Features of Foreign Investment Technology Transfer Act 2075 (FITTA)
The FITTA 2075 came into existence replacing the FITTA 1992 which was very short i.e. it only contained 10 articles. The FITTA 2075 came into effect from 13th of Chaitra 2075. The act was implemented with the focus of reforming the existing legal framework in relation to the sectors of foreign investment and technology transfer. It covers a wider area in relation to foreign investments. Investments can be done individually or jointly as per the act.
The objectives of the act are clearly mentioned in the preamble which includes:
- To make national economy competitive, strong and employment orientated,
- To maximize the mobilization of the available means and resources,
- To achieve Sustainable economic growth through industrialization ,
- To attract foreign capital, technology, investment in the sectors of Import substitute and export promotion,
- To increase in the productivity and infrastructural development through production of goods and services.
The act defines foreign investors as, “any foreign individual, firm, company, non-resident Nepali or foreign government or international agency or other corporate body of similar nature that makes foreign investment, and also includes in the case of a foreign investor that is an institutional foreign investor, the ultimate beneficiary of such an institution.
Areas of foreign Investment: Section 2(j) of the act highlights major areas of investment which are considered as the modes of Foreign Investment which includes:
- Investment in shares in foreign currency,
- Re-investment of Dividends/Profits,
- Investment through lease of airlines, ships, machineries and equipment,
- Investment in Equity through Venture Capital Funds by Corporate Foreign Investor incorporated in Nepal,
- Investment in secondary stock market,
- Investment through purchase of shares or asset,
- Investment by issue of securities in foreign stock markets,
- Technology transfer which includes Licensing of foreign Intellectual Property (Trademark, Patent, Design, Copyright and Trade secret etc.), Assignment of Franchise (Brand name or goodwill of the foreign industry) and providing management, consultancy or marketing services to industries established in Nepal,
- Incorporating Branch Unit.
Any foreign investor wishing to make foreign investment in Nepal has to get the approval from the foreign investment approving board by submitting an application by setting out the details, time schedule for bringing foreign investment into Nepal and the action plan of the investment and if completes in providing all the prescribed documents the foreign investment approving body shall give approval within seven days of receiving the application. After the approval is given the foreign investor also has to notify Nepal Rastra Bank in written form that the investment amount is earned from a legitimate source while the body can also revoke the investment approval if the investment is not made in time as per the approval given.
The act also mentions different bodies for approving the foreign investments in Nepal based on the amount of investment that is done:
- Investments not exceeding Six Billion Rupees: The department shall approve
- The investments exceeding Six Billion Rupees: The Investment Board under the Investment Board Act 2011 (2068)
There is also provisions for the repatriation of investments and earnings for the foreign investors by selling wholly or partly of the shares industries in accordance with the law.
The act also includes provisions on providing facilities to the industries with foreign investments or foreign investor, which includes:
- Can open a bank account at the financial institutions for the transactional purpose as per the laws,
- Can obtain foreign exchange facility on recommendation of the foreign investment approving body and with the approval of Nepal Rastra Bank,
- The foreign investment industries can employee foreign citizen if the Nepali citizen cannot fulfill the position of experts in its top-level management, high level technical, managerial or technical employee in accordance with the prevailing laws,
- The foreign investor may be provided with an identity card by the department in a prescribed form,
- Various visa Facilities such as non-tourist visa, business visa, residential visa etc. can be seen provided to the foreign investors and their family members as per the amount of investment,
- Can purchase land in their name for the management and operation of the industry
Further the act also restricts foreign investment in the following sectors:
- Primary agriculture sectors such as fish farming, animal husbandry, horticulture, milk business and others;
- Small and cottage enterprise,
- Personal service business such as tailoring, driving, barber shop,
- Arms and ammunition industry,
- Buying and selling of land and houses (other than construction industry),
- Retail business,
- Remittance service,
- Local catering, travel agency, trekking agency, homestay and rural tourism,
- Mass-media business such as newspapers, radio, TV and online news,
- Movies of national language,
- Management, accounts, engineering and legal consulting services, language training, music training, computer training and
- Other consulting services over 51% shareholding.