Investing in Nepal

INVESTING IN NEPAL
A LEGAL GUIDE
NEUPANE LAW ASSOCIATES

www.neupanelegal.com
Investing in Nepal
INVESTING IN NEPAL
This Investing in Nepal A Legal Guide introduces you to Nepal's investment
regulations, and business and trading environment with focus on legal and
regulatory matters.
The information in the guide is in summary form, and is intended as an

introductory guide only. The information is accurate as at 30 January 2016,
and will be updated regularly. We aim to cover all details required by foreign
investors and multinational companies that are not usually covered by other
such guides.
It is a general guide only and is not to be relied upon. Detailed advice should
be obtained to cover a specific fact situation.
If you would like help with business activities in Nepal, please contact us.
Anjan Neupane
Tej Bahadur Katuwal
Partner and Head of Corporate
Partner
(T) +977 1 4101631
(T) +977 1 4101631
(E) anjan@neupanelegal.com
(E) t.katuwal@neupanelegal.com
First Edition published December 2013

Second Edition published October 2015
Third Edition published January 2016
2
Investing in Nepal
ABOUT NEUPANE LAW ASSOCIATES

Neupane Law Associates is a leading international business and dispute
resolution law firm based in Kathmandu, Nepal. We have been advising
leading
corporates,
multinationals,
financial
institutions,
governmental
organizations and private individuals for over 30 years.
We are recognized as the "go to" law firm for international business and
dispute resolution. We have market-leading expertise in banking, foreign
investments, project finance, joint ventures, mergers and acquisitions,
insurance and reinsurance, and international commercial transactions. We
have represented our clients in many sophisticated international transactions
and highly complex disputes in Nepal.
Various international publications highly recommended our practice.

Chambers Asia-Pacific/Global 2016 ranks us Leading Firm ("Band-1") in Nepal
for
General
Business
Law.
It
states
our
practice
as
being
highly
recommended by international law firms and clients and our team with
excellent knowledge and practice experience of business law and Nepali
legal practicalities. Some recent awards received by the firm include
Investment Law Firm Nepal - 2015 by ACQ Global Awards, Overall Leading
Law Firm Nepal - 2014 by Acquisition International, and Leading Law Firm
Nepal - 2013 by ACQ Law Awards.
Investing in Nepal
INTRODUCTION
Nepal is a landlocked Himalayan nation with a population of just under 30
million. Located between India and China, two of the largest and fastest
growing economies of the world, Nepal promises tremendous investment
potentials.
The Government of Nepal claims that it has adopted and continues to adopt
liberal policies. Nepal continues to attract the attention of many foreign
investors
in
recent
years
particularly
in
hydropower,
agriculture,
manufacturing, information technology, tourism, and service sectors.

Doing business in Nepal is may not be very easy for foreign investors as legal
rules are often complex and opaque, and often inaccessible to foreigners as
they are contained in the local language.
Therefore, we felt the need to publish a holistic legal guide to help foreign
investors understand the basic legal processes of investing and doing
business in Nepal. We hope that this will provide the correct information to all
investors and policy makers.
Investing in Nepal
FOREIGN INVESTMENT REGULATIONS

Applicable Legal Framework
Investment in Nepal by foreign individuals and companies is regulated under
various laws and regulations. Particularly, they are:
Foreign Investment and Technology Transfer Act 1992
Industrial Enterprises Act 1992
Foreign Exchange (Regulation) Act 1965
Company Act 2006
Investment Board Act 2013
In addition, investors also need to comply with various additional regulations
and directives prescribed by the regulatory bodies which are as follows:
Department of Industries
Investment Board
Nepal Rastra Bank (the Central Bank of Nepal)
Other regulatory bodies such as Insurance Board, Civil Aviation

Authority, Nepal Telecommunications Authority, Ministry of Environment
etc.
Investing in Nepal
Other Relevant Laws

Some of the other important laws other than directly related to investment
that investors should take into consideration of are:
Arbitration Act 1999
Contract Act 2000
Customs Act 2007
Civil Code (Muluki Ain) 1853 (revised 1962)
Electricity Act 1992
Environment Protection Act 1997
Export-Import Control Act 1957
Income Tax Act 2002
Labour Act 1992
Local Self Governance Act 1999
Private Financing of Building and Operation of Infrastructure Act 2006
Public Procurement Act 2006
Value Added Tax Act 1996
Investors also need to be aware of the provisions of the Double Tax
Avoidance Treaties, and Investment Promotion and Protection Treaties
related to their home jurisdictions.
Investing in Nepal
Investment and Business Methods

