Flash Alert

19 January 2025

On 13 January 2024, the Honorable President Ram Chandra Poudel enacted an Ordinance based on the
recommendation of the Government of Nepal (GoN) and the Council of Ministers. Notably, this Ordinance introduced
the following amendments to the 11 Acts for the improvement of economic and business environment and promotion
of Investment.

Reference to
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Amended Acts Summary of Major New and Amended Provisions
the Prevailing
Law
The Foreign Sub-section Addition to the definition of foreign investment
Exchange 2G(4) Foreign Investment means the following investments made abroad by a
(Regulation) Act New provision company or entity incorporated in Nepal: -
2019 (1962)
• Investment in shares of a limited liability partnership, firm, investment
fund, company, or similar entity incorporated or registered abroad as
a limited liability entity and not listed on a foreign stock market.
• A limited liability partnership, firm, investment fund, company, or
similar entity incorporated or registered abroad and listed on a foreign
stock market: investing up to twenty percent of the paid-up capital of
such an entity in shares or buying shares.
• However, this limit will not apply if a Nepali citizen invests funds
earned during their stay abroad.
• A company incorporated in Nepal, or an investment made by the
establishment to open or register its branch or liaison office abroad.
• The amount deposited by a company or establishment incorporated
in Nepal in a deposit account of a bank located abroad.
The Foreign Section 10 A Eligibility for foreign investment
Exchange Replaced The following persons, companies, or establishments incorporated in
(Regulation) Act Nepal shall be allowed to invest abroad (irrespective of contrary
2019 (1962) provisions mentioned in the prevailing laws):
a) As per Sub-section (2) of Section 3 of the Act Restricting Investment
Abroad, 1964 (2021), industries exempted from investing in foreign
countries may be granted permission by the GoN through a
notification in the Nepal Gazette.
b) The industry classified as an information technology industry
according to Industrial Enterprises Act, 2076 (2020).
c) The amount received during the period from the earnings made by
any Nepali citizen during his stay abroad.
Under the employee share sale scheme implemented by the parent
company of a Nepal-based company or its subsidiaries abroad, Nepali
citizens employed by the Nepal-based company may acquire shares
without transferring foreign currency from Nepal and earn income from
those shares.
The conditions for individuals, companies, or establishments investing
abroad, along with sectoral investment limits and other related provisions,
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will be determined by Nepal Rastra Bank and announced through a public
notice.
Revenue Section 12(4) Person arrested for offence under the act to be presented within 24
Leakage Amendment hours excluding travel time
(Investigation If an individual is to be arrested in connection with the investigation of an
and Control), offense under Revenue Leakage (Investigation and Control), Act 2052,
Act 2052 (1995) the investigating officer may issue an arrest warrant if circumstances
demand immediate action. Such circumstances include, but are not
limited to, the offender attempting to evade capture, posing a threat to
evidence, absconding, or being caught in the act of committing an
offense. The arresting authority shall ensure that the individual is
apprehended without undue delay and presented before the appropriate
authority for review and approval within 24 hours of the arrest,
excluding travel time.
Revenue Section 13(A) Settlement of revenue leakage cases
Leakage Amendment • If the RID determines that the revenue leakage are below NPR 30
(Investigation million, it may direct the relevant organization or agency to recover
and Control), the income tax, value added tax, excise duty, customs duty, or other
Act 2052 (1995) taxes or non-taxes. However, if any actions are taken with the intent
to intentionally or maliciously evade revenue, a case shall be filed.
• In cases of revenue leakage exceeding NPR 30 million, a case shall
be filed.
• If the concerned person applies to pay the revenue amount and
fine amount before the case is filed, the Revenue Investigation
Department (RID shall accept the payment and decide not to
proceed with the case. The application must be submitted to the
RID. If such an application is made, the public prosecutor’s
office will decide not to prosecute the case.
Revenue Section 13(A) Procedure for further investigation in tax evasion cases
Leakage Amendment • If the public prosecutor's office reviews the case file and determines
(Investigation that further investigation is necessary, it shall return the case file to
and Control), the investigating officer with the reasons for the additional
Act 2052 (1995) investigation. This decision must be made within 30 days of the
date of receipt of the file.
