Foreign Investment and Technology Transfer Act 1992 ( FITTA)

Foreign investment has been accorded very high priority for Industrial Development in Nepal. Government has pursued open and market oriented liberal policy for national economic development. In line with this policy, new Industrial Enterprises Act and the Foreign Investment and Technology Transfer Act have been promulgated in 1992. Various procedures have been streamlined and simplified to make them transparent and to improve the investment climate.
Foreign Investment and Technology Transfer Act 1992
Last date of Amendment in 2000 ( 2057)
Procedural Manual For Foreign Investment In Nepal 2005

Forms of Foreign Investment
According to FITTA, 1992, "Foreign Investment" means following investment made by a foreign investor in any industry:
a) Investment in share (Equity),
b) Reinvestment of the earnings derived from the clause (a) above,
c) Investment made in the form of loan or loan facilities.

Forms of Technology Transfer
Foreign Investor may also participate in the form of "Technology Transfer" to be made under an agreement between an industry and a foreign investor on the following matters: a) Use of any technological right, specialization, formula, process, patent or technical know-how of foreign origin, b) Use of any trademark of foreign ownership, and c) Acquiring any foreign technical consultancy, management and marketing service,
Industries not to be granted permission for Foreign Investment
1. Cottage Industries (the list of cottage industries is given in Annex-21).
2. Services (Business such as hair cutting, beauty parlour, tailoring, driving training, etc.)
3. Arms and Ammunition Industries
4. Gunpowder and Explosives

5. Industries related to Radio-Active Materials

6. Real Estate Business (excluding construction industries)

7. Film Industries (National Languages and other recognised languages of Nation)

8. Security Printing, 9. Bank notes and Coins, 10. Retail Business

11. Travel Agency, 12. Trekking Agency, 13. Water Rafting

14. Pony Trekking, 15. Horse Riding

16. Cigarette, Bidi, Alcohol (excluding more than 90% exportable)

17. Internal Courier Service, 18. Atomic Energy

19. Tourist Lodging, 20. Poultry

21. Fisheries, 22. Bee Keeping, 23. Consultancy Services such as Management, Accounting, Engineering, Legal Services.

Features

Technology Transfer - Technology transfer is possible even in areas where foreign investment is not allowed.

No Nationalization – IEA 1992 has guaranteed against nationalization of privately owned industries enterprises.

Decontrol of Prices - The government does not interfere in the fixation or control of prices of industrial products.

Simplification in import of machinery and raw materials - Industry can approach any commercial bank directly to open Letter of Credit for the import of machinery or raw materials needed for the industry. Recommendation or import license from either Department of Industries or Department of Commerce or Nepal Rastra Bank is not necessary.

Minimum approval procedures - Except industries that affect security and public health, other industrial activities do not require to obtain any license or permission for establishment and operation. They just need to be registered under the concerned Department.

The list of industries that required license are as follows:

• Industries producing explosives including Arms, Ammunition and

Gunpowder Security Printing, Bank Notes and mint industries.

• Cigarettes, Bidi, Cigar, Chewing tobacco, khani (chewing tobacco)

industries and industries producing goods of a similar nature utilizing

tobacco as the basic raw materials and alcohol or beer producing

industries.

Time bound decision process - Time bound decision process has been ensured for cases with complete documents. Decisions with regards to industrial license, registration and duty drawbacks are now to be made within 30, 21 and 60 days from the date of application, respectively.

Transparency and clarity of facilities available - The facilities and incentives available to various categories of industries have been clearly slept out in the Act itself to avoid any ambiguity.

Repatriation of profits, dividend, technical and managerial fees, and certain portion of salaries of foreign experts have been guaranteed. The corporate income tax for manufacturing units is fixed at 20% and is one of the lowest in the region.

Non-tourist visa for carrying out studies for investment and

business/residential visa for foreign investors have been provisioned and the procedures have been further simplified.

At international level, Nepal has taken numerous steps to promote foreign investment in the country. Some of the key institutional arrangements that have been achieved so far are listed as under:

• Nepal is a member of the World Intellectual Property Organisation (WIPO) and the Multilateral Investment Guarantee Agency (MIGA).

• Nepal has entered into Bilateral Investment Treaties (BITs) with countries such as France, Germany, Mauritius, and United Kingdom.

• Nepal has also entered into Double Taxation Treaties (DTTs) with 9

countries, namely, India, Norway, China, Pakistan, Sri Lanka, Austria,

Thailand, Mauritius, and Republic of South Korea.

• To ensure access to the vast potential market, Nepal is the member of

WTO, SAFTA, and BIM-STEC.

• Nepal is also a signatory to the Convention on the Settlement of

Investment Disputes between States and Nationals of Other States and a

member of the International Centre for the Settlement of Investment

Disputes (ICSID), associated with the World Bank.

Formation of Company:

Foreign Investment and Technology Transfer Act (FITTA) 1992 allows foreigners to form either a private limited company or a public limited company. The incorporation/registration of the company is done by Company Registrar's Office (CRO) The companies are incorporated and registered under the provisions of the Company Act, 2006 (2063)  has provision for two types of companies, namely, Public and Privates.

Explanation:

Foreign Investment and Technology Transfer Act – 1992 & Industrial Enterprises Act -1992 are the two most important acts for the promotion of industries in Nepal. These two acts are highly encouraging acts for attracting FDI or Joint venture investments in Nepal.

Foreign  investors  are  equally  treated  as  local  investors  and  the  same  act  prevail regarding incentives and facilities to foreign investors. Any foreign national are granted 6 months non-tourist visa if he or she want to conduct some survey, study or research with the  objective of making investment in Nepal. After that if he or she invest or establish an industry, then the investor along with his dependant family is granted with business visa until their investments are retained. Similarly if a foreign investor at a time makes an investment of US $ one hundred thousand is granted a residential visa to him and his dependant family. All these are highly encouraging statements. However in actual practice, the investors have to face various problems from time to time. This is  mainly due to fact that DOI is only an recommending body whereas granting of visa is the authority of the Immigration Department.