There are several ways through which foreign companies may enter the
Nepalese market:
Establishing a fully owned subsidiary
Foreign investors can establish a fully owned subsidiary by taking
permission from Department of Industries, Industrial Promotion Board, or
the Investment Board depending on the type of your investment.
Establishing a joint venture company
Foreign investors can establish a fully owned subsidiary by taking
permission from Department of Industries, Industrial Promotion Board, or
the Investment Board depending on the type of investment.
Establishing a branch office
Foreign companies undertaking business and transactions are required
to open branch office in Nepal if they are providing services from a
fixed location in Nepal for over 30 days. Recommendation from a
relevant ministry will be required to establish a branch office.
Establishing a liaison office
Foreign companies are required to open a liaison office if they are
appointing its representative in Nepal or intend to open an office to
undertake representative activities. Generally, recommendations from
ministries are not required.
In addition to these methods investors can also undertake technology
transfer agreements (management, licensing, franchising etc) or appoint
local distributors to undertake business in Nepal.
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Investing in Nepal
Required National Participation

Investors from all countries are allowed to invest in Nepal. Government of
Nepal has not discriminated against investors from any particular country.
However, foreign investors are required to partner with Nepalese investors in
some sectors such as consulting (maximum foreign shareholding can be 51%)
and aviation (maximum foreign shareholding can be 49% for domestic and
80% for international operators).
Once a Nepalese subsidiary is registered, such subsidiary is treated as a
Nepalese company. The law does not discriminate between foreign owned
and locally owned companies. However, in relation to some government
procurement, local and international tenders may occasionally require of
local and/or foreign partners from particular countries.
Companies or Individuals?
Both companies and individuals can invest in Nepal. There are no rules
discriminating or restricting natural and legal persons or major procedural
differences during investment.
Minimum Investment
Minimum investment amount for foreign companies and individuals investing
in shares of a company in Nepal has been fixed at NPR. 5,000,000 (Five Million
Nepali Rupees) which is equivalent to around USD 50,000. The investor will
have to at purchase shares equivalent to this amount or lend over this
amount. This may not apply in setting up of contact/liaison offices or branch
offices of foreign companies.
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Investing in Nepal
Opening A Subsidiary
The subsidiary company of the foreign company can be opened in Nepal
under Company Act, 2006. The holding company can control the subsidiary
company by:
! By holding direct or indirect control over the formation of the board of
directors;
! By holding majority shares of the company.
Opening Procedure for Subsidiary

The steps for approval or registrations required (for general projects) are as
follows:
Obtain foreign investment approval from Department of Industry
If the foreign investment is of fixed assets up to five hundred million,
then approval of Department of Industry is required.
o If the foreign investment proposed more for an industry requiring
fixed assets beyond excess of two billion rupees then approval
of Industrial Promotion Board is required.
Registration of company (private, public or branch) at Companies
Registrar Office
Register for tax at the Tax Office
Obtain foreign investment approval from Nepal Rastra Bank
Register as an industry at the Department of Industry
Complete the required environmental compliance procedures (if
required by Environmental Protection Act)
Investing in Nepal
Documents Required for New Projects

The following documents are required for approval of Joint Venture or 100%
owned subsidiaries from the Department of Industries:
Investment Application
Joint Venture Agreement (if applicable)
Project Report
Notarized company registration and constitutional documents of
foreign companies or passport copies of individuals
Board of Director resolutions for foreign companies
Investor Bio-Data/CV or Company Profile
Financial Credibility Certificate (provided by a foreign bank)
Power of Attorney for representatives
Additional documents required by Nepal Rastra Bank are:

Investment timeline
Commitment letter not to repatriate for at least one year of investment
Documents providing source of funds of the investor
Non-blacklisting certificate obtained from Credit Information Bureau
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Investing in Nepal
Share Acquisitions Procedure in Existing Companies

