Preliminary expenses of foreign investors to be counted as FDI

Kathmandu, August 17

The preliminary expenses of foreign investors for the purpose of company registration and office set up in the country will also be counted as foreign direct investment (FDI) from now on.

Issuing a directive, Nepal Rastra Bank (NRB) has instructed the bank and financial institutions (BFIs) — class ‘A’ and national level class ‘B’ institutions — to certify such expenses as FDI. Earlier, such preliminary expenses that were transferred to the bank accounts of the Nepali agents of foreign investors were not considered as FDI inflow in the country.

As per the circular, the central regulatory and monetary authority has directed the commercial and national-level development banks to certify such amount, that are transferred to an account of the agent after the company is officially registered with the Office of Company Registrar, as FDI. This provision is applicable only for those companies that are being established in cent per cent ownership of the foreign investor.

According to Bhisma Raj Dhungana, NRB executive director for Foreign Exchange Management Department, foreign investors can transfer one per cent of the paid-up capital of the company as preliminary expenses.

“After registering the company at Office of Company Registrar, the firm needs to get the FDI amount approved from the Department of Industry or from the Investment Board Nepal, and the NRB has made arrangements to count preliminary investment as FDI based on the audit report of the company,” said Dhungana, adding, “The auditor’s report should compulsorily certify that amount as the preliminary expenses, under this facility.”

As per the statement posted on the NRB’s website today, the provision came into effect from Friday and the central bank has circulated the directive to all the BFIs that are authorised to conduct foreign exchange transactions.