Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal has taken a bold step to globalize its information technology (IT) sector by amending the Foreign Investment and Foreign Loan Management Regulation, 2078, allowing Nepali IT companies to invest up to 50% of their foreign exchange earnings from service exports, or a maximum of USD 1 million, whichever is lower, in overseas IT ventures.
The Nepal Rastra Bank (NRB) announced the fourth amendment, aligning with the FY 2082/83 budget, which permits Nepali firms to invest abroad to enhance global competitiveness. This move is set to propel Nepal’s IT industry, valued at over USD 500 million annually, onto the international stage.
Under the revised rules, IT firms registered under Nepal’s industrial laws can invest within their paid-up capital limits, exclusively in IT-related sectors, subject to NRB approval for foreign exchange. Companies must verify export earnings, paid-up capital, and audited financials before investing.
The budget also allows up to 25% of export income for foreign investment in sectors like processing plants for semi-processed exports, with 50% of profits from such ventures required to be repatriated to Nepal. With over 1,500 IT firms employing 50,000 professionals, per the Computer Association of Nepal, this policy unlocks opportunities for global expansion, partnerships, and technological innovation.
In parallel, the NRB has streamlined foreign investment inflows. Approved foreign investors can now open accounts in Nepali banks or financial institutions to deposit investment-related funds in convertible foreign currency or Nepali rupees. Earnings from foreign investments and repatriated amounts can be held in Nepali rupee accounts.
Non-Resident Nepalis (NRNs) may transfer funds for joint investment company shares before obtaining approval, with no regulatory penalties if approval is later granted. Unallocated share application funds can be repatriated upon submission of a request with recommendations from the investment company or its share registrar.
Tax-related funds can be brought into Nepal via banks without NRB or foreign investment authority approval, enhancing ease of doing business. These reforms, part of Nepal’s broader economic strategy, aim to attract foreign direct investment (FDI), which reached USD 650 million in 2024, per NRB data, while fostering outbound investment by local firms. By balancing stringent oversight with investor-friendly policies, Nepal is positioning itself as an emerging tech and investment hub in South Asia, driving economic growth and global integration.
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