Prior to investing in Nepal, foreign investors may want to learn about and understand the benefits of investing, as well as how profits from investments can be repatriated to their home country. This article is intended to assist investors in learning more about investing. The process of converting any foreign currency into one’s home currency and transferring it to one’s country of origin is known as repatriation. Businesses must reinvest profits earned in the country.
If you make investments in Nepal, such as share subscriptions or investments in Nepal-based industries, you can repatriate the funds in the following ways. A foreign investor may repatriate its investment from Nepal by selling all or part of the shares or industry in which it has an investment under Nepal law, after paying all taxes that may be owed under Nepal law. After paying the tax-related liabilities under the current law, a foreign investor may repatriate the amount in the same foreign currency in which the investment was made or in another convertible foreign currency with the approval of the Nepal Rastra Bank:
After taxes, all investments and profits made by a foreign investment company are repatriable.
For repatriation to a foreign country, the following funds are allowable:
1. Distribution of profits
Foreign investors can purchase shares to invest in Nepal. Dividends, or payments made to shareholders from a company’s profits, are a common way for cash to be repatriated. The amount received in dividends and taxes paid to the Nepal government is the same dividend amount that can be repatriated to the country of residence after approval from the Nepal Rastra Bank and the foreign investor’s foreign exchange.
2. Dividends that are tax-free
A dividend can be treated as a tax-free distribution rather than a taxable dividend in some cases. Dividends are tax-free if a number of conditions are met.
3. Is your income taxed?
If a foreign investor’s earnings have already been taxed in Nepal, they are not taxed again. Earnings that have already been taxed are referred to as previously taxed income.
4. Interest earned on investment
Profits from foreign investments can be repatriated. A foreign multinational corporation may make a loan to a Nepalese subsidiary. The loan principal and interest are then repaid, and the foreign earnings are repatriated.
5. Royalty payments
The foreign direct investment enables the acquisition of technology and licenses, as well as the use of intellectual property. The investors may receive royalties as a result of their investments in intellectual property. Foreign investors may license intellectual property rights to Nepalese investors. As a result, royalties are recognized. Foreign-sourced royalties are taxed at a lower rate than domestic royalties. The investment can be repatriated to the country of origin after clearing taxes in Nepal. Amount of royalty received under the technology transfer agreement; provided, however, that a royalty or fee for the use of a trademark under the transfer of technology in a liquor industry other than one that exports 100% of its liquor shall not exceed 5% of the total selling price, as prescribed, excluding the applicable tax.
Amount received from the sale of shares in which foreign investors have a stake.
7. Fund liquidation or winding up
In the event of a liquidation or winding up of an industry or company, the amount remaining after paying all liabilities incurred as a result of the liquidation or winding up.
8. Lease rent amount
Amount received as damages or compensation, if any, from the final settlement of a lawsuit, arbitration, or any other legal process in Nepal; and (g) Amount that can be repatriated in accordance with the applicable law.
9. How will the funds be returned?
When transferring funds in a convertible foreign currency, the amount must be converted at the current exchange rate.
A. If a foreign investor makes a loan to any industry or company against the pledge or mortgage of movable or immovable property in Nepal, and the pledged or mortgaged property is required to be auctioned or forfeited due to nonpayment of the principal or interest of such a loan, the lending institution may repatriate the principal and interest. The institution making such a loan may repatriate the loan’s principal and interest through an auction of such property, just as if it were a Nepali bank or financial institution.
B. If a lease agreement is terminated due to non-payment or breach of the lease agreement’s terms, the foreign investor may repatriate its investment and the property invested in the lease.
10. Documents Required for Remittance of Funds
- Section 20 of FITTA 2019 requires foreign companies to file a profit remittance application along with the following documents:
- Auditors’ certificate detailing how the remittable amount was calculated; • Certified copies of the audited balance sheet and profit and loss account statement for the fiscal year in question;
11. Certificate of Tax Clearance
A tax clearance certificate is a declaration from the applicant stating that the profits sought for remittance are earned solely in the ordinary course of business and do not include profits from any other source.
12. Winding-up remittances require documentation
If the company does not make any profits in a given year and is forced to close its doors, there is a separate provision in place to repatriate the money to a foreign country. Remittances of branch office winding-up proceeds are also permitted under FITTA 2019.
- For the remittance, a tax clearance certificate from the Income Tax Department is required.
- An auditor’s certificate attesting that all liabilities in Nepal have been paid in full or adequately provided for;
- An auditor’s certificate stating that the winding up is in accordance with the provisions of Nepal’s Companies Act and
- An auditor’s certificate stating that no legal proceedings against the applicant or the company in liquidation are pending and that there are no legal obstructions to the remittance.
Corporate Lawyer Nepal has been assisting foreign investors in the repatriation process. We also assist with the dissolution of a business.
f you need such legal assistance, please contact us at +977-9849517735 or firstname.lastname@example.org
Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.