Investment Due Diligence and Negative List Review in Nepal

Investment due diligence and negative list review in Nepal is the process of confirming that a proposed foreign investment is permitted under the Foreign Investment and Technology Transfer Act 2075 (FITTA 2075), checking sector-specific ownership caps, and verifying all legal, corporate, and regulatory conditions before a DOI or IBN application is filed. Getting this wrong after the application stage is expensive and, in restricted sectors, unrecoverable. Sunshine Lawfirm conducts FDI due diligence for foreign investors in Kathmandu, Lalitpur, Pokhara, and internationally, including full Negative List checks updated for the January and March 2025 FITTA amendments.

What is Investment Due Diligence and Negative List Review in Nepal?

Investment due diligence and negative list review is a pre-investment legal verification process that determines whether a foreign investor’s proposed business activity is permitted under Nepali law. The Foreign Investment and Technology Transfer Act 2075 (2019), commonly called FITTA, governs all foreign investment in Nepal through a “negative list” approach. This means all sectors are technically open to FDI unless explicitly listed in the Schedule as restricted or prohibited .

The Negative List identifies nine categories of industries where foreign investment is either prohibited or capped. These include primary agricultural production (poultry, fisheries, beekeeping, fruits, vegetables), cottage and small industries, personal service businesses (hair cutting, tailoring, driving), arms and ammunition manufacturing, real estate business (excluding construction), retail business, internal courier services, travel agencies and tourism guides, mass communication media in national language, and consultancy services with more than 51% foreign ownership.

Additionally, the 2025 amendment introduced foreign ownership caps on aviation sectors: 80% for international airlines, 49% for domestic airlines, and 95% for aviation training and maintenance institutions . The Automatic Route allows immediate FDI approval for specific sectors including energy, tourism, ICT, manufacturing, and agriculture processing through the Department of Industry’s online system without prior manual review.

Any foreign investor who proceeds without verifying sector eligibility risks application rejection, capital freezing, or legal penalties. The Department of Industry maintains authority to reject applications for sectors on the Negative List, and the Investment Board Nepal reviews larger investments exceeding NPR 6 billion for sector compliance.

Our Investment Due Diligence and Negative List Review Services

Sunshine Lawfirm handles investment due diligence and negative list review end-to-end in Nepal, from initial sector classification through to approval strategy development.

Sector Eligibility Verification : We analyze your proposed business activity against the FITTA 2075 Schedule, Industrial Enterprises Act 2076 (2020), and current Nepal Gazette notifications to confirm whether your sector is prohibited, restricted, or fully permitted for foreign investment.

Negative List Compliance Analysis : Our lawyers review the specific restrictions applicable to your industry, including foreign ownership percentage caps, minimum export requirements (such as the 75% export condition for large agricultural industries), and conditional permissions.

Automatic Route Qualification Assessment : We determine whether your investment qualifies for the streamlined Automatic Route approval through the Department of Industry’s online portal, or if manual review and additional documentation are required.

Corporate Structure Recommendations : Based on sector restrictions, we advise on optimal shareholding structures, joint venture arrangements with Nepali partners, or alternative entity formations that maximize foreign ownership while maintaining full legal compliance.

Document Preparation and Review : We prepare and verify all required documentation including project reports, financial credibility certificates, source of investment declarations, and power of attorney documents to meet Department of Industry or Investment Board Nepal standards.

Government Liaison and Pre-Application Consultation : Our team engages directly with the Department of Industry’s Foreign Investment and Technology Transfer Section or Investment Board Nepal officials to clarify sector classifications before formal submission.

Ongoing Compliance Monitoring : We track amendments to FITTA, Nepal Gazette notifications, and regulatory changes that might affect your investment after approval, including the March 2025 amendment requiring prior DOI approval for foreign equity transfers to domestic parties.

How Investment Due Diligence and Negative List Review Works Step by Step

The investment due diligence and negative list review process in Nepal generally involves six key steps, handled through consultation with the Department of Industry and review of official government notifications.

Step 1: Initial Business Activity Classification (3–5 days) You provide your business plan, proposed activities, and corporate structure. We classify your activity under the Industrial Enterprises Act 2076 categories and cross-reference with the FITTA 2075 Schedule to identify potential restrictions.

Step 2: Negative List Verification (2–3 days) We verify whether your sector appears in the nine prohibited categories of the FITTA Schedule or subject to 2025 amendment caps. For borderline activities (such as agro-processing versus primary agriculture), we consult Department of Industry classification guidelines.

Step 3: Automatic Route vs. Approval Route Determination (1–2 days) If your sector appears on the Automatic Route list (energy, tourism, ICT, manufacturing, agro-processing), we confirm qualification for immediate online approval. If not, we prepare for standard approval route documentation.

