Foreign Investment and Data Protection: What Tech Companies Need to Know Before Entering Nepal
Nepal's technology sector has moved from a quiet corner of the economy to one of its most actively courted destinations for foreign capital. With the country set to graduate from Least Developed Country status in late 2026, IT service exports crossing roughly USD 1 billion in 2025, and the government easing entry rules specifically for the IT sector, more foreign investors and technology companies are looking seriously at Nepal as a market and as a base of operations.
But market entry is only half the picture. A foreign company setting up in Nepal has to clear two separate legal tracks at once: the investment approval process that allows foreign capital and ownership in the first place and the data protection and privacy obligations that come with operating a digital platform handling Nepali users' information. Getting one right and overlooking the other is a common and costly mistake.
Key Legal Framework
1. Foreign Investment and Technology Transfer Act, 2075 (2019)
FITTA is the primary law governing foreign direct investment in Nepal. It sets out the minimum investment threshold, the automatic approval route, the negative list of sectors closed or restricted to foreign investment, and investor protections including repatriation rights for profits, dividends, and proceeds from share sales.
2. Industrial Enterprises Act, 2076 (2020)
Governs industry registration and classification, which determines licensing requirements, incentive eligibility, and applicable compliance obligations.
3. Companies Act, 2063 (2006)
Governs company incorporation, corporate governance, shareholder rights, and the structure of the Nepali entity through which the foreign investment will operate.
4. Foreign Exchange (Regulation) Act and Nepal Rastra Bank Bylaws
NRB approval and registration are required to bring investment capital into Nepal through proper banking channels and to support eventual repatriation.
Key Steps for Market Entry
- Confirm sector eligibility by checking the current negative list
- Apply for foreign investment approval through the Department of Industry or Investment Board Nepal
- Register the company with the Office of the Company Registrar under the Companies Act, 2063
- Obtain NRB approval for capital inflow
- Register for tax and social security
- Obtain sector-specific licenses if applicable
Data Protection Obligations
Foreign tech companies operating in Nepal must comply with the Privacy Act, 2075 and related regulations regarding collection, storage, and processing of personal data. This includes requirements for consent, data security measures, and restrictions on cross-border data transfers.