Can a foreigner invest in the share market in Nepal? This question is asked by many Non-Resident Nepalis (NRNs), overseas investors, and foreign nationals who wish to participate in Nepal's growing capital market. The answer depends on the investor's status, the legal framework under the Foreign Investment and Technology Transfer Act (FITTA) 2019, and the regulations set by the Securities Board of Nepal (SEBON) and Nepal Rastra Bank (NRB). This guide has been prepared to explain every aspect of foreign investment in Nepal's share market, including who is eligible, what the legal framework permits, how NRNs can invest, and what restrictions apply to pure foreign nationals.
Nepal's stock market, known as the Nepal Stock Exchange (NEPSE), has grown significantly in recent years. As of mid-February 2026, NEPSE's market capitalization stood at NPR 4,484.79 billion, equal to 73.43% of GDP, with 284 listed companies. The index stood at 2,931.55 on March 22, 2026. However, access for foreign investors remains limited and regulated, making it essential to understand the precise legal pathways available.
The eligibility to invest in Nepal's share market is determined by citizenship status and regulatory classification. The following categories of investors are recognized under Nepali law:
| Investor Category | Eligibility | Key Requirements |
|---|---|---|
| Nepali Citizens | Full access | Citizenship certificate, PAN, DEMAT account |
| Non-Resident Nepalis (NRNs) | Allowed with restrictions | NRN ID card, NRN DEMAT, NRFC account |
| Foreign Nationals (Non-NRN) | Not allowed for portfolio investment | Must establish company under FITTA for indirect equity |
| Foreign Institutional Investors | Limited (Venture Capital Funds) | SEBON approval, specialized fund structure |
The critical distinction must be understood: NRNs are treated differently from pure foreign nationals. NRNs hold Nepali citizenship or ancestry and are granted specific investment privileges under the NRN Act 2064 and FITTA 2019. Pure foreign nationals who do not qualify as NRNs face significant restrictions on direct portfolio investment in NEPSE.
The direct answer to whether a foreigner can invest in Nepal's share market is nuanced. According to the U.S. State Department's 2025 Investment Climate Statement, foreign investors are not allowed to invest in the Nepal Stock Exchange nor permitted to trade in the shares of publicly listed Nepali companies. Only Nepali citizens and Non-Resident Nepalis (NRNs) are allowed to invest in NEPSE and trade stock.
However, the Foreign Investment and Technology Transfer Act (FITTA) 2019 provides alternative pathways. FITTA explicitly includes investment in listed securities in the secondary market within the definition of foreign investment. Additionally, FITTA allows for the creation of venture capital funds to enable foreign institutional investors to take equity stakes in Nepali companies. The Securities Board of Nepal (SEBON) regulates these specialized investment structures.
Nepal Rastra Bank stated in a 2025 report that portfolio investments by non-residents are not allowed and are limited to the private equity and venture capital (PEVC) space only. This means that while pure foreign portfolio investment in NEPSE is prohibited, strategic and institutional investment through approved structures remains possible.
The foreign investment landscape in Nepal's capital market is governed by multiple laws and regulations. Understanding this framework is essential before making any investment decision.
| Legislation | Purpose | Relevance to Share Market Investment |
|---|---|---|
| Foreign Investment and Technology Transfer Act (FITTA) 2019 | Governs all foreign investment in Nepal | Defines foreign investment to include listed securities; allows venture capital funds |
| Securities Board of Nepal Act 2064 | Regulates securities market | Oversees NEPSE, brokers, and investment funds |
| Nepal Rastra Bank Act 2058 | Regulates foreign exchange | Controls capital flows and repatriation |
| Companies Act 2063 | Governs company formation | Required for establishing investment vehicle |
| NRN Act 2064 | Defines NRN rights and privileges | Grants NRNs investment access in Nepal |
FITTA Section 10 specifically addresses foreign investment in securities. It states that entities establishing venture capital funds can transact in securities through the secondary market in the stock exchange after registering with SEBON. However, the minimum shares to be purchased, investment limit, minimum shareholding period, and reserve fund in foreign currency will become effective after Government of Nepal notification. As of 2026, these detailed procedures have not yet been fully prescribed.
