For a foreign franchise, the royalty clause is only the beginning. A payment outward from Nepal should be supported by the approved technology-transfer arrangement, the invoice and accounting trail, tax evidence and the NRB foreign-exchange process. Treat the remittance file as a continuation of the original approval file.
This guide addresses the money-out stage. Start with technology-transfer approval in Nepal if the agreement has not yet been assessed, and return to the franchise registration guide for the overall structure.
How to Repatriate Franchise Royalty from Nepal
- Confirm that the franchise or technology-transfer agreement is the approved basis for the royalty.
- Confirm the relevant DOI or competent approval record.
- Raise the royalty invoice on that approved basis.
- Prepare the certified-auditor calculation or amount-due evidence.
- Complete the applicable withholding or tax payment and retain the proof.
- Prepare the company decision and the required financial and compliance records.
- Prepare the applicable NRB or foreign-exchange application under the current framework.
- Submit the remittance file through the applicable channel.
- Remit the royalty to the foreign franchisor after the required checks and approval.
This is a high-level sequence, not a universal timeline. The agreement, approval, invoice, audit and tax records must remain consistent throughout.
The approved basis comes first
FITTA section 7 allows foreign investment through technology transfer to an industry established in Nepal. It requires the agreement to state its terms and says it cannot provide royalty repatriation above the prescribed ceiling. The Act does not itself give a universal franchise royalty percentage; do not rely on an old market figure as a current legal limit.
The commercial agreement, DOI approval record and invoice should describe the same rights and payment basis. If they do not, resolve the mismatch before presenting the payment as a routine franchise charge.
NRB’s foreign-exchange evidence framework
NRB’s published Foreign Investment and Foreign Loan Management Bylaw provides for a foreign-currency facility for royalty under a technology-transfer agreement. Bylaw 6 uses an application under Schedule 9 and bases the facility on the relevant approval or recommendation of the foreign-investment approving body or relevant entity.
For technology-transfer royalty, the published Schedule 9 list calls for:
- the relevant approval or recommendation;
- the corporate decision and NRB foreign-investment-recording proof;
- audited financial statements, tax-clearance/return proof, and CIB/compliance declarations; and
- a certified-auditor statement of the amount due, invoice, DOI approval letter and approved agreement.
Tax evidence is part of the file
The Income Tax Act treats a resident’s payment of Nepal-source royalty as a withholding category under section 88(1). NRB’s evidence list separately calls for proof that tax has been paid under prevailing law. The current rate can change through fiscal measures and may interact with treaty issues; this page therefore does not state a percentage. Confirm the applicable current IRD rate and any treaty position for the actual payee before payment. Related background is available in the corporate tax guide and tax-clearance guide.
The useful operational discipline is simple: retain the agreement, invoice, calculation support, auditor statement, tax filings/payment proof and corporate approvals for the same reporting period.
Who Handles Each Stage?
| Authority / Party | Main Role |
|---|---|
| DOI / relevant approving body | Provides the technology-transfer or other approval basis for the agreement where applicable. |
| Inland Revenue Department (IRD) | Governs applicable tax and withholding compliance. |
| Nepal Rastra Bank (NRB) / foreign-exchange framework | Provides the outward-remittance and foreign-exchange application framework. |
| Nepal company / industry | Maintains the agreement, invoice, corporate decision, audit and compliance records supporting the file. |
Common mismatches to catch early
| Mismatch | Why it matters |
|---|---|
| Invoice calls the charge “marketing” but approval describes a royalty | It can break the link between the approved transaction and evidence presented. |
| Payment basis differs from the agreement | The auditor calculation and invoice may not reconcile. |
| Brand right is not supported by the approved agreement | The royalty may lack a clear contractual/approval basis. |
| Tax evidence is missing or stale | NRB’s published list specifically requires prevailing-law tax proof. |
| Corporate decision is missing | Schedule 9 identifies a corporate decision among the supporting records. |
A recurring payment checklist
- Confirm the relevant DOI approval and approved agreement remain aligned with the charge.
- Produce the invoice and certified-auditor amount-due statement on the agreed basis.
- Keep current audited financial, tax and compliance evidence available.
- Obtain the appropriate corporate decision and NRB foreign-investment-recording proof.
- Check the current NRB instrument and authorised-bank process before each transaction.
Need a review of the approval-to-remittance document trail? Technology-transfer approval support can help organise the documents for professional review.