Foreign investors may acquire already operating Nepali companies through
sale of shares, or join in as a joint venture partner through issue of new shares.
Documents required for the approval process are as follows:
Share Purchase Agreement, Share Issue Agreement and/or Joint
Venture Agreement (as appropriate)
Request letter of existing shareholder to sell share.
Request letter of foreign investor to buy share.
Relevant company/board resolutions
Copy of Passport and CV of a foreign investor if a foreign investor is an
individual.
Copy of the minute of board meeting regarding of foreign investor
regarding investing in Nepal through purchase of share if the investor in
a company along with certificate of incorporation and company
profile.
Financial Credibility Certificate of the foreign investor provided by a
bank.
Current shareholder list of a Nepalese company certified by
Company's Registrar Office.
Auditor's Report of Nepalese company.
Tax clearance certificate of Nepalese company.
Authority letter form the company to sign the documents on behalf of
the company.
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Investing in Nepal
After the approval procedures are complete with the Department of

Industries, the investor is also required to take Nepal Rastra Banks approval
and complete the deal by registering shares at the Office of the Companies
Registrar. Additional documents required by Nepal Rastra Bank are:
Investment timeline
Commitment letter not to repatriate for at least one year of investment
Documents providing source of funds of the investor
Non-blacklisting certificate obtained from Credit Information Bureau
Document issued by a chartered accountant providing fair value
valuation of the sales being sold (regulations generally do not like to
see transactions taking place at lower than fair value and if
transactions have been undertaken below fair value, they impose a
condition regulating future sale price)
Dispute resolution relating to joint ventures or technology transfers

Industries with fixed assets investment as per Industry Registration Certificate
of up to NPR 500 millions the dispute between a foreign investor and national
investor or the industry has to be settled by mutual consent in presence of the
Department of Industries. If the dispute could not be settled by mutual
consent then such dispute shall be settled by UNCITRAL model of arbitration
which has to be held in in Kathmandu.
Freedom to choose jurisdiction and law is provided to agreements Industries
with fixed assets investment of above NPR 500 millions and disputes may be
settled as mentioned in the Joint Venture Agreements, Share Purchase
Agreement, Licensing Agreements, or other agreements.
12
Investing in Nepal
WHAT CAN YOU INVEST IN?

Foreign Investment and Technology Transfer Act 1992 only allows foreign
investors to invest in businesses listed as industries as per the Industrial
Enterprises Act 1992. The list of businesses listed as industries are listed below.
If the business you want to invest in is not included in the list below, then
special permission from the Industrial Promotion Board chaired by the Minister
of Industry is required to classify such business as an industry for the Foreign
Investment Approval to be obtained. It is of key importance that investors
structure their business wisely by choosing the correct industry or multiple
industries.
Note: this list does not apply when registering a Liaison Office or Branch
Office of Foreign Companies, and to banks and financial institutions and
insurance companies, which their own respective regulators may permit
under specific laws governing those sectors.
The Government of Nepal has classified the following as industries:
Manufacturing Industries
All manufacturing industries that manufactures goods from raw

materials. This includes assembly industry.
Mining Industries
Extraction and processing of all types of mines and minerals.
Energy Industries
Energy production through hydro, wind, solar, coal, natural oil gas and
other sources.
13
Investing in Nepal
Survey/feasibility study of energy projects
Agricultural Industries
Silk worm farming
Fruits Farming and Fruits Refinery
Livestock Farming
Dairy Industry
Poultry Farming
Fish Farming
Tea Farming and Refinery
Farming Medical Plants and Refinery
Seeds Production Vegetable Products
Mushroom, Vegetable Farming and Refinery
Tissue culture
Green House
Bee Farming
Production of Honey
Rubber Farming
Horticulture
Private Leased Forest
Agro-forestry
Cotton Farming, Production of seeds of Cotton
Farming of fruits and cash crops for commercial purpose
Tourism Industries
Tourist residency, motel
Hotels and Resorts
Restaurants
Travel Agency
Skiing
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Investing in Nepal
Gliding
Water Rafting
Cable-car complex
Trekking
Pony-trekking
Hot air ballooning
Para sailing
Golf course
Polo
Horse riding
Entertainment (Amusement) Park
Adventure Tourism
Service Industry
1
2
Workshop
Publishing
Consultancy Services1
Ginning and Billing
Cinema
Construction
Photography
Hospital and Nursing Home
Education and Training
Laboratory
Airlines2
Construction and sale of residential homes
Telephone (cellular, mobile, paging)
Television broadcasting
Only maximum 51% investment is allowed

