Repatriating Profits: How Foreign Companies Can Remit Money from Nepal

Nepal is becoming an increasingly attractive investment destination, with foreign companies entering sectors like hydropower, ICT, manufacturing, and tourism. While the process of foreign company registration in Nepal has become more streamlined under FITTA 2019, one area that continues to raise questions among investors is the repatriation of profits.

Can you send your profits back to your home country? Yes—but only if you follow the legal, tax, and compliance protocols correctly.

This guide explains how foreign businesses can remit dividends, service fees, and capital gains from Nepal—legally and efficiently—while maintaining full compliance with the Nepal Rastra Bank (NRB), Inland Revenue Department (IRD), and the Department of Industry (DoI).

Legal Framework: Repatriation Rights for Foreign Investors

Nepal's legal framework offers full repatriation rights to foreign investors under:

• The Foreign Investment and Technology Transfer Act (FITTA) 2019

• NRB Foreign Exchange Regulation Guidelines

• Income Tax Act 2058

Foreign investors can remit the following:

• Net profits and dividends

• Sale proceeds of shares or business

• Interest and principal on foreign loans

• Royalties and technical service fees

• Management fees (approved under technology transfer agreements)

However, repatriation is allowed only after tax clearance and approval from Nepal Rastra Bank.

Step-by-Step Process for Profit Repatriation

Step 1: Ensure Proper Company Structure and Investment Registration

Before repatriating profits, the foreign investment must be:

• Registered with the Department of Industry (DoI)

• Approved by NRB with documented capital inflow

• Incorporated under Nepalese law, typically as a private limited or public limited company

Make sure your initial FDI inflow is officially recorded via SWIFT through NRB and supported with bank advice.

Step 2: Maintain NFRS-Compliant Financial Statements

Financial statements must comply with Nepal Financial Reporting Standards (NFRS) and must be:

• Audited by an ICAN-certified Chartered Accountant

• Approved by the Board of Directors and General Assembly

• Translated into Nepali (if requested by authorities)

Step 3: Obtain Tax Clearance from Inland Revenue Department

To qualify for repatriation, you must:

• File your annual corporate income tax return

• Clear all Tax Deducted at Source (TDS) obligations

• Obtain a tax clearance certificate for the relevant fiscal year

Ensure all payroll, VAT, and service taxes are up-to-date before requesting approval.

Step 4: Board Resolution for Dividend Declaration

If you are remitting profits as dividends:

• Pass a Board Resolution approving dividend distribution

• Declare net profits as per audited financials

• Ensure dividends are declared only from post-tax profits

Required Documents for Repatriation Approval

The following documents are generally required:

• Foreign Investment Approval Letter from DoI

• Capital Inflow Documentation (SWIFT advice, bank statements)

• Audited Financial Statements

• Tax Clearance Certificate

• NRB Form for Foreign Exchange Approval

• Board Resolution for Dividend Payment

• Shareholder Register

Additional documents may be requested depending on the nature of repatriation (e.g., loan repayment, royalty).

Role of Nepal Rastra Bank (NRB)

The NRB is the central authority that approves any foreign currency outflows. Once you have:

1. Obtained tax clearance

2. Submitted audited financials

3. Met documentation criteria

The NRB typically provides foreign exchange approval within 15 working days.

Repatriation is usually allowed in the currency of investment or another convertible foreign currency (e.g., USD, EUR).

Tax Implications of Repatriation

Nepal imposes the following taxes before profits can be remitted:

• Corporate Income Tax: Standard 25% on net profit

• Dividend Tax: Final withholding tax at 5%

• TDS on Royalties/Fees: 15% unless reduced under tax treaties

Nepal has Double Taxation Avoidance Agreements (DTAAs) with over 10 countries, which may reduce withholding rates.

Special Cases: Repatriating Other Types of Income

Sale of Shares / Capital Gains

• Repatriation allowed after payment of capital gains tax (usually 10–15%)

Technical Fees / Royalty

• Must be declared under an approved Technology Transfer Agreement

• TDS must be deposited before remittance

Loan Repayments (Principal + Interest)

• Must be pre-approved by NRB

• Repayment schedule should be included in the loan registration with NRB

Common Mistakes to Avoid

• Failing to record initial capital inflow properly

• Distributing dividends without proper board approval

• Skipping tax clearance or TDS filings

• Using informal channels for profit remittance

• Not updating NRB on shareholding or loan structure changes

Any of these can delay or block repatriation approval.

Practical Tips for Smooth Repatriation

• Engage a local ICAN-certified CA firm familiar with FDI compliance

• Maintain clean, audit-ready financials

• File returns on time (TDS, VAT, SSF, CIT)

• Ensure your foreign currency bank account is NRB-approved

• Apply for repatriation at least 1–2 months before target payout date

Summary: Why It Matters

For foreign investors, being able to legally and efficiently repatriate profits is crucial. Nepal’s legal framework under FITTA 2019, along with NRB and IRD coordination, does allow profit remittance—but only with strict compliance.

By understanding the full process—from tax clearance to NRB approval—foreign businesses can repatriate earnings with confidence, while protecting their credibility and future investment capacity in Nepal.

If you're pursuing foreign company registration in Nepal, understanding repatriation rules should be a core part of your investment strategy.