• Upon receiving the request for further investigation, the investigating
officer must resubmit the case file to the public prosecutor’s office
along with the proposed indictment and request for further
investigation, within 60 days from the date of receipt of the file,
in order to proceed with filing the case.
Revenue Section 20 (3) Provision for settlement of cases
Leakage (4) • For any case that is filed and is under consideration, the defendant may
(Investigation Amendment apply for a settlement by submitting an application and paying the
and Control), required fine.
Act 2052 (1995)
• A settlement may also be reached during the implementation stage, at
which point the defendant's prison sentence may be reduced.
• If the settlement involves the release of the defendant's movable or
immovable property, the officer handling the case must ensure the
settlement is executed accordingly.
• Before proceeding with a settlement, the opinion of the public prosecutor
must be obtained.
• While there is more than one defendant and if the revenue and penalty
of the relevant defendant is confirmed, the settlement shall be made by
paying the revenue and fine of his right.
• However, the settlement process must follow the procedures outlined in
the Criminal Procedure Code, 2074.
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Revenue Section 24(A) Provision for case withdrawal
Leakage New Provision A case filed against the defendant may be withdrawn in accordance with the
(Investigation procedure outlined in the Code of Criminal Procedure, 2074, except in
and Control), instances where the withdrawal is intended to defraud the revenue.
Act 2052 (1995)
Companies Act Section 4 Registration of Company
2063 (2006) Amendment After receiving company name approval from the Office of the Company
Registrar (OCR), the applicant must electronically upload the following
documents and submit the application in the prescribed format:
a) Certified copy of the citizenship certificate (for Nepali citizens).
b) Certified copy of the non-resident Nepali citizenship certificate (for
non-resident Nepali founders).
c) If the founder is an organization: a certified copy of the registration
certificate, the board's decision to establish the company, and key
documents related to the organization's formation.
Companies Act Section 18 Issue of shares for consideration other than cash
2063 (2006) 3A,3B, 3C, 3D, A company may issue or grant rights to shares in non-cash forms, such as
3E intellectual property, goodwill, services, or technical knowledge, subject to a
New special resolution at the general meeting. These rights can be provided to
the founder or any other person to purchase, issue, or acquire rights to
shares in a form other than cash.
Share valuation must comply with prevailing law and be determined by a
certified engineer or accounting practitioner. Shares may also be provided to
employees as part of a written agreement in lieu of salary or benefits. The
total non-cash share allotment is capped at 20% of the paid-up capital, or
40% for companies registered as start-ups.
Companies Act Section 63 Commencement of business
2063 (2006) Amendment No public company incorporated under the Companies Act 2006 shall
commence business activities without obtaining the necessary approval.
However, a private company already in operation that converts into a public
company is exempt from this requirement.
Companies Act Section 66A Employee Share Sale Scheme
2063 (2006) New a) A company and its subsidiaries may offer shares to directors or
employees, allowing them to purchase or be issued shares. Only
directors in regular employment with the company are eligible to
participate.
b) Participation in the scheme is voluntary, and the decision to purchase
shares rests solely with the individual director or employee.
c) The scheme must be approved by a special resolution at the company's
general meeting before implementation and include the following details:
• Total number of shares available for issuance or purchase.
• List of eligible employees.
• Purchase period duration.
• Offer price of shares.
• Maximum number of shares each employee may purchase.
• Other relevant terms of the scheme.
d) Shares acquired under this scheme cannot be sold or transferred during
a company-specified lock-in period.
e) Only employees actively in service during the share purchase period are
eligible.
f) Unpurchased shares within the specified period may be offered to other
employees.
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Companies Act Section 81(7) Amnesty on fines for late submission of return:
2063 (2006) Amendment If a company submits the required details, information, or documents to the
OCR by 31 Ashad 2082, a 90% discount will be provided on the fine for any
late submission of such details, information, or documents.
Companies Act Section 89(1)F Circumstances leading to disqualification for appointment or
2063 (2006) Amendment continuation as director
A person shall not be eligible for appointment to, or allowed to continue
holding, the office of the director if they are already a director, substantial
