percent of GDP, among the lowest in the region. Approval is not capital. The distance between a certificate and a funded, compliant, repatriation-ready company is measured in banking channels, recording, audited accounts and tax clearances, and that is exactly the distance where advisers earn their fee or fail to.

Five places where an FDI file actually breaks

1. Money that arrives without a record

Every rupee of foreign equity must enter through formal banking channels and be recorded against the approval. Investors routinely fund early operating costs from a director's personal account, an offshore vendor payment, or a group company loan that was never approved as a foreign loan. Each of those rupees is, for repatriation purposes, invisible. It went in; it cannot come out. The corrective work — regularising unrecorded inflows years after the fact — is expensive, slow and sometimes impossible.

Rule: no inflow before the approval, the account and the recording mechanism are all in place, and every tranche is reconciled to the approval on the day it lands.

2. Dividends that exceed distributable profit

Banks scrutinise mismatches between the dividend declared and the accumulated profit available for distribution. A declaration that outruns audited retained earnings, or one made before prior-year losses have been absorbed, will be stopped at the counter. So will a distribution made without the board and general meeting record to support it. The dividend decision is an accounting decision first and a treasury decision second, and it needs to be modelled against the audited balance sheet before the board resolves anything.

3. The country-of-repatriation trap

This is the newest and most under-appreciated change. Under the Fifth Amendment, funds repatriated to a country other than the one the original investment came from require NRB approval. If a Singapore-registered investor funded the Nepali subsidiary and the group later wants the dividend routed to a treasury account in Dubai, that is no longer a routine bank transaction.

Structures built to be tax-efficient in the group's home jurisdiction frequently assume flexibility on where money lands. In Nepal, from 2026, that assumption needs to be tested at the term-sheet stage, not at the remittance stage.

4. An exit valuation nobody can defend

When a foreign investor sells shares in an unlisted Nepali company and wants the sale proceeds out, the price cannot simply be whatever the parties agreed. NRB's long-standing position requires the share price of an unlisted company to be established on a fair value basis for the assets and liabilities, and the transfer itself may need endorsement from the approving authority where the original approval carried conditions or sectoral caps.

In practice this means the deal price and the valuation report have to agree with each other, the valuation methodology has to be one a reviewer recognises, and the working file has to survive being read by someone who was not in the negotiation. A share purchase agreement signed on a multiple pulled from a pitch deck, with no valuation to support it, is a repatriation problem wearing the costume of a completed deal.

5. Tax leakage that was designed in at entry

How the investment enters determines how much of the return survives the trip home:

• Equity versus shareholder loan. Dividend and interest are taxed differently, are repatriated under different documentation, and behave very differently in a loss-making year. The mix should be a modelled decision, not a default.
• Dividend withholding. Nepal's domestic rate on dividends sits below the rate in essentially every treaty Nepal has signed, which means a double taxation avoidance agreement gives you nothing on dividends. Treaties matter here for interest, royalties, technical service fees and the capital gains article — not for the dividend line most investors are focused on.
• Technology transfer and royalty. Royalty, management fee and technical service arrangements are a legitimate way to service a foreign parent, but each carries its own withholding treatment and its own approval and documentation requirements.
• Capital gains on exit. The tax position on disposal of shares by a non-resident should be computed at entry, when the holding structure can still be changed, not at exit, when it cannot.

Before you sign anything: a pre-investment checklist

1. Confirm the sector is not on the FITTA negative list, and check the sectoral cap — consultancy services, for example, remain capped at 51 percent foreign holding.
2. Confirm the approving body: DoI in most cases, IBN for very large or PPP projects.
3. Confirm whether the automatic route is available for your specific sub-sector.
4. Verify the minimum threshold position for each individual foreign investor, not for the investment in aggregate.
5. Fix the equity-to-loan mix, and model the tax cost of each repatriation channel before the shareholders' agreement is drafted.
6. Confirm the country to which funds will ultimately be repatriated, and whether that route triggers additional approval.
7. Build a compliance calendar covering annual audit, income tax return, OCR filings and reporting to the approving authority.
8. Agree the valuation basis and the exit mechanism in the joint venture agreement — put and call options, drag and tag rights, and the methodology to be applied.
9. Set up the reconciliation between the approval, the bank inflow advice and the share issuance from the first tranche.
10. Record the date on which each threshold, rate and sectoral cap was last verified against the law. In this regime, that date matters.

Frequently asked questions

What is the minimum FDI in Nepal in 2026? NPR 20 million per foreign investor for most sectors. Industries in the information technology sector are exempt from the minimum investment requirement.

Is there still a maximum limit on the automatic route? No. The NPR 500 million ceiling was removed with effect from 16 February 2026 for specified sectors, with approval issued online, generally within seven working days of a complete application.

Do I still need Nepal Rastra Bank approval to bring investment in? Prior NRB approval is no longer required for foreign equity inflows, including share transfers, following the Fifth Amendment of 30 December 2025. The inflow must still come through formal banking channels and be properly recorded, and repatriation is now processed through commercial banks.

Can a foreign investor own 100 percent of a Nepali company? In most open sectors, yes. Some sectors carry caps — for example, 51 percent in consultancy services and 80 percent in telecommunications — and sectors on the negative list are closed to foreign investment entirely.

How long does it take to repatriate a dividend? That depends almost entirely on the file: audited financial statements, tax clearance, evidence of the recorded inflow, board and general meeting records, and consistency between the dividend and distributable profit. A clean file moves at bank speed. An incomplete one does not move at all.

Where this leaves you

Nepal has spent three years making it easier to bring money in. It has not made it easier to bring money out — it has made the process faster for investors whose records are in order, and no faster at all for everyone else. The regulatory risk has not disappeared; it has moved from the approval counter to your own accounting and valuation file.

That is a good outcome for well-advised investors and an expensive one for the rest.

Our Firm advises foreign investors and Nepali promoters on FDI structuring, Department of Industry and NRB compliance, joint venture and technology transfer agreements, business valuation for entry and exit, and repatriation planning — including remediation where the record has already gone wrong.

If you are planning an investment into Nepal, restructuring an existing foreign-invested company, or preparing for an exit, contact canishantha(whatsapp). Send us the approval, the last audited accounts and the shareholding structure, and we will tell you what your repatriation position actually looks like.

This article reflects the position as verified on 15 August 2026. Thresholds, sectoral caps and bylaws in this area change frequently and often by gazette notification rather than by amendment to the Act. It is general information, not advice on any specific transaction.