Non-Resident Nepalis (NRNs) are granted specific privileges to invest in Nepal's share market. SEBON allows NRNs to invest in NEPSE through a structured process.
The NRN investment process involves several steps. First, the NRN must obtain an NRN ID card from the Non-Resident Nepali Association (NRNA) or the relevant Nepali embassy. Next, an NRN DEMAT account must be opened at the Central Depository System and Clearing Limited (CDSC) or through a registered broker. A Non-Resident Nepali Foreign Currency (NRFC) account must then be opened at a Nepal-based bank. The NRN must also obtain a Permanent Account Number (PAN) from the Inland Revenue Department. Finally, registration with a NEPSE-registered broker and a Trading Member System (TMS) account is required for active trading.
| Requirement | Details |
|---|---|
| NRN ID Card | Issued by NRNA or Nepali Embassy |
| NRN DEMAT Account | Opened at CDSC or through broker |
| NRFC Bank Account | Foreign currency account at Nepali bank |
| PAN Number | Tax identification from IRD |
| Broker Registration | NEPSE-registered broker with TMS access |
| Minimum Investment | No regulatory minimum; practical start at NPR 5,000-10,000 |
Repatriation of invested capital and returns is allowed subject to NRB foreign exchange regulations. NRNs can remit profits, dividends, and capital gains through authorized banking channels after obtaining necessary approvals.
Significant regulatory changes were introduced on December 30, 2025, when Nepal Rastra Bank issued the Fifth Amendment to the Foreign Loan and Investment Management Bylaws, 2078 (2021). These reforms represent one of the most significant liberalizations of Nepal's foreign exchange regime in recent years.
Key changes introduced by the Fifth Amendment include:
| Reform Area | Previous Position | New Position (From December 30, 2025) |
|---|---|---|
| Foreign equity inflows | Prior NRB approval required after DOI/IBN approval | NRB approval removed; post-inflow recording only |
| Repatriation approval | Processed by NRB Foreign Exchange Department | Delegated to Head Offices of A-Class Commercial Banks |
| Repatriation timeline | Often delayed due to centralized review | Banks must process within 15 days |
| Outward investment | Limited to profitable, export-oriented companies | All Nepali companies can invest up to USD 20,000 abroad |
These reforms do not change the fundamental restriction on pure foreign portfolio investment in NEPSE. However, they significantly ease the process for foreign investors who establish companies in Nepal or invest through approved structures, and they improve capital mobility for NRNs repatriating investment returns.
For foreign institutional investors, the most viable pathway to participate in Nepal's equity market is through the establishment of venture capital funds under FITTA Section 9 and Section 10.
The process involves obtaining approval from SEBON to establish a venture capital fund, registering the fund with SEBON under specialized investment fund regulations, and then transacting in securities through the secondary market. The minimum investment thresholds, shareholding periods, and reserve fund requirements are determined by SEBON notifications.
This pathway is designed for institutional investors such as private equity firms, sovereign wealth funds, and large investment houses. Individual foreign investors generally cannot access NEPSE through this route.
Several regulatory and structural barriers prevent pure foreign nationals from directly investing in Nepal's share market:
| Barrier | Explanation |
|---|---|
| Capital account restrictions | Nepal's capital account is not fully convertible |
| NRB policy | Portfolio investments by non-residents explicitly not allowed |
| Lack of foreign brokerage access | No foreign brokers are registered with NEPSE |
| Repatriation complexity | Even for approved investments, forex exit is regulated |
| Market liquidity concerns | NEPSE may lack sufficient liquidity for large foreign positions |
| Regulatory independence concerns | Questions raised about MOF influence over SEBON and NEPSE |
The U.S. State Department's 2025 Investment Climate Statement notes that while both NEPSE and SEBON have been enhancing their capabilities, the NEPSE is far from becoming a mature stock exchange and likely does not have sufficient liquidity to allow for the entry and exit of sizeable positions.
