50 percent of the average foreign exchange earned by the IT industry through exports in the last three years or USD 1 million, whichever is less, is exempted from investing abroad.
The information technology (IT) industry will be allowed to invest in foreign countries. Nepal Rastra Bank has opened the way for foreign investment to such industries through the fourth amendment of the 'Foreign Investment and Foreign Credit Management Regulations 2078'.
In order to create an investment environment in Nepal, the National Bank has for the first time opened the way for foreign investment in the information technology sector in accordance with the provisions of the Act published in the gazette on March 18, 2081 regarding the improvement of the economic and business environment and the promotion of investment.
According to the new arrangement, the IT industry will now be allowed to invest abroad 50 percent of the average foreign exchange earned through exports in the last three years or one million US dollars, whichever is lower. There was no such arrangement before.
In the law made to amend some of Nepal's laws related to improvement of economic and business environment and promotion of investment, provision was made to give exemption for foreign investment to the information technology industry. Revati Prasad Nepal, Head of Foreign Exchange Management Department, said that the same arrangement has been implemented by the National Bank through regulations.
The Act allowed the National Bank to open foreign investment. Accordingly, we have started with one million dollars," he said. For investment abroad, the IT industry must have earned foreign currency by exporting information technology services at least in the last three financial years.'
The government in the next fiscal year's budget has provided that export industries can invest up to 25 percent of their annual income abroad. Addressing some of the concerns of the private sector, the way for Nepalis to invest abroad has also been opened by giving concessions from land restrictions to tax facilities. It is said in the budget, "For the first time, the government has given legal recognition to sweat shares and loan business in companies. However, these provisions have not been implemented.
After the implementation of the mentioned system, Nepal said that the system related to investment abroad will be revised again. There is also a provision in the budget to allow Nepali businessmen or companies to set up processing factories by exporting sales branches or semi-processed materials abroad. For this, a legal provision will be made to allow up to 25 percent of the annual income from exports to be invested abroad. The government has arranged that 50 percent of the profit earned from such business should be returned within the country. The investment board has been given the responsibility of approving investments abroad.
In the new policy made by the National Bank, there is a provision that exempted industries can get the same facility of foreign currency needed to invest abroad according to the Banning Investment Abroad Act, 2021. "According to the current laws related to industrial business, the information technology industry will be able to get the same facilities of foreign currency needed to invest abroad in the information technology related sector/industry within the limits of its paid-up capital," said the National Bank.
Companies wishing to invest abroad must submit audited financial statements related to foreign investments to the unit within 6 months of the end of the financial year according to the fiscal year of the respective country and the fiscal year of Nepal. However, the National Bank has stated that if it is not required to be audited according to the laws of the respective country, it is not mandatory to submit unaudited financial statements with documents to prove it.
companies will have to bring in the money earned from investment abroad or the money brought back to Nepal through the banking system. The regulation also mentions that if it is found that the foreign exchange has been misused or if it is found to be contrary to the existing law, the action will be taken according to the existing law.
Rastra Bank has also simplified the arrangements for foreign investors to open and operate bank accounts in Nepal. According to this, foreign investors who have received foreign investment approval can open and deposit foreign investment-related funds in Nepali banks and financial institutions by opening an account in convertible foreign currency or Nepali rupees. There is a provision that the amount earned from foreign investment and the amount of investment return can be deposited in the Nepali currency (Neru) account opened in the Nepali Bank financial institution of the respective foreign investor.
For the purpose of non-resident Nepalis applying for shares of joint venture investment companies, the Rastra Bank has also made arrangements to deposit such amount into the foreign investor's account before the approval of the foreign investment and after the amount has been received, the approval of the foreign investment can be obtained. Provision has also been made for bank-financial institutions or applicant non-resident Nepalese who have an account abroad to return the amount applied for in Nepal without share distribution, to apply to the unit with the recommendation of the joint investment investment company or its share registrar.
