Some useful acts and policies regarding foreign investment.

FOREIGN INVESTMENT ACTS

To promote private Nepalese and foreign investment in the hydropower sector Government of Nepal (GoN) has promulgated Hydropower Policy - 1992, Water Resources Act - 1992/Regulation - 1993, Electricity Act -1993/Regulation -1993. Hydropower Policy – 1992, encourages the concept of Build, Operate, Own and Transfer (BOOT) policy. The policy provides incentive provisions to attract national and foreign investment in hydropower development

Nepal has created investment friendly environment to encourage foreign investment in the country. In order to make the investment climate more conducive, GoN formulated Foreign Investment and One Window Policy and Industrial Policy based on which Foreign Investment and Technology Transfer Act, 1992 (FITTA) and Industrial Enterprises Act, 1992 (IEA) were promulgated. These Acts were subsequently amended in 1996 and 1997, respectively, in order to make these acts more pragmatic based on the experiences gained.

One of the major strategies of The Hydropower Policy – 1992, is to pursue investment friendly, clear, simple and transparent procedures so as to promote private sector participation in the development of hydropower, also taking into account internal consumption and export possibility of hydropower.

FORMS OF FOREIGN INVESTMENT

According to Foreign Investment and Technology Transfer Act 1992, "Foreign Investment" means following investment made by a foreign investor in any industry:

-Investment in share (Equity),

-Reinvestment of the earnings derived from the clause (a) above,

-Investment made in the form of loan or loan facilities &

-Investment in kinds, e.g. machineries and equipment.

However, as per the decision of the Government made on September 5, 2012, the minimum amount of FDI has increased to NPR 5 million for each investor from USD 20,000.

ENTRY CONDITIONS

FITTA 1992 allows foreigners to invest only in private limited companies and in public limited companies registered with the Company Register Office (CRO). They are not allowed to invest in proprietorship or partnership firms.

"Private Limited Company" means a company which by its articles:

Limits the number of its shareholders from 1 to 50, excluding persons who are in the employment of the company, and

Prohibits any invitation to the public to subscribe in its shares.

"Public Limited Company" means a company that:

Has a minimum number of 7 shareholders (there is no maximum limit), and

Offers shares and debentures to the public through a prospectus which complies with the requirements of the Companies Act 2006 and Securities Act 2007.

FDI APPROVAL PROCESS IN NEPAL

Present FDI Approval process

1) Once the applicant submits the application with required documentation at the registration unit, it goes to the Director General who then forwards it to the FDI Director.

2) The documents are assessed by the officers and staff at the FDI section.

3)The application is presented in the FDI approval committee.

4) Copies of the project reports must be sent to the License Director and Technical Director prior to the meeting.

5) The members of the committee study the documents, discuss it objectively, and express their concerns, if any.

6) Even if there are concerns expressed or other documents to be received, the applications are generally recommended for final approval with the condition that the concerns are addressed and the documents received.

7) Once these conditions are fulfilled, the application is sent to the Director General for final approval. It takes 5-10 days for FDI approval, from the application date.

After obtaining approval for foreign investment, the industry is required to apply for registration of industry at the DOI within 35 days. If the registration cannot be done within the stipulated time, the investor will have to apply for an extension of the validity period.

NATIONAL TREATMENT

Industries established with foreign investment are entitled to enjoy all the facilities and incentives including income tax facilities as provided to the local investors.

NON-DISCRIMINATION

There is no discrimination between a Nepali and foreign investors, and among various foreign investors in matters of licensing, incorporation, tax, availability of visa, labor relation and repatriation.

There are two exceptions with respect to India:

1) Indian workers do not require a visa.

2) Indian investors can invest and repatriate in Indian currency, whereas third country investors can do so only in convertible currencies.

Furthermore, some differential treatment may occur with investors from countries with which Nepal has entered into BIPPA.

DISPUTE SETTLEMENT

For industries with fixed assets investment of up to NPR 500 million, if the dispute cannot be settled by mutual consultations in the presence of the DOI, it shall be settled by arbitration in accordance with the prevailing arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL)

-The arbitration should be held in Kathmandu

-The laws of Nepal shall be applicable in arbitration

-For industries with fixed assets investment of above NPR. 500 millions, disputes may be settled as mentioned in the Joint Venture Agreement/Share Purchase Agreement.

REPATRIATION

Foreign investor making investment in foreign currency shall be entitled to repatriate the following amounts:

-The amount received by the sale of the share of foreign investment as a whole or any part thereof;

-The amount received as profit or dividend from foreign investment;

-The amount received as the payment of principal or interest on any foreign loan;

-The amount received under the agreement for the technology transfer in such currency as set forth in the concerned agreement as approved by the DOI; and/authorized

OTHER POLICIES

-With a view to attract investment in industrial sector from both domestic as well as foreign investors, the industrial policy and the foreign investment and one window policies have been simplified, clarified and the investment climate has been made more conducive by introducing the following policy measures and procedural simplifications:

-Foreign investors are permitted to own up to 100 percent in hydropower.

-Projects under national priority such as Hydropower which provides employment to more than 300 national workers and use 50 percent domestic material are exempted to show the source of income if such investors invest before April 2019.

ENTRY INTO NEPAL

All visitors entering Nepal (with the exception of those from India) must acquire valid travel documents or visas. There are two ways to enter Nepal: by land transport or via airways.

VISA

Most of the foreign national can get visa (Tourist) at the entry port. There is an easy availability of non-immigrant visa like Non-Tourist Visa, Business Visa and Residential Visa.