Private vs public company in Nepal is one of the first questions foreign companies ask when planning market entry. The answer directly affects taxation, governance, and—often overlooked—social security tax obligations. Nepal’s Social Security Fund regime applies differently depending on company structure, workforce profile, and compliance posture.
This guide breaks it down clearly. We focus on what global founders, CFOs, and compliance heads actually need to know. You will learn how SSF contributions work, which exemptions exist, and how private and public companies compare from a regulatory and cost perspective.
A private company in Nepal is governed by the Companies Act 2006. It restricts share transfers and limits shareholders. Most foreign-owned subsidiaries fall under this structure.
Key features:
Minimum 1 shareholder and 1 director
Share transfer restrictions
Cannot issue public shares
Preferred for FDI and cost centers
A public company can offer shares to the public and must meet higher disclosure standards. It is suitable for large-scale capital raising or future IPO plans.
Key features:
Minimum 7 shareholders
Mandatory compliance with capital thresholds
Higher audit and reporting burden
Rarely used by foreign service companies
Nepal mandates employer and employee contributions to the Social Security Fund under the Labour Act 2017.
SSF is not optional. Non-compliance leads to penalties, blocked renewals, and labor disputes.
SSF applies to both private and public companies.
Employer contribution: 20% of basic salary
Employee contribution: 11% of basic salary
Total SSF contribution: 31%
These contributions fund:
Medical insurance
Accident coverage
Old-age benefits
Dependent family protection
| Area | Private Company | Public Company |
|---|---|---|
| SSF applicability | Mandatory | Mandatory |
| Workforce size | Usually smaller | Usually larger |
| Compliance scrutiny | Moderate | High |
| Audit exposure | Limited | Extensive |
| Cost predictability | High | Medium |
| Foreign ownership | Common | Rare |
Insight: SSF rates are the same. The difference lies in compliance intensity and enforcement exposure.
Both company types must register with SSF after hiring staff.
Company incorporation with the Office of Company Registrar
PAN registration with Inland Revenue
Labor office registration
SSF employer enrollment
Employee onboarding and SSF ID creation
Monthly contribution filings
Missed filings compound penalties quickly.
There is no blanket SSF exemption for:
Foreign-owned companies
Export-oriented services
IT or outsourcing firms
However, structural relief is possible.
Contractual workforce structuring
Secondment models with clear legal boundaries
Timing alignment between hiring and SSF activation
Salary component optimization within legal limits
These require careful legal drafting. Aggressive avoidance is risky.
Private companies offer:
Lower administrative cost
Faster decision-making
Easier compliance management
Better SSF predictability
Public companies make sense only when:
Local capital markets are required
Employee headcount exceeds several hundred
Brand visibility in Nepal is strategic
Under-reporting basic salary
Late SSF remittance
Misclassification of employees as consultants
Mismatch between payroll and SSF filings
Penalties include fines, interest, and legal exposure.
Is this a cost center or revenue-generating entity?
Will we hire more than 50 employees in year one?
Do we need public fundraising in Nepal?
Can we manage high disclosure obligations?
For 90% of foreign companies, the private structure wins.
Yes. SSF applies to all employers registered in Nepal, regardless of ownership nationality.
No. Rates are identical. Compliance scrutiny differs.
Generally no. Some limited treaty-based relief may apply, but local contracts trigger SSF.
Yes. Employer SSF contributions are deductible business expenses.
No. SSF applies once employment begins.
Private vs public company in Nepal is not just a legal distinction. It shapes your social security tax exposure, compliance risk, and operating cost. For foreign companies, private limited entities deliver clarity, predictability, and control especially under Nepal’s SSF regime.
Choosing the right structure early prevents regulatory friction later. When SSF compliance is built into your operating model, Nepal becomes a stable and scalable destination for global expansion.