Investing abroad: a 1964 blanket ban still stands beside the 2081 rules that open outbound investment

Laws and sections involved

• विदेशमा लगानी गर्न प्रतिबन्ध लगाउने ऐन, २०२१ ss.2(क), 3, 4
  Our paraphrase: "investment" covers foreign securities, partnership in a foreign firm, foreign bank accounts, real estate abroad and any other cash or in-kind investment abroad not exempted by notice (s.2(क)); "after this Act commences no one may make any kind of investment abroad" (s.3(1)), but the Government may exempt particular kinds by Gazette notice and set limits and conditions (s.3(2)); breach is punishable by a fine up to the amount invested, up to six months' imprisonment, or both (s.4). The Act applies to all Nepali citizens wherever they live (s.1(2)).
  Law Commission consolidated text (royal seal 2021/5/13); one amending Act listed (2066/10/7). ss.1–4 on PDF pp.1–3. No repeal found on the Law Commission page as of access. Official text ↗
• विदेशी विनिमय (नियमित गर्ने) ऐन, २०१९ · Foreign Exchange (Regulation) Act, 2019 s.2(छ४); s.10क(1)–(3)
  Our paraphrase: "investment abroad" means specified investments by a company or establishment registered in Nepal (unlisted foreign entities; up to 20 per cent of listed ones; branches; deposits; reinvestment) (s.2(छ४)); "notwithstanding anything in prevailing law", these may invest abroad: (क) industries exempted by notice under s.3(2) of the 2021 Act, (ख) industries classed as information-technology industries, and (ग) [foreign-exchange amounts received by foreign investors under s.7क(2) of the Foreign Investment and Technology Transfer Act] (s.10क(1)); employees may receive shares under a foreign parent's employee share plan without remitting money (s.10क(2)); Nepal Rastra Bank sets conditions and sector limits by public notice (s.10क(3)).
  Law Commission consolidated text (royal seal 2019/03/15); eleven amending Acts listed, the latest the Economic and Business Environment Improvement and Investment Promotion Act 2081 (2081/12/18), which inserted s.2(छ४) and s.10क. s.2(छ४) on PDF p.5; s.10क on PDF pp.16–17. Official text ↗

The apparent issue

Two in-force Acts point different ways: one bans all investment abroad by any Nepali citizen unless exempted; the other permits certain companies to invest abroad notwithstanding other law. The newer provision is narrower than the older ban: it covers companies and establishments, not individuals, so the position of individual Nepalis (for example, those who invested earnings while working abroad) remains under the 2021 ban. And s.10क(1)(क) depends on exemptions made under the 2021 Act, so repealing that Act outright could affect s.10क.

Evidence

• The Commission said that because the 2081 economic and business environment ordinance amended the Foreign Exchange Act to open direct and portfolio investment abroad, the 2021 Act has become irrelevant, and recommended repealing it and drafting a new Act to regulate investment abroad. High-Level Economic Reform Suggestion Commission Para 15, printed p.87 (PDF p.154); recommendation 33(झ), printed p.93 (PDF p.160); recommendation 190(क), printed p.XXIX (PDF p.32)
• Commenting on the Poush 2081 ordinance, the Commission noted that before it all investment abroad by Nepalis — including by those who earned money while abroad for work or study — was illegal under s.3(1) of the 2021 Act; that it was unclear what happens to investments made before the ordinance or funded from other sources; unclear what kinds of business may invest, in what form and up to what limit; that loan investment in wholly owned foreign subsidiaries appeared barred; and that safeguards against misuse of foreign exchange were not provided. High-Level Economic Reform Suggestion Commission Annex discussion on opening investment abroad, paras 3–13, printed pp.148–150 (PDF pp.215–217)
• The enacted s.10क now in the Law Commission text differs from the ordinance text the Commission quoted: it applies to "a company or establishment established in Nepal" (the ordinance said "person, company or establishment"), and the clause allowing a Nepali citizen to invest earnings made while abroad does not appear in the enacted list. We have not confirmed whether that clause was dropped or moved elsewhere. Nepal Law Commission · High-Level Economic Reform Suggestion Commission FXA s.10क, PDF pp.16–17; HLERC printed p.148 (PDF p.215), para 5

