Banking and profit repatriation in Nepal: what foreign firms need

If you plan to incorporate a company in Nepal, you also need a clear plan for banking and profit repatriation. The rules are welcoming, but process-driven. You must bring capital through formal channels, maintain proper books, and clear taxes before remitting dividends, royalties, interest, or service fees. This guide demystifies the legal framework, the exact documents banks will ask for, how approvals work, typical timelines, and common errors to avoid. Read it end-to-end to reduce rework, speed up transfers, and stay compliant.

Incorporate a company in Nepal: banking basics foreign investors should know

The banking foundation you set during incorporation determines how smooth your future remittances will be.

1) Choose the right account setup

• NPR current account for local receipts and payments.

• Capital inflow ledger to track paid-up capital and reinvested earnings.

• Foreign currency account (where permitted) if you earn in convertible currency or qualify under sector rules.

• Dividend payable ledger separated by shareholder for clean audit trails.

2) Capital must come through the banking channel

Inward remittances must be traceable from the investor’s bank to the Nepali company’s bank. Keep the SWIFT copy, bank credit advice, and the purpose code. These will be required later for dividend and capital repatriation checks.

3) Recordkeeping starts on day one

Maintain:

• Share register and allotment forms.

• Board and shareholder resolutions.

• Audited financials with profit appropriation notes.

• Tax payment receipts and withholding certificates.

Good records drastically shorten repatriation reviews at both bank and regulator levels.

4) Know who the “approving entities” are

• Department of Industry (DOI) or Investment Board Nepal (IBN) approves the FDI.

• Nepal Rastra Bank (NRB) grants foreign exchange approval for repatriation.

• Inland Revenue administers corporate tax and withholding at source.

• Commercial banks execute the transfer once the above conditions are satisfied.

The legal framework for repatriation 

Three pillars protect your right to remit earnings when you follow the rules.

FITTA 2019 — core investor rights

The Foreign Investment and Technology Transfer Act 2019 grants foreign investors the right to repatriate dividends, profits, sale proceeds of shares, loan principal and interest, royalties, and compensation from awards—subject to tax payment and compliance with applicable approvals. ibn.gov.np+1

FITTR 2021 — rules that operationalize FITTA

The Foreign Investment and Technology Transfer Rules 2021 detail procedures and, for technology transfer, typical royalty and technical fee caps (often 5% of local sales and 10% of export sales, depending on the arrangement). These caps guide agreements that will later underpin repatriation. T.R. Upadhya & Co.+1

NRB foreign exchange approval — the last mile

The NRB Foreign Investment and Foreign Loan By-Laws explain how banks and NRB approve foreign exchange for repatriation of dividends, share sale proceeds, royalties, and interest, including approval tiers and documentation. Recent monetary policy measures aim to streamline dividend repatriation further through the banking system. Nepal Central Bank+1

Bottom line: Your right to remit is clear in law. The speed of remittance depends on documentation quality and the order in which you complete tax and NRB steps.

Step-by-step: how to repatriate dividends and profits

Follow this in order to avoid circular queries from your bank:

1. Hold the Board meeting to recommend dividends from post-tax profits.

2. Hold the AGM (or pass written shareholder resolutions) to approve dividends.

3. Finalize audited financial statements showing profit appropriation and retained earnings.

4. Settle corporate income tax for the fiscal year. Keep the tax clearance certificate.

5. Prepare withholding tax workings on dividends (final WHT applies; see “Tax checklist”).

6. Compile the repatriation pack (see below).

7. Apply through your bank for NRB approval or bank processing (as applicable).

8. Bank compliance checks: KYC, source of funds trail, shareholder identity, sanctions screening.

9. Receive NRB/bank approval and sign your Form A or bank’s FX form.

10. Bank executes SWIFT to the shareholder’s overseas account in approved currency.

Typical repatriation pack (dividends):

• Board resolution; AGM minutes.

• Audited financials; profit appropriation note.

• Dividend calculation schedule; shareholder register.

• Evidence of initial capital inflow (SWIFT, credit advice).

• FDI approval letter (DOI/IBN) and company registration documents.

• Tax clearance certificate and WHT certificate on dividends.

• Beneficiary bank details and declaration forms required by the bank.

• Any sectoral approvals if your business is regulated.

Repatriating other payments 

Different payment types require tailored evidence and sometimes prior approvals.

Intercompany service fees and management fees

• Contract showing scope, pricing method, and deliverables.

• Invoices with supporting evidence (reports, logs, work orders).

• Transfer pricing rationale if services are intra-group.

• Withholding tax usually applies to cross-border services; gross-up if contractually agreed.

• NRB/bank review for genuineness and value justification.

Royalties and technology transfer fees

• Technology Transfer Agreement must align with FITTR royalty caps and structures.

• Show usage evidence (IP license, trademarks, code, or know-how delivery).

• Apply withholding tax as per the Income Tax Act; treaties may reduce rates.

• Banks will match the fee base (e.g., gross sales) against audited numbers. T.R. Upadhya & Co.

Foreign loans: interest and principal

• Loans must comply with NRB foreign loan requirements.

• Provide loan agreement, drawdown evidence, and interest working.

• Show tax deduction at source on interest to non-residents where applicable.

