KATHMANDU, Oct 8: According to the laws of Nepal, non-resident Nepalis can sell the investment shares in whole or in part and take the proceeds from the investment after paying all the taxes applicable according to the prevailing Nepali laws. Although there is a provision for NRNs to make foreign direct investment, there is no clear provision as to whether they are allowed to buy and sell shares listed in the Securities Board of Nepal. It is mandatory to open a demat account for buying and selling securities. Since it is mandatory to submit Nepal's permanent account number (PAN No.) to open that account, there has been ambiguity regarding non-resident Nepalis investing in the securities market.
The Securities Board of Nepal (SEBON) recently introduced some loose provisions in the Securities Registration and Issuance Regulations 2073. According to Section 41.b of the regulation, an investment company established as a joint venture of the Nepal government and NRNs can, with the approval of Nepal Rastra Bank, invest in shares, stocks or debentures in infrastructure related projects but the transaction of issued securities will be done only among non-resident Nepalis who have obtained foreign citizenship or permanent residence permit of a foreign country.This has created an environment where even non-resident Nepalis can invest in the securities market in Nepal.
Likewise, people who have citizenship of countries other than member countries of the South Asian Association for Regional Cooperation (SAARC) can send investment profits as non-resident Nepalis (NRNs). But for that, certain legal criteria must be met. According to the law of Nepal, an NRN must have lived in a foreign country for at least two years by engaging in any profession, business and employment in order to invest foreign currency.
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But some Nepali citizens living abroad cannot make such investments. Nepali citizens who are posted by the Government of Nepal in diplomatic missions or consulates abroad and who are studying in educational institutions abroad are not allowed to invest as NRNs.
Before the implementation of the Foreign Investment and Technology Transfer Act 2019, no provisions related to the approval of foreign investment were applicable to investments made by non-resident Nepalis in Nepal. Non-resident Nepalis could also invest like Nepalis. But after the implementation of this Act, the definition of foreign investor changed. Because non-resident Nepalis are also defined in it, investments can be made in Nepal only after obtaining the approval of foreign investment, such as all the provisions related to foreign investment.
While investing in Nepal, NRNs must invest a minimum of Rs 20 million like foreign investors. However, the minimum limit of foreign investment shall not apply to non-resident Nepali (natural persons) to invest in Nepal through an investment company established by the Government of Nepal and non-resident Nepalis.
In this way, non-resident Nepalis can send foreign currency in different installments for the investment they want to make in Nepal. According to the Foreign Investment and Technology Transfer Act, 25 percent of the investment approved must be remitted within one year of receiving the foreign investment approval. In addition, the approved foreign investor must bring at least 70 percent of the approved investment amount before starting commercial production or business from the industry or business in which he has invested and the remaining 30 percent within two years of starting commercial production or business from such industry or business. In the case of non-resident investors buying and investing in shares, there is a provision that such foreign investment should be made within one year of approval.
