Foreign Investment and Technology Transfer Act in Nepal (FITTA)

GP Sir
Posted by GP Sir 2 days Ago

Foreign investment is critical to a country’s economic growth. As a developing country, Nepal requires foreign investment to boost economic growth. To improve the legal framework for foreign investment in Nepal, the Foreign Investment and Technology Transfer Act, 2019 (FITTA) replaced the previous Foreign Investment and Technology Transfer Act, 1992.

FITTA has added new provisions to increase foreign investment opportunities in Nepal. In this article, we will look at the Foreign Investment and Technology Transfer Act in Nepal (FITTA) provisions and how they affect foreign investment in Nepal.

Foreign Employment and Remittance Policy of Nepal- FITTA

Foreign Investment and Technology Transfer Act in Nepal (FITTA)

One of the key changes in FITTA is its scope. Foreign investors now include Non-Resident Nepalis (NRN) and foreign individuals, firms, organizations, and governments. The act covers investment in foreign currency shares, reinvestment of profits earned from foreign currency or shares, investment through leasing of airlines, ships, and machinery, investment in venture capital funds, investment in the secondary stock market, investment through the issuance of securities in foreign stock markets, purchase of shares or assets in a Nepalese company, technology transfer, and investment in the establishment and expansion of the industry in Nepal (LawImperial, 2019).

Suggested Reading: Current Policies and Acts of Nepal

FITTA also covers technology transfer, including patents, designs, trademarks, and technological specialization, among other things. The Department of Industry must approve agreements to transfer technology, but technology transfer is allowed even in areas where foreign investment is not permitted.

A foreign investor must invest at least NPR 50 million to invest in Nepal, or roughly USD 450,000. The authority that approves foreign investment depends on the amount of investment. The Department of Industry approves investments up to NPR 1 billion (approximately USD 9 million), while the Investment Board approves investments worth more than NPR 1 billion.

Suggested Reading: Current Macroeconomic and Financial Situation of Nepal

FITTA provides various visa facilities for foreign investors, such as non-tourist visas for study, research, or investment for up to 6 months, business visas for investments up to the minimum investment amount, and residency visas for investors who invest more than USD 1 million at a time. Nepal also provides a one-stop service mechanism that gives foreign investors exemptions, facilities, concessions, or services through a single service mechanism. The Department of Industry established the One-Stop Service Center to make it easier for foreign investors to do business in Nepal.

Foreign investors can repatriate their profits and investments after paying all applicable taxes. Before getting their money back, they must ensure they have followed all laws, agreements, and obligations. With permission from Nepal Rastra Bank, foreign investors can get their money back in the same or another foreign currency that can be converted. Foreign investors can repatriate up to 70% of their net profit each fiscal year after meeting all tax obligations, while the remaining net profit of 30% must be reinvested in Nepal. However, foreign investors can reinvest their entire net profit in Nepal if they choose to do so.

Scopes of Foreign Investment and Technology Transfer Act in Nepal (FITTA)

  1. Definition of foreign investors: FITTA defines foreign investors as Non-Resident Nepalis (NRN) and foreign individuals, firms, organizations, and governments.
  2. Types of foreign investment: FITTA covers various types of foreign investment, such as investment in foreign currency shares, reinvestment of profits earned from foreign currency or shares, investment through leasing of airlines, ships, and machinery, investment in venture capital funds, investment in the secondary stock market, investment through the issuance of securities in foreign stock markets, purchase of shares or assets in a Nepalese company, and investment in the establishment and expansion of industry in Nepal.
  3. Technology transfer: FITTA covers various aspects of technology transfer, such as patents, designs, trademarks, goodwill, technological specialization, formulas, procedures, user licenses, know-how sharing, franchises, technical and management services, and advertising services.
  4. Minimum investment: A foreign investor must invest at least NPR 50 million, or roughly USD 450,000, according to a notice from the Ministry of Industry, Commerce, and Supplies on May 29, 2019.
  5. Approving authority: The amount of investment influences the authority that approves foreign investment. The Department of Industry approves investments up to NPR 1 billion (approximately USD 9 million). The Investment Board approves investments worth more than NPR 1 billion (approximately USD 9 million).
  6. Visa facilities: FITTA provides various facilities related to visas for foreign investors, including non-tourist visas, business visas, and residency visas.
  7. One-stop service mechanism: FITTA has a new provision for a one-stop service mechanism that gives foreign investors exemptions, facilities, concessions, or services through a single service mechanism.
  8. Repatriation: FITTA covers the repatriation of all types of investments, such as profits, benefits, income, and the money from selling shares, after paying all due taxes. Foreign investors can repatriate up to 70% of their net profit each fiscal year, and the remaining net profit of 30% must be reinvested in Nepal.

Importance of Foreign Investment and Technology Transfer Act in Nepal (FITTA)

  1. Broadening the scope of foreign investment: FITTA has expanded the definition of foreign investment to include foreign individuals and organizations and Non-Resident Nepalis (NRN). It also covers various forms of foreign investment, such as investment in foreign currency shares, leasing of airlines, ships, and machinery, investment in venture capital funds, investment in the secondary stock market, issuance of securities in foreign stock markets, and technology transfer.
  2. Encouraging technology transfer: FITTA includes provisions related to technology transfer, which covers various aspects such as licensing of foreign intellectual property, franchising, management, technical, and marketing services. The Department of Industry must approve agreements to transfer technology. FITTA allows technology transfer even in areas where foreign investment is not allowed. This provision can help promote the development of new technologies and improve the industry’s productivity.
  3. Setting a minimum investment threshold: FITTA requires foreign investors to invest at least NPR 50 million, or roughly USD 450,000. This minimum investment threshold helps ensure that foreign investors commit seriously to investing in Nepal, which can create jobs and contribute to economic growth.
  4. Streamlining the approval process: FITTA has streamlined the approval process for foreign investment by dividing it into two categories based on the investment amount. The Department of Industry approves investments up to NPR 1 billion (approximately USD 9 million), while the Investment Board approves investments worth more than NPR 1 billion (approximately USD 9 million). This new system simplifies the approval process and helps to speed up the investment process.
  5. Providing visa facilities: FITTA provides various visa facilities for foreign investors, including a 6-month non-tourist visa for foreigners who wish to visit Nepal for study, research, or investment. It also grants business visas to investors who invest up to the minimum investment amount and a residency visa to investors who invest more than USD 1 million at a time. These visa facilities make visiting and doing business in Nepal easier for foreign investors.
  6. Establishing a one-stop service mechanism: FITTA has a new provision for a one-stop service mechanism that gives foreign investors exemptions, facilities, concessions, or services through a single service mechanism. The Department of Industry recently established the One-Stop Service Center to make it easier for foreign investors to do business in Nepal.

Conclusion

In conclusion, Nepal’s Foreign Investment and Technology Transfer Act establishes the rules for foreign investment and technology transfer in Nepal. FITTA has a broader scope than its predecessor and offers several services and exemptions to foreign investors, making it easier for them to do business in Nepal. Foreign investors can also return their profits and investments home after paying all applicable taxes. FITTA is a positive step towards boosting foreign investment and promoting economic growth in Nepal.