Facilities

Facility of foreign currency

An industry with foreign investment may, on recommendation of the foreign investment approving body, and with the approval of the Nepal Rastra Bank obtain the foreign exchange facility for such amount as may be required for the following purposes

• To pay such remuneration as may be payable to any foreign expert, technical or managerial employee employed in the industry in accordance with Section 27,
• To pay the principal or interest of any bonds or debentures issued in accordance with sub-section (1) of Section 11.
• To repatriate the foreign investment or income earned in accordance with Section 20.

After obtaining approval from the Nepal Rastra Bank in accordance with sub-section (1), an industry with foreign investment may pay or use such amount as approved from the foreign currency held in the account of such industry as referred to in Section 25

Any foreign expert, technical or managerial employee employed in an industry in accordance with Section 27 may repatriate to his or her country in convertible foreign currency such amount of saving out of the remuneration receivable by him or her, after paying income tax in Nepal in accordance with the prevailing law

The exchange or repatriation of convertible foreign currency in accordance with sub-section (2) or (3) shall be made according to the open market exchange rate.

Provision relating to experts, top-level technical and managerial employees

An industry with foreign investment shall fulfill the positions of experts in its top-level management high-level technical, managerial employees or technical employees from amongst the Nepali citizens.

if an industry with foreign investment cannot fulfill the positions of experts in its top-level management high-level technical, managerial employees or technical employees from amongst the Nepali citizens and it is necessary to transfer technical knowledge or skill through any technical or expert of another country in such an industry, the industry may employee any foreign citizen in accordance with the prevailing law.

The concerned industry shall provide details relating to the foreign citizens employed in accordance with sub-section (2) to the Department. The Department shall provide the details also to the Ministry of Finance, Ministry of Home Affairs and Ministry of Labor, Employment and Social Security.

The employees and workers employed in any industry with foreign investment in accordance with sub-section (2) shall comply with the terms and conditions referred to in the prevailing Nepal law.

Provision relating to industrial security

Such industrial security shall be provided to any industry with foreign investment as may be available to any other industry established in Nepal.

Facility of identity card

The Department may provide an identity card in the prescribed form to any foreign investor who makes such foreign investment as prescribed.

Provision relating to visa facility

The non-tourist visa not exceeding six months shall be granted to a foreign citizen who visits Nepal to make a study, research or survey for foreign investment.

The business visa shall be granted to a foreign investor or one authorized representative of him or her and the family members of such an investor or representative to stay in Nepal until the foreign investment equal to such minimum amount as prescribed is maintained.

In the case of an investor who makes investment exceeding the prescribed amount, such facility shall be provided only to a maximum of two persons and his or her family member.

The residential visa shall be provided to a foreign investor who makes foreign investment in an amount exceeding one million US dollars or in convertible foreign currency equivalent thereto at one time or to the authorized representative of him or her and the family member of such a person until the foreign investment equal to such minimum amount as prescribed is maintained.

The tourist visa shall be provided to any foreign expert, technical or managerial employee to be employed in an industry in accordance with Section 27.

The body giving working approval and work permit for the non-tourist visa shall make decision whether or not to give working approval or work permit, after completing the necessary procedures not later than fifteen days.

Other provisions relating to visa facility shall be as prescribed

Provisions relating to land

A foreign investor can purchase land required for the industry himself/herself or through other means in accordance with the prevailing law.

if a foreign investor is unable to purchase or manage the necessary land on his or her own for the operation of the industry as prescribed and makes a request, setting out the content, for the purchase or acquisition of the land, the foreign investment approving body shall make necessary recommendation, coordination and facilitation for that purpose.

If such land as in excess of the ceiling is required for an industry which is operated or to be operated with foreign investment, for the establishment and operation of the industry, the body registering the industry shall make necessary recommendation, coordination and facilitation in accordance with the prevailing law. The land that is not subject to such ceiling shall be used only for the same purpose for which it has been purchased.

Other provisions relating to the provision of land in lease to an industry with foreign investment and to the ceiling of land shall be in accordance with the Industrial Enterprises Act and the prevailing law.

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:

• Indian workers do not require a visa
• 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

Nationalization or expropriation not to be made

No industry with foreign investment in accordance with this Act shall be nationalized

No industry shall, except for a public purpose, be expropriated directly or indirectly. If it is required to expropriate it for the public purpose, due process referred to in the prevailing law shall be fulfilled.

No Change in terms, services and facilities

Any provision made in a manner to change the terms of foreign investments and any exemption, facility or concession receivable by foreign investors is to the disadvantage of any foreign investor having obtained approval prior to the making of such provision, and such a change shall not apply to such an investor.

Opening of foreign Currency Account

Foreigner and companies can open and operate foreign currency account in any of the commercial banks in Nepal.