Only maximum stake of 49% in domestic and 80% in international airlines is allowed
15
Investing in Nepal
Satellite and cable television
Cloth and yarn dying
Cloth printing
Transportation of goods
Battery recharging
Security guard
Advertising designing and ad-agency
Publishing
Liquid petroleum gas refilling
Mapping
Documentary and television show production
Construction heavy equipment leasing and maintenance
Cargo
Radio
Veterinary clinic
Diagnostic services
Operation and maintenance of buildings, roads, airport, pipelines,

sports complex, rope-way, power projects, inland clearance depo and
others
Shipping
Packaging service
Dry cleaning
Catering (Local catering is not allowed)
Video audio recording
V-Sat
Internet services
Interior decoration
Investment company
Professional services such as plumbing, wiring,
Fashion design
16
Investing in Nepal
Ready mix concrete
Electricity installation and maintenance
Computer software
Call centre
Computer data collection, processing and designing
Business process outsourcing (BPO)
ICT value added services
Email service
Telex service
Telegraph service
Internet protocol television
Internet Telephony
Data network
Waste collection and cleaning service
Student hostel
Child care centre
Elderly care homes
Sports services
Theatre and dance
Construction (Infrastructure) Industry
Construction and operation of roads, railway, rope way, trolley-bus,

tunnel,
fly-over
bridges,
industrial,
commercial
and
residential
complexes
Construction, management and operation of conference centre
Construction, management and operation of water pipelines, sewage

infrastructures
Construction, management and operation of power houses and

transmission lines
Construction, management and operation of irrigation infrastructure

17
Investing in Nepal
WHAT YOU CANNOT INVEST IN?

Annex 1 of the Foreign Investment and Technology Transfer Act 2049 does
not allow investment in the following industries:
Household industries
Personal service businesses such as barber shop, beauty parlours,

tailoring, driving training
Weapons industry
Radioactive elements related industries
Buying and selling of lands and houses (except construction businesses)
Movies, films of Nepali language
Security printing
Currency and coins businesses
Retail businesses with operations in less than three countries
Beedi (Local/traditional cigarette) industry (except industries that

export more than 90%)
Internal courier service
Atomic energy
Chicken farming
Fish farming
Bee farming
Legal, accounting, engineering and consultancy business3
Local catering business
Rural tourism
Technology
transfer
(franchising,
technology
licensing,
management,
trademark licensing etc) is allowed in all industries. These companies will also
be allowed to open contact/liaison offices.
Only consultancy business other than legal, accounting, engineering with up to 51% foreign
shareholder stake is allowed
18
Investing in Nepal
OPENING A BRANCH OR CONTACT OFFICE

Branch Office
A foreign company can also register its branch to undertake incomeproducing activities within Nepal other than through establishment of a
subsidiary or a joint venture. Establishment of branch offices requires
recommendation from a relevant Nepal government agency or entity. A
branch office may be suitable for one off work eg. providing construction
services, government procurement, management and other similar activities.
Contact/Liaison Office
Contact/liaison office may only spend and have employees but may not
undertake income generating activities within Nepal. Contact office may
be appropriate for those wishing to have a point of contact for their business
within Nepal.
19
Investing in Nepal
LOAN TRANSACTIONS
Foreign Investment and Technology Transfer Act 1992 and Foreign Exchange
(Regulation) Act 1965 allows foreigners to lend money to industries and
businesses in Nepal. Regulatory permission needs to be obtained form two
institutions Department of Industries and Nepal Rastra Bank (Central Bank of
Nepal) in order to do so. Interest, principal, fees, and other charges can be
repatriated to foreign convertible currency after approvals have been
obtained from both Department of Industries and Nepal Rastra Bank.
The Central Bank of Nepal has introduced a directive stating that it shall only
approve loan transactions with maximum interest rate of One Year LIBOR +
5.5%. Shareholder loans are capped at LIBOR + 2% and need to maintain
debt-equity ration of 60:40. Withholding tax of 15% applies on interest
payments made to foreign banks and companies that do not have a Double
Tax Avoidance Treaty with Nepal.
Security can be obtained on assets of the borrower company or the
guarantors (eg. land, houses, movable assets, shares, off-take agreements,
government licences and other assets) after the loan transaction has been
approved by the Department of Industries. Additional approvals may also be
required to register security depending on the structure of the transaction.
Security has to be registered at the local land revenue office or the Secured
Transactions Registry. Security registration charges at land revenue offices are
1% of the loan amount (the registration fee is NPR 40,000 maximum for banks
licensed by the Central Bank of Nepal). NPR 500 is charged for registration of
security at Secured Transaction Registry.
20
Investing in Nepal
SPECIAL SECTOR RULES