While direct portfolio investment in NEPSE is restricted for pure foreign nationals, several alternative pathways exist:
| Alternative Pathway | How It Works | Suitability |
|---|---|---|
| Establish a company in Nepal | Foreign investor incorporates under Companies Act 2063, then invests in shares | Long-term strategic investors |
| Joint venture with Nepali partner | Foreign capital injected into existing or new company | Manufacturing, services, infrastructure |
| Venture capital fund | Institutional investor establishes SEBON-approved fund | Large institutional investors |
| NRN partnership | Foreign investor partners with NRN who holds legal title | Informal; carries legal risks |
| Indirect investment through Nepali entity | Investment made through a Nepali-registered subsidiary | Corporate investors |
Each of these alternatives requires compliance with FITTA, company registration at the Office of Company Registrar (OCR), tax registration, and potentially industry-specific approvals from the Department of Industry (DOI) or Investment Board of Nepal (IBN).
For foreign investors who choose to establish a company or invest through approved structures, minimum investment thresholds apply:
| Investment Type | Minimum Amount | Notes |
|---|---|---|
| Standard foreign direct investment | NPR 20 million (~USD 155,000) | Applies to most sectors under FITTA |
| IT and technology-based industries | No minimum | Exempted under automatic route |
| Venture capital fund | Determined by SEBON | Procedures not yet fully prescribed |
| NRN investment | No specific minimum | Subject to general FITTA rules if structured as FDI |
The minimum investment requirement was reduced from NPR 50 million to NPR 20 million in recent years, making Nepal more accessible to mid-sized foreign investors.
One of the most critical concerns for foreign investors is the ability to repatriate profits and capital. The FITTA legislation promises to make this easier, but practical challenges have been reported.
Under the Fifth Amendment (December 2025), repatriation authority has been decentralized to A-Class commercial banks, which must process applications within 15 days. NRB approval is now required only if repatriation is sought to a country other than the original source country of investment.
Repatriable amounts include capital from sale of shares, dividends and profits, loan repayments and interest, technology transfer royalties (subject to sector caps), lease rentals, and compensation from legal disputes or arbitration.
However, the U.S. State Department reports that in practice, repatriation is difficult, time-consuming, and not guaranteed. Multiple approvals are often required, and the process can take months. Telecommunications-related repatriation requires approval from the Nepal Telecommunications Authority (NTA), and joint ventures require Ministry of Finance approval.
Understanding the composition of NEPSE helps investors assess opportunities:
| Sector | Share of Market Capitalization (Mid-January 2026) | Number of Listed Companies |
|---|---|---|
| Banks, Financial Institutions & Insurance | 52.3% | 132 |
| Hydropower | 15.2% | 97 |
| Investment Companies | 7.3% | — |
| Manufacturing & Processing | 6.9% | 26 |
| Trading | 4.8% | 4 |
| Hotels | 3.1% | 8 |
| Others | 10.4% | 10 |
| Total | 100% | 284 |
The banking and financial sector dominates NEPSE by market capitalization, while hydropower represents the largest growth sector by number of listings. Nepal has an estimated 83,000 MW of technically feasible hydropower potential, of which only around 3,000 MW has been developed.
Tax obligations for investors in Nepal's share market are governed by the Income Tax Act 2058:
| Tax Type | Rate | Applicability |
|---|---|---|
| Short-term capital gains (held < 365 days) | 7.5% on profit | Individual investors |
| Long-term capital gains (held > 365 days) | 5% on profit | Individual investors |
| Dividend income | 5% (withheld at source) | All investors |
| Corporate income tax | 25% standard | Companies registered in Nepal |
| Capital gains tax for companies | 25% | Corporate investors |
NRNs are taxed under the same framework as resident Nepali citizens for income derived from Nepali sources. Foreign companies established in Nepal are subject to corporate tax rates.