shareholder, employee, auditor, or adviser of another company with similar
objectives, or have any personal interest in such a company.
However, the following exceptions apply:
a) A person from a private company may become a director of another
private company with similar objectives.
b) A person from the parent company may serve as a director of its
subsidiary company, or a person from the subsidiary company may
serve as a director of the parent company.
c) This provision does not apply to public companies, except those related
to banks, financial institutions, or the insurance sector.
Companies Act Section 113 Power to appoint an auditor
2063 (2006) Amendment If the annual general meeting is not held or it fails to appoint an auditor for
any reason, or if the auditor appointed under this Act ceases to continue, in
the case of a private or public company not listed on the stock market,
the Board of Directors of such company may appoint another auditor
after informing the OCR. In the case of a public company listed on the
stock market, the OCR may, at the request of the Board, appoint another
auditor.
Companies Act Section 136(A) Provision for Cancellation of Company Registration
2063 (2006) Amendment a) If a company has not conducted any business, is not operational, or has
failed to submit the required details or pay the penalty as per the relevant
sections, it may request the cancellation of its registration. The company
can make this decision through a general meeting and submit an
application to the OCR.
b) If the company is unable to convene a general meeting or meet quorum
requirements, the current directors or shareholders may decide and
apply for the dissolution of the company.
c) A fine, or an amount equal to 0.5% of the company’s paid-up capital
(whichever is lower), must be paid along with the required details when
submitting the application for cancellation.
d) If the office believes there are grounds not to cancel the registration, a
notice will be published in a national daily newspaper, providing a 30-
day period for objections to be submitted.
e) If no objections are received within this period, or if the objections are
deemed unsatisfactory, the office may proceed with the cancellation of
the company’s registration.
f) Once the registration is canceled, the office will notify the relevant
directors and publish the information on the OCR's website.
Companies Act Section 176(1) Investments can be made in excess of the limit by passing a special
2063 (2006) Amendment resolution
A company shall not, directly or indirectly, lend money to another company
in excess of 60% of its paid-up capital and free reserves or 100% of its free
reserves, whichever is higher, without passing a special resolution in a
general meeting. Furthermore, the company shall not provide a guarantee
for a loan taken by another company or invest in the securities of another
company beyond the aforementioned limit.
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the Prevailing
Law
Arbitration Act Section 13(A) Rapid Arbitration
2055 (1999) New The parties may settle the dispute by resorting to the rapid arbitration service
as prescribed by contract or agreement..
Arbitration Act Section 30(4) Limitations on Court Review of Arbitrator's Evidence
2055 (1999) New When a party dissatisfied with the arbitrator's decision files a petition to
challenge and invalidate the arbitrator's ruling, the court shall not rely on the
arbitrator's evidence or re-examine the evidence that the arbitrator used in
making the decision.
BAFIA, 2073 Subsection 2 of Provisions on Disbursement of Credit
(2017) Section 55 When extending credit, BFIs must secure acceptable movable or
Amendment immovable property as collateral or obtain a suitable guarantee or project
development agreement signed or agreed upon between the investor and
the Government of Nepal, provincial government, local government, or
another relevant authority under the Public-Private Partnership model to
protect the interests of the bank and its depositors.
BAFIA, 2073 Subsection 3A of Provisions on Disbursement of Credit
(2017) Section 55 In the event of adverse circumstances arising in a project implemented
New Provision under the Public-Private Partnership model mentioned above, or if the
borrower defaults on loan interest or principal repayments for such
projects, the BFI shall have the authority to exercise step-in rights (the
right that allows a third party, such as the lender, to take over the contract)
with the second party, i.e., the Government of Nepal, Provincial
Government, or Local Government.
Special Subsection 2(4) Cancellation of license of the license-holder
Economic Zone of Section 10 If the industry established in the Special Economic Zone sells more than
Act, 2073 (2016) Removal of 25% of the product produced by it in the internal market of Nepal (since
existing these types of industries are supposed to be export oriented), then
provision license of such industry/entity provided under this act shall be cancelled.
(Now Removed)

