Repatriation of Profits from Nepal

Foreign investors who establish a company in Nepal frequently ask one practical question before committing capital: once the business earns money, can the profit be taken out of the country lawfully? The answer under Nepali law is yes, provided that the investment was brought in through the proper legal channel, recorded with the competent authorities, and that all tax obligations have been settled. Repatriation is a statutory right recognised by the Foreign Investment and Technology Transfer Act, 2019 (FITTA), and it is administered through the Department of Industry (DOI), the Investment Board Nepal (IBN), and Nepal Rastra Bank (NRB).

This article explains, in question form, how repatriation of profits from Nepal works, which laws apply, what documents are required, and which taxes must be paid before funds may leave the country. CompanyNP prepares and files these applications on behalf of foreign shareholders, and the guidance below reflects the requirements set out in the governing statutes and in the directives published by the concerned regulators.

What Is Repatriation of Profits and Which Laws Govern It in Nepal?

Repatriation means the lawful transfer of money out of Nepal, in foreign currency, by a foreign investor who has previously brought investment into Nepal. It is not an automatic bank transfer. It is a regulated transaction that requires prior approval from the investment approving authority and foreign exchange facility from the central bank.

Which statutes and regulations apply?

The legal framework consists of several instruments that operate together:

• Foreign Investment and Technology Transfer Act, 2019 (2075) – Section 20 grants the right to repatriate and lists the repatriable amounts.
• Foreign Investment and Technology Transfer Rules, 2021 (2077) – prescribe forms, applications and procedures.
• Foreign Exchange (Regulation) Act, 1962 (2019) – gives Nepal Rastra Bank exclusive authority over foreign currency transactions.
• Nepal Rastra Bank Foreign Investment and Foreign Loan Management Bylaw, 2021 (2078) – governs recording of inward investment and approval of outward remittance.
• Companies Act, 2006 (2063) – Sections 182 and related provisions govern how and when dividends may be declared.
• Income Tax Act, 2002 (2058) – imposes withholding tax on dividends, royalties, interest and gains.
• Industrial Enterprises Act, 2020 (2076) – governs industry registration and related facilities.

The authentic Nepali and English texts of these laws are published by the Nepal Law Commission at lawcommission.gov.np.

Which authorities are involved in the approval chain?

Department of Industry and Investment Board Nepal

The DOI is the approving body for most foreign direct investment projects, while the Investment Board Nepal handles projects above the statutory threshold prescribed for its jurisdiction. The approving body that granted the original foreign investment approval is the same body that must approve repatriation. Procedural notices, application forms and the One Stop Service Centre details are available at doind.gov.np.

Nepal Rastra Bank

NRB is the foreign exchange regulator. Even after the DOI grants repatriation approval, the actual conversion of Nepali rupees into convertible foreign currency and the outward remittance require NRB’s foreign exchange facility, granted through the Foreign Exchange Management Department. Circulars and bylaws are published at nrb.org.np.

Inland Revenue Department

Before any remittance, the Inland Revenue Department must be satisfied that income tax, withholding tax, value added tax and other dues have been paid. Tax clearance certificates and audited returns are filed through the IRD system at ird.gov.np.

What Amounts May a Foreign Investor Lawfully Repatriate?

Section 20 of FITTA sets out an exhaustive list. A foreign investor who has obtained approval and brought investment through the banking channel may repatriate the following in foreign currency:

• Dividends or profits received from the foreign investment.
• The amount received from the sale of the whole or part of the shares of the investment.
• The amount of the principal and interest of an approved foreign loan.
• Royalty, fees or consideration received under a technology transfer agreement approved by the approving body.
• The amount received as compensation or damages from a final settlement of a lawsuit, arbitration award or any other legal process.
• The amount remaining after liquidation or winding up of the company, after payment of all liabilities.
• The amount received under a lease agreement for lease investment.

In which currency may repatriation be made?

As a general rule, repatriation is permitted in the same currency in which the investment was originally brought into Nepal, or in another convertible foreign currency approved by Nepal Rastra Bank. The rupee equivalent is converted at the prevailing exchange rate on the date of remittance, as determined under NRB rules.

