Nepal Foreign Investment Law Update 2026
Foreign investment law in Nepal in 2026 reflects a series of continuous legal and policy reforms aimed at simplifying approval procedures, expanding eligible sectors, and improving capital inflow mechanisms. The framework is still primarily governed by the Foreign Investment and Technology Transfer Act, 2019 (FITTA), the Industrial Enterprises Act, 2020, and the Foreign Exchange (Regulation) Act, 1962. However, multiple amendments, notifications, and Nepal Rastra Bank regulations issued between 2024 and 2026 have significantly reshaped how foreign direct investment (FDI) operates in Nepal.
The 2026 updates focus on three core areas: automatic route expansion, removal of investment ceilings, and easing of capital and repatriation rules.
Major Legal Amendments Under FITTA Framework
The most significant legal development affecting foreign investment in Nepal is the amendment to FITTA in 2025, followed by implementation-level reforms in 2026.
A key amendment in 2025 expanded the definition of technology transfer and allowed broader forms of foreign participation in Nepalese industries. It also strengthened the legal basis for cross-border technical service exports and investment structures.
This amendment shifted Nepal’s investment regime from a tightly controlled approval system toward a more flexible and hybrid model combining approval-based and automatic-route investment mechanisms.
Key changes introduced include:
- Expansion of technology transfer scope (IT, management, outsourcing, engineering services)
- Recognition of cross-border service-based investments
- Legal basis for outward investment from earnings in specific sectors
- Strengthening of NRB oversight on foreign currency flows
These reforms form the foundation of the 2026 investment policy direction.
Expansion of Automatic Route for Foreign Investment
One of the most important updates in 2026 is the expansion of the automatic approval route for foreign direct investment.
The Government of Nepal issued a notification on 16 February 2026 expanding the automatic route to 102 industrial areas across seven sectors, significantly simplifying approval procedures for eligible industries.
This reform has several legal and procedural impacts:
Key Features of the 2026 Automatic Route Reform
- Automatic approval extended to 102 industries
- Coverage expanded across manufacturing, tourism, agriculture, IT, and services
- Removal of prior investment ceiling for automatic approvals
- Faster approval process with reduced DOI/IBN intervention
Earlier rules imposed an investment ceiling (such as NPR 500 million limit for automatic approval), but this restriction has now been removed in the 2026 framework.
This change allows larger investments to enter Nepal without full manual scrutiny, provided they fall within eligible sectors.
Removal of Minimum Investment Requirement in Selected Sectors
Another major 2026 update is the relaxation of the minimum investment threshold in specific industries, particularly in the IT and digital economy sectors.
Under the revised policy framework:
- Minimum investment requirement of NPR 20 million continues for general sectors
- IT and digital service industries may be exempt from minimum threshold under automatic route
- Startups and innovation-based companies receive relaxed entry conditions
This shift is aligned with Nepal’s strategy to attract small-scale foreign technology investors and digital entrepreneurs.
The removal of minimum thresholds in selected sectors marks a major departure from earlier restrictive investment entry policies.
Liberalization of Foreign Exchange and Repatriation Rules
Nepal Rastra Bank (NRB) has introduced multiple reforms between 2025 and 2026 to improve foreign exchange flexibility.
Key updates include:
- Easier approval process for inward foreign investment
- Simplified repatriation procedures for dividends and capital gains
- Improved foreign currency settlement mechanisms
- Gradual easing of outward investment restrictions under defined conditions
These changes reduce delays in profit repatriation, which has historically been a concern for foreign investors.
NRB now allows faster verification of:
- Foreign inward remittance certificates
- Dividend repatriation applications
- Loan repayment approvals
This improves investor confidence in capital exit mechanisms.
Strengthening of Sectoral Regulation and Negative List Updates
The negative list under FITTA continues to regulate prohibited sectors, but 2026 updates reflect gradual liberalization.
Key policy direction includes:
- Continued prohibition of cottage industries and personal service businesses
- Restrictions remain on arms, explosives, and atomic energy sectors
- Partial liberalization in retail and service-based sectors under conditions
- Greater clarity on consultancy and professional service investment limits
At the same time, Nepal has clarified that technology transfer is permitted even in restricted sectors, ensuring flexibility for knowledge-based investment structures.
Investment Board Nepal (IBN) Reforms
Investment Board Nepal continues to play a central role in large-scale investment approval, particularly for projects above NPR 6 billion.
2026 reforms include:
- Faster approval timelines for infrastructure projects
- Increased coordination with DOI and NRB
- Expansion of one-window service system
- Improved Project Development Agreement (PDA) mechanisms
IBN’s role is increasingly focused on strategic infrastructure such as hydropower, transport, and energy projects.
Simplification of Company and Industry Registration Process
The 2026 reforms also improve post-approval procedures, especially company incorporation and industry registration.
Key improvements include:
- Integrated online company registration with OCR
- Faster industry registration under DOI
- Digital submission of FDI documentation
- Reduced physical verification requirements
These reforms reduce procedural delays after investment approval, making the overall FDI process more efficient.
Policy Shift Toward Liberal Investment Environment
The overall direction of Nepal’s foreign investment law in 2026 shows a clear policy shift toward liberalization.
Key policy trends include:
- Expansion of automatic approval system
- Reduction of bureaucratic steps
- Encouragement of technology-driven investment
- Increased focus on digital economy and renewable energy
- Improved foreign exchange and repatriation systems
Nepal is gradually transitioning from a highly controlled approval-based FDI system to a hybrid model combining regulatory oversight with automatic investment facilitation.
FAQs on Nepal Foreign Investment Law Update 2026
What are the major changes in Nepal FDI law in 2026?
The major changes include expansion of the automatic approval route to 102 industries, removal of investment ceilings in selected sectors, and liberalization of foreign exchange and repatriation rules. These reforms simplify the investment process and reduce regulatory delays.
Has the minimum investment requirement changed in 2026?
The general minimum investment requirement of NPR 20 million still applies in most sectors. However, IT and digital service industries may be exempt under the automatic route, reflecting a more flexible investment policy.
What is the automatic route in Nepal FDI law?
The automatic route allows eligible foreign investments to receive faster approval without full manual review by authorities. In 2026, this system has been expanded to 102 industries, significantly simplifying the approval process.
Are foreign investors allowed to repatriate profits easily in 2026?
Yes, repatriation rules have been simplified in 2026. Investors can repatriate dividends, capital gains, and loan repayments after obtaining Nepal Rastra Bank approval and submitting required financial documentation.
Which authority regulates foreign investment law in Nepal?
Foreign investment is regulated by the Department of Industry (DOI), Investment Board Nepal (IBN), Nepal Rastra Bank (NRB), and governed under FITTA, 2019 and related laws.
Conclusion
The Nepal foreign investment law update 2026 reflects a major policy shift toward a more open and investor-friendly legal environment. Through expansion of the automatic route, removal of investment ceilings, and improved foreign exchange mechanisms, Nepal has significantly simplified the FDI framework. While FITTA, 2019 remains the core legal foundation, 2025–2026 reforms have modernized the system to attract larger and more diversified foreign investments, particularly in technology, energy, and service sectors.