Special Section 11 Commencement of operation

Economic Zone Amendment a) The license-holder shall enter into an agreement with the authority
Act, 2073 (2016) regarding the establishment and operation of the industry within 120
days from the date of obtaining the license.
b) If the license-holder fails to finalize the agreement within 120 days but
submits a request for an extension within that timeframe with a valid
justification, the authority may grant a one-time extension of up to 30
days.
Special Sub-section 1 of Mandatory export
Economic Zone Section 13 All the products produced by the industry under SEZ shall be exported.
Act, 2073 (2016) Amendment & However, if unavoidable circumstances prevent the industry from
addition to exporting, the industry may with the prior approval of the authority sell the
existing quantity permitted by the authority in the domestic market of Nepal during
provision the period of such circumstances.
Explanation: Unavoidable circumstances mean situations like war, floods,
earthquakes, fires, industrial accidents, adverse changes in trade policy of the
nation, etc.
Special Section 26A Bank loan facility
Economic Zone New Provision Industry established/Licensed under SEZ act can now take loans from
Act, 2073 (2016) BFI’s by mortgaging fixed assets other than land and or license
agreement u/s 11.
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Special Sub-section 2 of Income tax rebate for relocated industries
Economic Zone Section 27 An industry established in SEZ in a mountain or hilly district prescribed
Act, 2073 (2016) Amendment by GON shall from the date of commercial operation receive a 100%
rebate in income tax for the first 10 years and thereafter a 50% rebate in
income tax for the next 10 Fiscal Years. However, industries relocated to
SEZ after their initial establishment shall get such rebate in income tax
only for the remaining period/years from the date of their initial
establishment.
Foreign Sub-section 6(3) Addition to the definition of technology transfer
Investment and of section 2 Management and technical services, information technology, Marketing
Technolgy (Clarification has and market research, finance, accounting and auditing, engineering,
Transfer Act, been made in outsourcing, human resource outsourcing, digital data processing and
2075 (2019) existing digital data migration, design services or technical skills or knowledge.
provision)
Foreign Sub-section 10 Addition in the meaning of foreign investment
Investment and of Section 2 Foreign Investment now also includes the investment made by a foreign
Technology New Provision Investor in units of SIF (Specialized Investment Fund) licensed by
Transfer Act, SEBON.
2075 (2019)