What if the investment came from India in Indian currency?

Where the investment was made in Indian currency, repatriation is generally permitted in Indian currency, subject to NRB approval. Investors from India should also consider the Nepal–India Double Tax Avoidance Agreement when calculating the final tax burden on dividends and interest.

Is there any restriction on the amount of dividend?

FITTA does not cap the dividend amount. The limitation arises from company law and accounting: a company may only distribute what it has lawfully earned and recorded as distributable profit. A foreign investor cannot repatriate more than the proportionate share of profits attributable to the shares actually held and recorded.

What Are the Preconditions for Repatriating Dividends?

Repatriation applications are refused most often because of defects at the entry stage rather than at the exit stage. The following conditions must be satisfied.

Must the investment be recorded with Nepal Rastra Bank?

Yes. This is the single most important requirement. The foreign investment must have been:

• Approved in advance by the DOI or IBN under FITTA.
• Remitted into Nepal through a formal banking channel from the investor’s own account abroad.
• Recorded with Nepal Rastra Bank, which issues confirmation of the inward remittance and the amount of recognised foreign investment.

Capital that entered Nepal informally, through third-party accounts, or as cash carried into the country is not recognised as foreign investment and cannot support a repatriation claim. Investors who are still at the entry stage may review the process explained by CompanyNP at companynp.com before transferring funds.

What does the Companies Act require before a dividend is declared?

Under the Companies Act, 2006:

• Dividends may only be distributed out of profits, after providing for accumulated losses and depreciation.
• The financial statements must be audited by a licensed auditor and approved by the annual general meeting.
• The board must recommend and the general meeting must approve the dividend, unless the articles provide otherwise.
• The declared dividend must be distributed to shareholders within the timeframe prescribed by law.
• Annual returns and updates must be filed with the Office of the Company Registrar.

A company that has not held its annual general meeting or has not filed its returns with the Company Registrar will normally be unable to proceed with repatriation.

Must all taxes be cleared before remittance?

Yes. Section 20 of FITTA expressly conditions repatriation on the payment of all applicable taxes under prevailing law. In practice, the approving body and the bank will require evidence of income tax return filing, payment of corporate tax, and deposit of the dividend withholding tax with the Inland Revenue Department.

What Is the Procedure and Documentation for Repatriation?

What are the steps in the process?

The typical sequence is as follows:

1. Close the fiscal year and complete the statutory audit.
2. File the income tax return and pay corporate income tax; obtain the tax clearance certificate.
3. Hold the annual general meeting and pass a resolution declaring the dividend.
4. Deduct and deposit the applicable withholding tax on the dividend.
5. Apply to the DOI or IBN for repatriation approval, using the prescribed form and fee.
6. Submit the approval, together with supporting documents, to Nepal Rastra Bank for foreign exchange facility.
7. Instruct the commercial bank to execute the outward remittance to the investor’s account abroad.

Which documents are commonly required?

While the exact checklist may be updated by the regulators, the following are ordinarily requested:

• Application in the prescribed format with company stamp and authorised signature.
• Certificate of incorporation issued by the Office of the Company Registrar and industry registration certificate.
• Foreign investment approval letter from the DOI or IBN.
• NRB investment recording letter and evidence of inward remittance (SWIFT advice, bank credit advice).
• Share certificates and updated shareholder register.
• Audited financial statements for the relevant fiscal year.
• Minutes of the board meeting and annual general meeting approving the dividend.
• Tax clearance certificate and evidence of withholding tax deposit.
• Permanent Account Number certificate and latest tax returns.
• Passport copy or incorporation documents of the foreign investor.
• Bank details of the beneficiary account abroad.

How long does the process usually take?

Timelines depend on the completeness of the file. Where the audit, tax filings and corporate records are in order, applicants generally progress through the approving body and the central bank within a few weeks. Incomplete files, unrecorded capital, or unresolved tax assessments extend the process considerably.

How does repatriation work for share sale proceeds and liquidation?

