Automatic Rule launches for Foreign Investment in Nepal 2023-2024

The department of Industry (DoI) will take an automatic route in order to establish a conducive atmosphere for attracting foreign direct investment. By eliminating the laborious process, the department has simplified the process of attracting foreign direct investment through a one-door approach.

In the current fiscal year’s budget, it was stated that foreign investment of up to 10 million rupees will be approved automatically.

The system’s appealing feature is that foreign investors can invest 100% or through a joint venture with Nepali investors, and investment approval information is automatically sent to related bodies such as the investor, Nepal Rastra Bank, and the Company Registrar’s Office via the system, eliminating the need for the investor to obtain separate foreign investment approval.

The process will continue after this declaration is accepted. The investor must choose a sector (in which to invest). The investor must first choose the sectors in the macro log. The Industrial Business Act includes sectors.

Energy-based industries, infrastructure-based industries, agriculture and forestry-based industries, tourism-based industries, service-based industries, information technology-based industries, and manufacturing-based industries all exist in these sectors.

According to the department, this automated method only requests 10% of the essential details.

What is the procedure for approval?

There is a webpage for the department. Foreign investors must create a user ID. When applying through this automatic process, every investor is new.

The investor can access its dashboard after creating a user id by inputting the user id and password.

Foreign investment can be approved from overseas using this method, and there is no need to visit the industry department to do so. The automated route is used for projects up to 10 crores (total project cost) in the areas and sub-areas approved by the Government of Nepal.

Nepal Rastra Bank and the (OCR) Office of Company Registar have their own automation systems. The data is kept directly in that system by the department. In the absence of such a system, the department sends information via email.

Foreign investment can currently be brought in in select industries using this arrangement, with project proposals ranging from 20 million to 100 million rupees. Internal preparations have been completed so that the government of Nepal can make a decision and put it into action as soon as the notice is published in the Nepal Gazette.

By submitting the form filled out in the template provided by the department, the foreign investor receives an immediate investment approval certificate. Foreign investors can fill out this online form while overseas. The application process for this facility begins the day after the announcement is published in the gazette.

In this situation, the investor receives a confirmation message in which they are asked whether they want to proceed through the approved route or the automated route, while utilizing the same user credentials as the current approval procedure and this automatic route. The page is forwarded and the dashboard displays in the investor tab when the investor clicks the ‘Automatic Route’ option.

The investor must first accept the declaration. Investors’ investments in it are not on the blacklist, investors provide documentation in accordance with AMLCFT (Money Laundering and Financial Investment in Terrorism), and the source of investment is lawful. It contains items such as documents attached (placed) and all details entered being correct.

For example, if an investor wants to get into the energy business, he must first decide which sector, location, and municipal body (at the local level) to invest in.

The sub-investment section comes next. In this section, investors can select the sub-sectors of the sector they first selected. For example, if an investor selects energy as a sector, he can then select sub-sectors such as wind, solar power, biomass, and so on.

For each project, investors can select one sector and any number of sub-sectors.

The investor must now complete his information. If the investor is a company, some additional documents are required while filling out the investor information. If the investor possesses a passport, he only needs his passport and biodata.

It is also critical to distinguish whether the investor is a foreigner or a Nepali, and whether the investment is made by a company or an individual.

Aside from that, if you claim to be an NRN, it includes a section for Non-Resident Nepali (NRN) details. When the NRN investor selects yes, a slot will appear for the number to be entered. Individual investors must keep their passport, biodata, and photos on hand. Other papers can be kept by uploading fresh ones that the investor wants to keep.

Several documents must be submitted by a corporation. Everything from board member information to MoUs, AOUs, and beneficiary tree documentation is necessary.

The company name and incorporation number must be provided. This number varies per country, and because there is no number in any country’s company registration certificate, it is not required to fill it out. However, the country in which the corporation is registered must be declared.

The information concerning the board of directors of a corporation should also be kept. Fill out the details with director information.

The following documents should be provided:

  • Letter of authority
  • memorandum of understanding,
  • articles of association,
  • company registration certificate,
  • and three of ultimate beneficiaries.

This system just wants to know about the investments.

What is the entire cost of the project, how much is the fixed investment, and how much is the working capital?

Foreign investors must contribute a minimum of Rs 2 crore. Furthermore, because the total project cost is less than $100 million, more than five investors will be prevented from qualifying for the time being.

Furthermore, the investor can create investment plans, product descriptions, and timeframes for investments. Selecting these will finish all but the names. The department has put in place a system to decrease the frequency of errors.

This system generates the foreign investor’s investment approval certificate when they fill out this form. Investors can fill out both forms using a mobile phone or a computer. With the same certificate, investors can go immediately to the office of the company registrar. This information has already reached the company registrar’s office and Rashtra Bank.

Aside from it, the investor’s project proposal and, in the case of joint venturers, the joint venture agreement (JVA) must be submitted later during the industry registration process.

The department also preserves a QR code to verify the legitimacy of the certificate.

Should you have any questions, please do not hesitate to connect with us.

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