Possible readings

1. Reading 1: s.10क opens with "notwithstanding anything in prevailing law", so for the companies it lists it overrides the 2021 ban; the 2021 Act remains only as a residual rule and could be replaced by a dedicated outbound-investment law, as the Commission recommends.
2. Reading 2: the two Acts are designed to work together — the 2021 ban stays as the default and the exemption notices made under it feed into s.10क(1)(क) — so the 2021 Act is not obsolete; repealing it without moving the exemption mechanism into the Foreign Exchange Act could narrow or confuse s.10क.
3. Reading 3: for individuals, nothing in the enacted s.10क lifts the 2021 ban, so investments individuals hold abroad (for example, from earnings while working abroad) may still technically breach s.3(1) unless covered by a Gazette exemption; this is the gap the Commission described, and the enacted text may have left it wider than the ordinance did.

Why it matters in practice

Businesses and individuals cannot easily tell what investment abroad is lawful, which may discourage legitimate outbound investment and returns, or leave many people technically in breach of a criminal provision. Repealing the 2021 Act without care could unintentionally remove the exemption route that s.10क relies on.

Possible improvements and trade-offs

• Repeal the 2021 Act and enact a dedicated outbound-investment law setting permitted sectors, limits, approval and regulation (the Commission's recommendation), moving the exemption mechanism into the new law.
  Clear, modern framework; requires careful transition so that s.10क(1)(क) and existing notices keep working, and a policy decision on individuals' existing holdings abroad.
• Amend s.10क to cover individuals (for example, earnings made while abroad) and to state how investments made before 2081 are treated.
  Targets the main gap quickly; leaves two overlapping Acts in place.
• Use Gazette exemptions under s.3(2) of the 2021 Act to clarify the position of individuals pending a new law.
  Fast and within existing powers; notices can be changed easily, so certainty is limited.

Questions for legal review

1. Does s.10क of the Foreign Exchange Act override s.3(1) of the 2021 Act only for the companies it lists, or more widely?
2. What is the current legal position of investments abroad held by individual Nepali citizens, including those made before 2081 from earnings abroad?
3. Which Gazette exemptions under s.3(2) of the 2021 Act are currently in force, and would they survive a repeal?

Research status

Researched

2026-10-12

Confidence

Medium confidence — Both provisions were read in the official texts and a government commission states the issue directly. Confidence is not high because the Commission's detailed comments were on the ordinance, which differs from the enacted text, and the Nepal Rastra Bank notices and Gazette exemptions that fill in the rules were not reviewed.

Review

Not yet reviewed by a qualified lawyer.

Still unresolved

• The text of the Economic and Business Environment Improvement and Investment Promotion Act 2081 (2081/12/18) was not read directly; we relied on the consolidated Foreign Exchange Act.
• Nepal Rastra Bank notices under s.10क(3) and Gazette exemptions under s.3(2) of the 2021 Act were not reviewed.
• Whether the provision on citizens' earnings abroad was moved to another Act was not checked.

Sources

1. उच्चस्तरीय आर्थिक सुधार सुझाव आयोगको प्रतिवेदन: आर्थिक सुधारको मार्गचित्र (Report of the High-Level Economic Reform Suggestion Commission: Roadmap for Economic Reform) Checked 2026-10-11
2. विदेशमा लगानी गर्न प्रतिबन्ध लगाउने ऐन, २०२१ (Act Restricting Investment Abroad, 2021) — consolidated Nepali text Checked 2026-10-11
3. विदेशी विनिमय (नियमित गर्ने) ऐन, २०१९ (Foreign Exchange (Regulation) Act, 2019) — consolidated Nepali text Checked 2026-10-11