For the sale of shares, the transfer must first be approved by the approving body and recorded with the Company Registrar. The buyer’s payment, the valuation basis and the capital gains tax payment must be documented before the net proceeds may be remitted. In liquidation, the liquidator must complete the process under the Companies Act and the Insolvency Act, settle all creditors and taxes, and only the residual amount attributable to the foreign shareholder is repatriable.

What Taxes Apply and What Are the Common Compliance Risks?

Which taxes affect repatriated amounts?

Under the Income Tax Act, 2002, the principal charges relevant to foreign investors include:

• Corporate income tax on company profits at the applicable rate for the sector.
• Final withholding tax on dividends distributed to shareholders.
• Withholding tax on royalties and service fees paid to non-residents.
• Withholding tax on interest paid on approved foreign loans.
• Tax on gains from the disposal of shares, collected at the rates prescribed by law for listed and unlisted securities.

Applicable rates are amended periodically by the annual Finance Act, so the rate in force in the relevant fiscal year must be confirmed with the Inland Revenue Department.

Do Double Tax Avoidance Agreements reduce the burden?

Nepal has concluded Double Tax Avoidance Agreements with a number of countries, including India, China, Republic of Korea, Thailand, Sri Lanka, Mauritius, Austria, Norway, Pakistan, Qatar and Bangladesh. Where a treaty applies, the withholding rate on dividends, interest or royalties may be lower than the domestic rate. Treaty benefits are not automatic; the investor must establish residence in the treaty country and provide supporting documentation to the Inland Revenue Department.

What are the most common reasons applications are rejected?

• Investment not recorded with Nepal Rastra Bank at the time of inflow.
• Funds remitted from an account not belonging to the approved investor.
• Shares not issued or not entered in the shareholder register.
• Annual general meeting not held or annual returns not filed.
• Audit reports qualified or inconsistent with tax returns.
• Withholding tax not deducted or not deposited within the statutory deadline.
• Repatriation claimed in excess of the recorded and approved investment.

How does CompanyNP assist foreign investors?

CompanyNP advises foreign shareholders throughout the investment lifecycle, from company registration in Nepal and FITTA approval to annual compliance and repatriation filings. Our services include preparing the approval application, coordinating with auditors, verifying NRB records, computing withholding obligations, and liaising with the commercial bank until the remittance is executed. Investors may review our foreign direct investment services at companynp.com or contact our team for a document review before the fiscal year closes.

Frequently Asked Questions

Can a foreign investor repatriate profits if the investment was never recorded with Nepal Rastra Bank?

No. Recording of the inward remittance with Nepal Rastra Bank is a mandatory precondition. Unrecorded capital is not recognised as foreign investment under FITTA, and neither the approving body nor any commercial bank will process the outward remittance.

Is separate approval required each time a dividend is repatriated?

Yes. Repatriation approval is granted transaction by transaction, based on the audited accounts and the general meeting resolution for the relevant fiscal year. A fresh application to the approving body and Nepal Rastra Bank is required for each distribution.

Can profits be repatriated before the annual audit is completed?

No. The approving body relies on audited financial statements to verify distributable profit and tax compliance. Interim distributions without a completed audit, tax return and general meeting resolution will not satisfy the documentation requirements for foreign exchange facility.

What happens to repatriation rights when a company is wound up?

Upon liquidation, the liquidator must settle all creditors, employees and tax liabilities under the Companies Act and Insolvency Act. Only the residual amount attributable to the foreign shareholder’s recorded investment may then be approved for repatriation in foreign currency.

Are royalty payments under technology transfer agreements repatriable?

Yes, provided the technology transfer agreement was approved by the Department of Industry or the Investment Board before implementation. Royalty may be remitted within the approved terms, after deduction and deposit of applicable withholding tax on non-resident payments.

Does a Double Tax Avoidance Agreement automatically reduce dividend withholding tax?

No. Treaty relief must be claimed with supporting evidence, including a tax residency certificate from the investor’s home jurisdiction. The Inland Revenue Department evaluates eligibility, and the domestic rate applies until treaty entitlement is properly established and accepted.