Can a foreigner directly buy shares on NEPSE?
No, pure foreign nationals who are not NRNs cannot directly buy shares on NEPSE. Only Nepali citizens and Non-Resident Nepalis (NRNs) are permitted to invest and trade in Nepal's stock exchange.
Can an NRN invest in Nepal's share market?
Yes, NRNs are allowed to invest in NEPSE. They must obtain an NRN ID card, open an NRN DEMAT account, establish an NRFC bank account, obtain a PAN number, and register with a NEPSE broker.
What is the minimum investment for NRNs in Nepal's share market?
There is no regulatory minimum investment amount for NRNs. Practically, one can start with NPR 5,000-10,000. However, brokerage fees (0.36-0.6% per transaction) make very small investments inefficient.
Can foreign institutional investors invest in Nepal?
Yes, but only through approved venture capital funds under FITTA Section 9 and Section 10. These funds must be registered with SEBON and comply with specialized investment regulations.
What is the process for a foreigner to invest in Nepal indirectly?
A foreigner can establish a company in Nepal under the Companies Act 2063, obtain foreign investment approval from DOI/IBN under FITTA, inject capital through banking channels, and then use the company to invest in shares or other assets.
Is profit repatriation allowed for foreign investors in Nepal?
Yes, FITTA allows repatriation of profits, dividends, capital gains, and other returns. However, the process requires multiple approvals and can be time-consuming. The December 2025 NRB reforms have simplified this by delegating approval authority to commercial banks.
What sectors are restricted for foreign investment in Nepal?
Foreign investment is restricted in primary agriculture, small and cottage enterprises, personal services, arms and ammunition, real estate business (excluding construction), retail business, mass media, movies in national language, and certain consultancy services.
What is the tax rate on share market profits in Nepal?
Short-term capital gains (shares held less than 365 days) are taxed at 7.5%, and long-term gains at 5%. Dividend income is taxed at 5% withheld at source.
Can a foreigner open a DEMAT account in Nepal?
No, standard DEMAT accounts at CDSC require Nepali citizenship. Foreigners must establish a company or invest through approved institutional structures to hold shares indirectly.
What recent reforms have made foreign investment easier in Nepal?
The December 2025 Fifth Amendment to NRB's Foreign Loan and Investment Management Bylaws removed prior NRB approval for equity inflows, decentralized repatriation approvals to commercial banks, and allowed Nepali companies to invest up to USD 20,000 abroad without approval.
Attorney Nepal PVT LTD is recognized as a leading provider of foreign investment and corporate legal services in Nepal. With extensive experience in FITTA compliance, SEBON regulations, NRB foreign exchange procedures, and company registration, the firm has successfully assisted numerous foreign investors and NRNs in navigating Nepal's complex regulatory landscape.
The legal team at Attorney Nepal PVT LTD specializes in structuring foreign investments to comply with Nepali law while maximizing operational flexibility. Services include foreign investment approval applications, company incorporation and structuring, PAN and VAT registration, SEBON and NRB compliance advisory, repatriation strategy and documentation, NRN investment structuring, and ongoing corporate governance and compliance management.
For a confidential consultation on foreign investment in Nepal's share market, contact Attorney Nepal PVT LTD today. Your investment deserves a strong legal foundation, and your success deserves expert guidance.
The information provided in this guide is for general informational and educational purposes only. It does not constitute legal, financial, or investment advice, and no attorney-client relationship is created by reading this content. Laws, regulations, and market conditions may change, and individual circumstances vary. For advice specific to your situation, consult a qualified legal and financial professional. Attorney Nepal PVT LTD disclaims all liability for actions taken or not taken based on this content.
For further reading and authoritative sources on foreign investment in Nepal's share market, the following resources are recommended:
June 13, 2026 - BY Admin