Airlines
Maximum Foreign Investment Permissible: 49 to 95 %
Regulatory Body: Civil Aviation Authority of Nepal
Foreign Investment is permissible in domestic airlines, international

airlines, flying schools and repair and maintenance work
Hotels
Maximum Foreign Investment Permissible: 100%
Regulatory Body: Ministry of Tourism
Applicable Act and Policies: Tourism Policy, Tourism Act
Approval from the Department of Tourism required for operating

restaurant, hotels, and resorts
Higher Education
Medical Education
Regulatory Body: Ministry of Education
Applicable Act and Policies: Directive of Ministry of Health and

Population
on
Establishment,
Operation,
Standards
and
Infrastructure of Private and Non-governmental Health Institution,

2061
Affiliation to a University has to be entered into and approval from

the Ministry of Education required.
Engineering Education/ Management Education
Regulatory Body: Ministry of Education

21
Investing in Nepal
Applicable Act and Policies: Technical Education Policy of Ministry

of Education
Approval is granted under the Technical Education Policy of Ministry

of Education
Mining
Regulatory Body: Department of Mines
Applicable Act and Policies:

o Department of mines and Geology (Department) Act, Mines
and Minerals Act, 2050 (1993) Mines and Minerals Regulations,
2056 (1999)
o License from the Department of Mines has to be obtained for
mining activities in Nepal
Telecommunications
Maximum Foreign Investment Permissible: 80% (Telephone operations)
Regulatory Body: Nepal Telecommunication Authority,
Ministry of Information and Communication
Applicable Act and Policies: Telecommunication Act
Approval of Nepal Telecommunication Authority is required to operate
services and obtain license prior to operation
Energy
Regulatory Body: Ministry of Energy/Department of Electricity

Development
Off taker: Nepal Electricity Authority
Applicable Act and Policies: Electricity Act

22
Investing in Nepal
Infrastructure and Public Private Partnership
Investors can propose to the relevant ministries directly or bids may

be invited by the government. A concession agreement will be
signed by the relevant Ministry. Some concessions will be processed,
negotiated and signed by the Investment Board.
Applicable Act: Private Financing in Build and Operation of

Infrastructures, 2006.
Industries under the Jurisdiction of Investment Board
Fast Track Road, Tunnel, Railway, Ropeway, Trolley Bus
Construction of international as well as regional level airport and in

modernization and management of the running airport
Waste management and refinement plants
Chemical Fertilizer Production, Petroleum Refinery
Construction of big bridge specified by the Government of Nepal,
Bank and Financial Institution to be established in foreign investment

having more than 51% or in the establishment or operation of
Insurance or Reinsurance Company
Medical college as well as hospital or nursing home having more

than three hundred beds
Hydropower project having the capacity of Five Hundred or more

than Five Hundred Megawatt (500 or more MWs)
Establishment of Special Economic Zone, Export Promotion or

Refinement Zone, Special Industrial Zone or Information Technology
Park,
Construction Industry, Mine Industry, Tourism Industry, Air industry or

Productive Industry having fixed capital of Ten hundred million
rupees or having more than Ten hundred million rupees project cost
Concession agreement has to be signed with the Investment Board

to undertake these projects
23
Investing in Nepal
OTHER ISSUES FOR FOREIGN INVESTORS