Export oriented industrial companies can also open Foreign Currency Account.

Industries incorporated as 100 percent foreign owned or as a joint venture may also open a foreign currency account to deposit the equity share of the foreign party in convertible currency. This can be used only to import equipment and plants as well as other fixed assists necessary for the industry.

Repatriation

• Foreign investor making investment in foreign currency shall be entitled to repatriate the following amounts:
• The amount received by the sale 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 principle or interest of 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 person.

Duty Drawback Facility

Any duty or taxes levied on the raw materials, auxiliary raw materials etc. used for producing goods for export are entitled to get refund of these duty and taxes based on the quantity of exports.

The application for this must be submitted within a year of the export date. The application form along with all the necessary documents must be submitted.(25)

1. Original Custom declaration form for the import of raw materials (Aayaat Pragyapan Patra)
2. Receipt of the duty payment
3. Calculation of the raw material uses
4. Sales invoice
5. Certificate of receipt of payment
6. Copy of the agreement with the buyer

Bonded warehouse Facility

The duty drawback facility is available to the industries on the quantities of raw materials imported and used for the production of goods for export.

Export oriented industries may obtain the facility of bonded warehouse.

The raw material can be imported just by entering into a pass book without paying any custom duty or sales tax.

Those raw materials are deducted from the passbook upon export of finished product.

However, the industry must also submit a bank guarantee, which must be sufficient to cover the duties.

The industry in order to avail this facility must apply to the Department of Custom along with the following documents:

1. Company registration certificate
2. Memorandum and Articles of Association
3. Industry registration certificate
4. L/C copy for input of raw materials
5.  Lease contract if the building for industry is on rent and land registration certificate if company owns the land.
6. Recommendation from Garment Association if the industry is a garment unit.
7. Bank guarantee

Dispute Settlement

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

Land and Factory Shed in the Industrial District

Space and Factory shed are available in limited numbers in Industrial Districts at Patan, Balaju, Bhaktapur, Hetauda, Dharan, Pokhara, Butwal, Birendranagar, Dhankutta, Nepalgunj and Rajbiraj managed by Industrial District Management Ltd., located at Balaju, Kathmandu.

Land and Factory Shed outside Industrial District

Industries can also be set-up outside the industrial district. In this case, the investor himself has to arrange for land and other utility facilities from the concerned agencies.

Foreign nationals are not permitted to own land and building in their individual names. However, foreign investors can purchase the land and building in the name of the company after incorporating the company at Company Registrar's Office.

Services of local real estate dealers can be used for acquiring land. Local partner, if associated, can be helpful in this regard. After identifying the land, it has to be registered at local office of the land revenue department.

Electricity Connection

The company has to apply to the local office of the Nepal Electricity Authority in a prescribed form, as shown in Appendix-19, for electricity connection along with the following documents.

• Copy of the Ownership certificate of the land and building. (In case of building constructed in the leased land or rented land, agreement with the owner in a prescribed form should be attached).
• Copy of certificate of incorporation.
• Copy of Industry Registration Certificate.

Sea Ports

India:

Visakhapatnam Port in Andrapradesh and Haldia Port in Kolkata are the two seaports where Nepal brings or sends goods to third countries.

Talks with India is ongoing for the Mundra port at Gujarat and Dhamra port in Odisha

Bangladesh:

Since September 1997, Nepal is allowed to use the port facilities at Bangladesh’s Mongla Port and at present Nepal has access to Chittagong and Mongla sea ports and four land port stations namely Birol, Banglabandha, Chilahati and Benapole for bilateral trade with Bangladesh and third countries by all means of transportation. The land trade between the countries have been taking place through Kakarbhitta–Phulbari– Banglabandha transit route

Hedging facility

Hedging facility can be obtained after getting an approval to bring in “foreign loan” corresponding to the existing national laws. Thereafter, the company must submit an application to the Central Bank to obtain hedging facility. The hedging fee will be determined by Nepal Rastra Bank. The hedging facility will be available to infrastructure development mainly in:

• Hydropower project with a capacity of 100 MW or more,
• Transmission lines that are more than 30KM in length with the capacity of 220KV or more
• Rail, metro, and mono railway lines that are more than 10KM in length
• Fast-track roads that are more than 50KM in length, and
• Other projects specified by the Government of Nepal

DOCUMENTS REQUIRED FOR HEDGING REGISTRATION

• Copy of Memorandum of Association and Articles of Association of the company
• Approval letter for implementation of project
• Copy of loan agreement
• Copy of foreign investment approval letter granted by IBN or DoI
• Copy of approval letter from NRB to bring foreign currency Certificate of Registration of the company and tax clearance certificate

Please visit the official website of Ministry of Finance; www.mof.gov.np for more details