Foreign Sub-section 1 of Foreign Investment in an industry may be made

Investment and Section 3 Clarification has been made in the provision by mentioning that a foreign
Technology Amendment investor may make foreign investment in any industry other than those
Transfer Act, industry mentioned in the schedule of this act (i.e. industry or
2075 (2019) business restricted for foreign investment) and derive gains from such
investment.
Foreign Subsection 2 of Investment of forex earnings from technology transfer
Investment and Section 7A Foreign currency earnings from technology transfer may be brought into
Technology Amendment Nepal with approval from the Nepal Rastra Bank (NRB). Alternatively,
Transfer Act, these earnings can be invested abroad in limited liability partnership
2075 (2019) firms, investment funds, or similar limited liability entities, provided that
such investments comply with prevailing foreign exchange laws.
Foreign Section 9A Foreign Investment can be made in units of SIF
Investment and New Addition a) A foreign investor may invest in the equity of an industry by investing
Technology in a Venture Capital Fund with approval from the SEBON or by
Transfer Act, purchasing units of an SIF registered with SEBON.
2075 (2019)
b) To invest in an industry using funds invested in units of a SIF as per
(a), approval must be obtained by following the process outlined in
Section 15.
c) The Fund Manager must submit details of the foreign investor's
investment in the SIF to the DOI.
Foreign Section 12 Loan from a foreign financial institution
Investment and Amendment a) Any industry, with the approval of NRB and in accordance with the
Technology prevailing law, can take a project loan, or a loan by entering into a
Transfer Act, project financing agreement with a foreign financial institution.
2075 (2019)
b) Exemptions, facilities and concessions provided to Industries with
Foreign Investment under Chapter 5 of this act shall also be provided
for the loan taken by industries under point (a) mentioned above.
c) Foreign currency facilities shall be provided to industries for the
repayment of the loan’s principal and interest taken under point (a)
mentioned above, aligning with the provisions/process set by NRB.
d) The borrowing industry may pledge its immovable property as
collateral to the foreign financial institution for the loan obtained under
point (a) mentioned above.
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e) The industries mentioned in the schedule (i.e. industries in which
foreign investment is not allowed) are not allowed to take the loan as
mentioned in point (a)
Foreign Sub-section 1 of Approval of foreign investment made by Non Resident Nepalese
Investment and section 15 (NRN)
Technology New addition NRNs or entities such as companies, firms, or investment funds with
Transfer Act, more than 50% NRN ownership must inform the DOI about their
2075 (2019) investments. Upon receiving this information, the DOI will grant approval
for the investment.
(Now, this provision eliminates the requirement for NRNs and entities with
more than 50% NRN ownership to obtain approval from the foreign
investment approving body to invest in Nepal.)
Foreign Section 18A Transfer of foreign investment free of charge
Investment and New addition a) If an individual or entity intends to transfer all or part of their foreign
Technology investment to another individual or entity without charge, they must
Transfer Act, submit an application to the DOI.
2075 (2019)
b) After reviewing the application, the DOI may approve the transfer,
provided the necessary tax is recovered from the recipient as per
prevailing law.

Foreign Sub-section 2 of Repatriation of foreign investment made in units of SIF

Investment and section 20 A foreign investor may repatriate the following amounts in the same
Technology New addition foreign currency in which the investment was made, or in another
Transfer Act, convertible foreign currency, with the approval of Nepal Rastra Bank,
2075 (2019) after settling tax liabilities as per prevailing laws:
a) Amount received from the sale of SIF units
b) Profit/dividends earned from the investment in SIF
Foreign Sub-section 6A Repatriation of foreign investment made in units of SIF
Investment and of Section 20 An application must be submitted to the SEBON to obtain approval for
Technology New Addition repatriating the amount, as mentioned above (SIF investment), by the
Transfer Act, foreign investor to another country.
2075 (2019)
Foreign Sub-section 1A Repatriation of foreign investment made in units of SIF
Investment and of Section 20 Once the process outlined in Section 20 is completed, foreign investors
Technoloogy New addition may repatriate their foreign investment without requiring a
Transfer Act, recommendation from the DOI or approval from NRB.
2075 (2019)

Foreign Serial 11 of Addition to negative list

Investment and Schedule 1 The following airline industries related to operations, training,
Technoloogy New Addition maintenance, and passenger services, with foreign investment
Transfer Act, exceeding the specified limits:
2075 (2019)
a) International Airlines: 80%
b) Domestic Airlines: 49%
c) Training Institutions: 95%
d) Repair and Maintenance: 95%
Public Private Sub-section 4 of Directive to be issued for ‘One Stop Service Centre’
Partnership and section 46 The Board shall draft and implement the procedure for the operation of
Investment Act, New Addition ‘One Stop Service Centre’.
2075 (2019)
Public Private Sub-section 2(4) Fund of the Investment Board
Partnership and of section 57 (Board formed under the chairmanship of Prime Minister for
Investment Act, New Addition promotion of investment and public – private partnership)
2019
The Board's fund shall also include a portion of the income allocated from
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Law
the amount received by the GON from projects implemented by the
Board.
Industrial Sub-section 1A Registration of industry
Enterprises Act, of section 3 If an industry established and operating without registration at the time of
2076 (2020) New Addition the commencement of subsection 1A applies for registration within one
year from the date of its commencement, the DOI shall register the
industry after imposing and recovering the penalty specified in section
43(1).
Industrial Sub-section 2 & EIA and IEA requirements
Enterprises Act, 5 of Section 7 7(2): EIA or IEA shall not be required solely for an increase in capital.
2076 (2020) Amendment 7(5): Industries exempt from conducting an EIA or IEA must submit an
'Environmental Management Plan' instead of a 'Self-declaration' when
applying for registration, detailing the reasons and justification for the
exemption from these assessments.
Industrial Sub-section 7 of Removal of ipso facto inoperative clause
Enterprises Act, Section 8 After obtaining the permission for the registration of industries specified
2076 (2020) Amendment in Schedule 1 of the IEA from the Industrial Promotion Board (IPB) the
industry shall apply the DOI for the registration of industry within the
period mentioned in the permit. If no application is made within such
specified period, such permit shall ipso facto become inoperative.
(The ipso facto inoperative clause has now been removed)