Real Estate Acquisitions
Real estate can be acquired without permission for the activities of the
subsidiary. Branch and liaison offices cannot purchase real estate.
Exchange Controls
Nepal implements strict foreign exchange controls. Usually, permission from
the Nepal Rastra Bank is required to remit funds abroad. However, foreign
exchange requirements are slowly becoming flexible, eg. permission is not
required to import goods through letters of credit. Regulatory permission is not
required to remit above USD 10,000 per remittance for fees, royalties,
advertising and other purposes through wire transfers.
Post-Incorporation Legal Compliance
There are various post-incorporation compliances that need to be
undertaken regularly such as (a) undertake annual filing of the company at
Office of Company Registrar; (b) approve of shareholders list, directors list
from Office of Company Registrar; (c) certificate of investment from banks
should be obtained once funds are remitted, (d) all investment and
transactions should take place through proper banking channels (amount
invested or consideration of purchase price should be deposited in the
company accounts), (e) fulfil other compliance requirements, licence
requirements depend on the industrial sector, and (f) environmental
regulations have to be complied with depending on the industry sector.
Business Visa and Work Permits
Foreign visitors other than Indian nationals need valid passports to enter
Nepal. There is a provision in the Foreign Investment Act to provide six month
24
Investing in Nepal
investors visa for feasibility studies, however, is not currently granted, and
investors have to use tourist visas instead.
A foreign investor or the authorized representative of such investor and their
dependent family members is provided business visa until such investment is
retained. First a six-month visa is granted and extended gradually based on
progress of the project. After the project has achieved commercial operation
or required amount has been invested, a five-year business visa may be
provided.
Foreign workers (including Indian nationals) will require work permit to work in
Nepal. Work permit can only be obtained by proving that employees of such
skill, education and experience are not available in Nepal. The process to
obtain work permit is lengthy and clearances from over 4 government
departments are required.
Repatriation
The foreign investor can repatriate (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 or interest on any foreign loan;
(d) 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.
Repatriation approvals can take several months. Recommendation of the
Department of Industries and approval from Nepal Rastra Bank is needed for
the repatriation. Audit reports, resolutions, bank account statements, tax
clearance certificates, and various other documents need to be presented
for obtaining remittance approval from repatriation for dividends/profits.
25
Investing in Nepal
TAXATION
Corporate Taxation
There is a 25% tax imposed on the taxable income of any corporate institution
for any income year. However, the tax rates may vary according to the
business of the corporation. Special income tax rates apply as follows:
Type of Business
Tax Rate
Banks, financial institutions, general insurance
30%
Entities engaged in manufacturing (except alcohol and 20%

tobacco industries)
Entities constructing and operating roads, bridges, tunnels, 20%
ropeways, flying bridges, trolley buses and trams
Entities
engaged
in
building
and
operating
public 20%
infrastructure to be transferred to the government

Entities engaged in power generation, transmission or
20%
distribution
All income earned from export of goods and services
20%
*Please note that other special exemption or reductions are also available.
Please consult for detailed advice.
26
Investing in Nepal
Personal Taxation
All companies employing staff should deduct taxes for each employees at
the following rates:
Income (per annum)
Tax Rate
NPR 200,000 or less
1%
More than NPR 200,000, less than NPR 15% of taxable income of more than
300,000
NPR 200,000
More than NPR 300,000
25% for taxable income of more than

NPR 300,000
More than NPR 2,500,000
Additional 40% on the taxable amount

calculated under 25% rate on the
taxable income of more than NPR
2,500,000
Tax can be deducted in the amount of 6% on payments to the provident

fund or an approved retirement fund. If a natural person has a taxable
income of NPR 2.5 million (USD 25,000) or above, an additional tax of 40%
must to be paid for an income above NPR 2,500,000 (USD 25,000). Rates vary
by a small degree for married couples.
27
Investing in Nepal
Withholding Taxes
Resident entities must pay a 5% withholding tax on dividends. A

withholding tax of 5% is also levied on profits repatriated by a
permanent establishment to its parent company.
Withholding tax of 15% applies to royalties, lease, commission, interest

paid (except to Nepalese banks).
Withholding tax of 10% applies to real estate leases/rental payments

and aircraft lease payments
Withholding tax of 1.5% applies for service fees, construction or

contract fees paid to VAT registered entities
Capital Gains Tax

For corporate entities and businesses incorporated, capital gains are treated
as income and taxed at the same rate as income.
For natural persons, the tax rates are as follows:
2.5% if the ownership of disposed non-business taxable property (land

and building) is held for more than five years
5% if the ownership of disposed non-business taxable property (land

and building) is held for less than five years; and
5% on all gains in the stock market securities transactions.
28
Investing in Nepal
Value Added Tax (VAT)

VAT is levied at a single rate of 13%. Leasing and buying/selling of real estate
are VAT-exempt. VAT is not levied on goods and services exported, which are
zero rated. Goods such as basic agricultural products, medicine, education
services, air transport, financial and insurance services are also exempt.
Tax Depreciation
Assets depreciation rates are as follows:
Class
Assets
Rate
Buildings, structures and similar works of a permanent
5%
nature
B
Computers, data handling equipment, fixtures, office
25%
furniture and office equipment