• Repatriation follows the amortization schedule and NRB/bank approval rubric. Nepal Central Bank

Branch offices and PEs

• Profit remittance by a permanent establishment is subject to final withholding on branch profit repatriation. Maintain audited PE financials, tax proof, and the parent’s details for SWIFT. Baker Tilly

Tax checklist before any remittance

Your compliance stack must be watertight. Here’s the short, workable list:

• Corporate Income Tax assessed and paid for the period.

• Dividend WHT applied correctly; WHT certificate prepared.

• Royalties/Services/Interest WHT computed and paid if applicable.

• Treaty positions documented (Tax Residency Certificate, beneficial ownership).

• No outstanding liabilities flagged by Inland Revenue for the remitting period.

• Reconciliations tie back to audited financials and ledger balances.

• E-filings completed and acknowledgments stored.

In Nepal, dividends paid by resident companies are generally subject to final withholding of 5%. Many outbound services, royalties, and interest to non-residents attract withholding at 15%, unless reduced by a treaty or special rule. Confirm current rates with your tax advisor and bank before filing. Baker Tilly+2Prime Law Nepal+2

Repatriation pathway matrix 

*SLA = processing time after complete documentation. Complex sectors or missing paperwork extend timelines.

Banking operations after you incorporate 

FX and cash controls that help later

• Map revenue and payables in NPR vs. foreign currency to plan hedging.

• Use forward cover where available to reduce FX risk.

• Pay withholding monthly to avoid large year-end cleanups.

• Keep purpose codes consistent across invoices, filings, and SWIFT messages.

• Reconcile sales bases (for royalties) every month with finance and sales teams.

• Maintain a per-shareholder dividend ledger to simplify clearance.

Internal approvals you should adopt

• Two-step sign-off: tax lead + controller before any FX application.

• Document library: scan and catalog all regulatory and tax documents.

• Yearly pre-AGM health check: predicted profits, tax position, and dividend capacity.

• Vendor master for cross-border counterparties with KYC/beneficial ownership on file.

Minimum investment thresholds, routes, and who approves what

• The minimum FDI threshold is NPR 20 million for most sectors, with no minimum for IT-based industries under the automatic route (as of mid-2025).

• DOI typically handles approvals up to defined limits, while IBN takes very large or strategic projects.

• The automatic route and policy updates are intended to speed smaller investments. 

Typical timelines you can budget

• Company incorporation: 7–15 working days with accurate filings.

• FDI approval and capital inflow: 5–15 working days after complete documents.

• Dividend repatriation: 5–15 working days once taxes are cleared and the pack is complete.

• Royalties/fees/interest: 7–20 working days, depending on the bank’s review and any NRB escalation.

These timelines assume clean documentation, standard sectors, and no adverse compliance flags.

Common pitfalls 

1. Dividend declared without tax clearance
   Fix: Close books, settle tax, then approve and pay dividends.

2. Missing proof of initial capital inflow
   Fix: Keep SWIFT and credit advice from day one; store in your repatriation pack.

3. Royalty base not reconciling to audited sales
   Fix: Align contract metrics with how your ERP books revenue.

4. Treaty relief claimed without documents
   Fix: Obtain Tax Residency Certificate and beneficial ownership declaration before remittance.

5. Board/AGM minutes not precise
   Fix: Include dates, amounts, currency, and authority to sign FX forms.

6. Payments bunched at year-end
   Fix: Spread remittances across quarters; use a calendar with filing cut-offs.

7. Intercompany services too vague
   Fix: Describe the service, KPIs, and evidence. Value-justify with a short memo.

Worked examples 

Example A Annual dividend repatriation

• FY profit after tax: NPR 50,000,000.

• Dividend declared: 40% of paid-up share capital; dividend pool NPR 20,000,000.

• Withholding: 5% (NPR 1,000,000).

• Documents: Board + AGM minutes, audited FS, dividend schedule, WHT cert, FDI approvals, capital inflow SWIFT.

• Bank processing: 8 working days. Payment in USD to two shareholders.

Example B Royalty under a technology transfer agreement

• Royalty: 5% of local sales, 10% of export sales as per FITTR guidance.

• Sales: NPR 300,000,000 local; NPR 100,000,000 export.

• Royalty base: NPR 15,000,000 + NPR 10,000,000 = NPR 25,000,000.

• Withholding: 15% (NPR 3,750,000), subject to treaty checks.

• Pack: Agreement, audited sales base, calculation, WHT certificate.

• Processing: 12 working days.

Example C  Interest on registered foreign loan

• Principal: USD 2,000,000; rate 6% p.a.

• Semi-annual interest: USD 60,000.

• Withholding: 15% (USD 9,000), unless treaty relief.

• Pack: Loan approval, drawdown proof, interest schedule, WHT certificate.

• Processing: 7 working days.

FAQ 

1) Can I repatriate profits in the same year I incorporate?
Yes, once you earn post-tax profits, complete audit, and hold the AGM. You also need dividend WHT and proof of capital inflow.

2) Do I always need NRB approval for dividends?
Banks process repatriation under NRB rules/by-laws. Depending on thresholds and your case, the bank may obtain or rely on NRB tiered approvals.

3) What is the dividend tax in Nepal for foreign shareholders?
Dividends paid by Nepali companies are generally subject to final withholding of 5% before remittance.

4) Are royalties and service fees capped?
Technology transfer agreements often follow FITTR caps (e.g., 5% local, 10% export). Banks verify the base against audited sales.

5) What if I reinvest profits instead of repatriating?
Reinvestment is permitted. Keep board resolutions and update the share register or capital reserves as your advisor recommends.