Industrial Sub-section 7A Extension of time limit for registration

Enterprises Act, & 7B of Section Section 8(7A): If the application for registration cannot be submitted to
2076 (2020) 8 the DOI within the specified timeframe in the permit letter, a request for
New Addition an extension must be submitted to the IPB.
Section 8(7B): If the reasons provided in the application under
subsection 7A are deemed valid, the Industrial and Investment Promotion
IPB may grant an extension of the permit period.
Industrial Sub-section 1 of Approval for relocation of industry
Enterprises Act, Subsection 11 If an industry registered for operation in one place needs to be shifted to
2076 (2020) Amendment another place, the industry shall make an application, setting out the
reasons, to the DOI.
Provided that approval of the DOI is required to shift it from one Province
to another.
(The requirement of approval of DOI is now removed for shifting from one
province to another)
Industrial Sub-section 2 of Communication of relocation of industry
Enterprises Act, Section 11 If an application for industry relocation is submitted, the DOI may approve
2076 (2020) Amendment the relocation following an Environmental Impact Assessment (EIA),
provided the EIA is recommended by the local authority of the destination
area. The relocation approval must also be communicated to the Ministry
of Industry and the relevant local authority of the province.
Industrial Section 12A Approval for change in ownership
Enterprises Act, Amendment To request a change or transfer of ownership of an industry, an
2076 (2020) application, along with the required documents, must be submitted to the
DOI for approval. After reviewing the application and documents, the DOI
will grant approval within 35 days, if deemed appropriate.
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Industrial Sub-section (11) Foreign loans and additional facilities for IT Industries
Enterprises Act, & (12) of section 29(11): With approval from the NRB, any industry may obtain a project
2076 (2020) 29 loan or project financing loan from a foreign financial institution.
New Addition 29(12): The facilities and concessions outlined in this Act shall also apply
to IT-based industries engaged in software development, data
processing, business process outsourcing (BPO), or knowledge process
outsourcing (KPO), provided their annual turnover exceeds NPR 50
million.
Industrial Sub-section 6 of Exemption on Land ceiling
Enterprises Act, section 32 Industries holding or purchasing land exceeding the prescribed land
2076 (2020) Amendment ceiling may mortgage up to 50% of the excess land to BFIs as collateral
for loans, provided the loans are based on the Detailed Project Report
(DPR) and intended for expanding the industry’s capacity.
Industrial Serial 28 of Addition in definition of agricultural industry
Enterprises Act, Schedule 4 Industries based on agriculture and forest products now include those
2076 (2020) Amendment focused on agricultural technology and mechanization.

Compiled by: Roshani Shah and Sagar Mainali, Audit Executives

PKF Comment

By revising existing laws and acts through an ordinance, the government is signaling its unwavering support for
investment. This move instills confidence in both local and foreign investors, assuring them of a stable and
conducive business climate. The amendments aim to simplify bureaucratic procedures, making it easier for
investors to navigate legal requirements.

The focus on foreign investors underscores Nepal’s openness to global capital inflows. These amendments
position Nepal as an attractive destination for FDI.

The provision allowing national priority projects within protected areas demonstrates a delicate balance between
economic development and environmental conservation.

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Phone: +977 1 4510927 | 4520026 | Fax: +977 1 4513307 | Email: trunco@ntc.net.np | www.pkf.trunco.com.np

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