Step 4: Ownership Structure Optimization (3–5 days) For restricted sectors with percentage caps (such as ride-sharing at 70% foreign investment or aviation services), we design shareholding structures that maximize foreign ownership while complying with caps.

Step 5: Document Preparation and Pre-Submission Review (5–7 days) We prepare your project report, financial credibility documentation, and source of investment proof. For investments exceeding NPR 6 billion, we coordinate Investment Board Nepal requirements instead of standard Department of Industry procedures.

Step 6: Formal Application Submission and Monitoring (7–15 days) We submit your application through the Department of Industry online portal (imis.doind.gov.np) for Automatic Route, or manual submission for standard approval, and monitor processing until approval certificate issuance.

Total processing time for due diligence and approval generally ranges from 3 to 6 weeks, depending on sector complexity and government processing volumes.

Documents Required for Investment Due Diligence and FDI Approval

The following documents are typically required for foreign investment due diligence and approval in Nepal.

For Foreign Investors (Individual or Corporate):

• Bio-data or detailed company profile showing business history and experience
• Certified copy of company registration certificate, Memorandum of Association, and Articles of Association (for corporate investors)
• Corporate resolution or board decision authorizing investment in Nepal
• Financial credibility certificate issued by a bank in the investor’s home country
• Documentation stating source of investment funds and proposed time schedule for capital injection
• Valid passport copy (for individuals) or passport copies of directors (for corporate entities)
• Power of attorney authorizing a Nepali representative to complete approval and registration processes

For the Proposed Nepali Entity:

• Draft project report outlining project background, market analysis, technical specifications, financial projections, and fund utilization details
• Commitment letter stating foreign investor will not repatriate investment for at least one year
• Joint venture agreement (if applicable) or share subscription agreement
• Company name reservation from Office of Company Registrar (if new entity)

Additional Requirements for Specific Cases:

• Share purchase agreement (for investment in existing companies)
• Technology transfer agreement (if applicable)
• Lease agreement documentation (for lease-based investments)
• Sector-specific licenses or pre-approvals (for regulated industries like banking, insurance, or aviation)

Note: All foreign documents must be notarized and authenticated. Requirements may vary based on investment size, sector, and whether applying through Automatic Route or standard approval.

Timeline and Government Fees for FDI Due Diligence and Approval

The foreign investment due diligence and approval process in Nepal typically takes 30 to 60 days from complete application submission, subject to government processing times.

Department of Industry (DOI) Timeline:

• Automatic Route approval: Immediate upon online submission for qualified sectors
• Standard FDI approval: 7 working days for complete applications under FITTA 2075 Section 17
• Investment Board Nepal (IBN) approval: 15–30 days for investments exceeding NPR 6 billion

Nepal Rastra Bank Timeline:

• Prior approval for foreign currency inflow: Not required after December 30, 2025 reforms; statutory notice only
• Foreign investment recording: 7 working days from application with complete documents
• Repatriation approval: 15 working days; now delegated to A-Class commercial banks for most transactions

Government Fees:

• Foreign investment approval fee: NPR 2,000 to 25,000 depending on investment amount (Department of Industry)
• Technology transfer approval (if applicable): NPR 5,000 to 50,000
• Company registration: NPR 1,000 to 100,000 based on authorized capital (Office of Company Registrar)
• Industry registration: NPR 1,000 to 10,000 (Department of Industry)
• PAN/VAT registration: No government fee (Inland Revenue Department)

Professional Fees: Our fees for investment due diligence and negative list review vary based on case complexity, sector classification difficulty, and whether Investment Board Nepal involvement is required. Contact us for a transparent quote based on your specific investment proposal.

Why Use Sunshine Lawfirm for Investment Due Diligence

Sunshine Lawfirm has established working relationships with the Department of Industry’s Foreign Investment and Technology Transfer Section and maintains current knowledge of 2025 FITTA amendments including the new prior approval requirement for foreign equity transfers.

Our lawyers have handled numerous FDI due diligence matters for manufacturing, tourism, ICT, and energy sector investors from India, China, Europe, and the United States. We prevent common mistakes including misclassification of business activities (particularly in agriculture processing versus primary production), failure to identify hidden ownership restrictions, and inadequate documentation of fund sources that delays Nepal Rastra Bank recording.

We coordinate directly with the Investment Board Nepal for large-scale infrastructure and hydropower projects exceeding NPR 6 billion, ensuring streamlined approval processes for complex investments. Our Kathmandu office provides immediate access to government offices, while we serve clients nationwide including Lalitpur and Pokhara through coordinated consultation.