C
Automobiles, buses and minibuses
20%
Construction and earth moving equipment and any
15%
depreciable asset not included in another class

including
pollution
development,
natural
control,
research
research
and
exploration
equipments
E
Intangible assets other than depreciable assets
Average rate
included in class D
according to
the useful life.
29
Investing in Nepal
Land Registration Tax

Land registration tax (similar to stamp duty) has to be paid when
selling/transferring land to a new owner at the following rates:
Property Type
Municipal Areas Tax
Non-municipal Area
Tax
For
land/houses
worth
Rs. Rs. 400
Rs. 300
10,000 or less
Property worth Rs. 10,001 Rs. 1000
Rs. 500
25,000
Property worth Rs. 25,001 or 4.5%
2%
more
Taxes on Possession of Real Estate

Municipal House Tax
The annual tax for the possession of houses in municipal areas has to be paid
to the Municipal Office. The rates are as follows:Class
Type of House
Tax Rate (per sq.

feet)
Raw bricks with mud mortar or made of wood Rs. 450

(timber)
Kiln bricks/stones with mud mortar
Rs. 525
Kiln bricks/stones with cement mortar.
Rs. 575
RCC frame structure
Rs. 635
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Investing in Nepal
Property Tax
Property tax is levied on the following rates in municipal areas:Property Valuation (NPR)
Tax Rate
Up to 1 million
none
1 million 2 million
Rs.300
2 million 3 million
0.05%
3 million 5 million
0.25%
5 million 10 million
0.50%
Over 10 million
1.50%
Other Taxes
Other taxes such as Customs Duty, Excise Duty and specific royalties for
power production and operation of casinos are also applicable. Customs
and excise duty refund for imported raw materials and machineries for export
oriented industries and exported goods are available under Industrial
Enterprises Act 1992.
31
Investing in Nepal
END
If you have any questions or require further information, please feel free to
contact us at info@neupanelegal.com
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NEUPANE LAW ASSOCIATES

The information in the guide is in summary form, and is intended as an

Tej Bahadur Katuwal

Partner and Head of Corporate

(T) +977 1 4101631

(T) +977 1 4101631

First Edition published December 2013

ABOUT NEUPANE LAW ASSOCIATES

organizations and private individuals for over 30 years.

Various international publications highly recommended our practice.

manufacturing, information technology, tourism, and service sectors.

FOREIGN INVESTMENT REGULATIONS

Nepal Rastra Bank (the Central Bank of Nepal)

Other regulatory bodies such as Insurance Board, Civil Aviation

Other Relevant Laws

Investment and Business Methods

Required National Participation

Opening Procedure for Subsidiary

Documents Required for New Projects

Additional documents required by Nepal Rastra Bank are:

Share Acquisitions Procedure in Existing Companies

After the approval procedures are complete with the Department of

Dispute resolution relating to joint ventures or technology transfers

WHAT CAN YOU INVEST IN?

All manufacturing industries that manufactures goods from raw

Extraction and processing of all types of mines and minerals.

Survey/feasibility study of energy projects

Silk worm farming

Fruits Farming and Fruits Refinery

Tea Farming and Refinery

Farming Medical Plants and Refinery

Seeds Production Vegetable Products

Mushroom, Vegetable Farming and Refinery

Private Leased Forest

Cotton Farming, Production of seeds of Cotton

Farming of fruits and cash crops for commercial purpose

Tourist residency, motel

Hotels and Resorts

Hot air ballooning

Entertainment (Amusement) Park

Ginning and Billing

Hospital and Nursing Home

Education and Training

Construction and sale of residential homes

Telephone (cellular, mobile, paging)

Only maximum 51% investment is allowed

Satellite and cable television

Cloth and yarn dying

Advertising designing and ad-agency

Liquid petroleum gas refilling

Documentary and television show production

Construction heavy equipment leasing and maintenance

Operation and maintenance of buildings, roads, airport, pipelines,

Catering (Local catering is not allowed)

Video audio recording

Professional services such as plumbing, wiring,

Ready mix concrete

Electricity installation and maintenance

Computer data collection, processing and designing

Business process outsourcing (BPO)

ICT value added services

Internet protocol television