How to Incorporate a Company in Nepal for IT Outsourcing (2025 Playbook)

Foreign founders often ask the same question every year: how do I incorporate a company in Nepal for IT outsourcing without friction? In 2025, the answer is clearer than ever.

Nepal has emerged as a reliable hub for software outsourcing and back-office technology services. You gain access to a growing pool of skilled engineers, English-fluent teams, and cost-competitive operations in a friendly time zone. Once you follow the right process, compliance is predictable and profit repatriation is transparent.

This guide walks you through every step from choosing the right entity to managing FDI payroll banking tax and ongoing compliance.

Why Choose Nepal for IT Outsourcing in 2025?

Nepal is quickly becoming a preferred destination for global IT outsourcing. Here’s why founders and tech leaders are choosing Nepal:

• Growing talent pool – Thousands of IT graduates join the workforce annually, while senior returnees bring international experience.

• English fluency – Developers and managers work confidently in English, ensuring seamless collaboration with global clients.

• Time zone advantage – Nepal’s working hours overlap with APAC, the Middle East, and Europe, making real-time communication easier.

• Improved infrastructure –  Internet connectivity and digital infrastructure in Kathmandu, Lalitpur, and other cities have improved significantly.

• Cost efficiency –  Salaries, office space, and operations remain far more affordable than in India, Vietnam, or Eastern Europe.

• Government support – Policies encourage IT exports, foreign investment, and digital employment.

For founders, this means you can build a compliant team, protect IP, maintain strong margins, and repatriate profits smoothly.

Entity Options for Foreign IT Companies in Nepal

Foreign investors have four main options when setting up in Nepal. Each option comes with its own advantages and limitations.

• Private Limited Company (Subsidiary)
  The most common structure for IT outsourcing. It allows full hiring control, direct invoicing, stronger IP protection, and tax efficiency.

• Branch Office
  Suitable for delivering projects under the parent company’s scope. Less flexible than a subsidiary.

• Liaison Office
  Used for research, networking, or coordination. It cannot generate revenue locally.

• Local Vendor or PEO Arrangement
  Quick to start, but offers limited control over operations and weaker protection of intellectual property.

Recommendation: A private limited company is the best option for long-term outsourcing operations.

Side-by-Side Comparison of Entity Options

Recommendation: A private limited subsidiary is usually the best choice. It provides the highest level of control, straightforward invoicing, and a solid base for long-term scaling.

How to Incorporate a Company in Nepal for IT Outsourcing

Follow these steps to register your IT outsourcing company in Nepal and stay fully compliant:

Step 1: Plan and Structure

• Define your service lines, target clients, headcount, and budget.

• Decide whether you need a long-term subsidiary or a short-term setup.

Step 2: Choose the Entity

• Most IT outsourcing firms select a private limited subsidiary for full control, invoicing, and future scalability.

Step 3: Reserve the Company Name

• Secure a unique company name with the Office of Company Registrar (OCR).

Step 4: Draft Key Documents

• Prepare the Memorandum of Association (MOA) and Articles of Association (AOA) with IT services in scope.

Step 5: Board Resolutions

• Pass resolutions authorizing the investment, directors, and local signatories.

Step 6: File for FDI Approval

• Apply under the Foreign Investment and Technology Transfer Act (FITTA).

• Choose whether the Department of Industry or Investment Board Nepal will handle your case.

Step 7: Select a Banking Partner

• Open accounts with a commercial bank that has experience handling foreign investment.

Step 8: Company Registration

• Submit documents to the OCR and obtain your Certificate of Incorporation.

Step 9: Register for PAN

• Obtain a Permanent Account Number (PAN) to operate legally and meet tax requirements.

Step 10: VAT Registration (If Applicable)

• Register for VAT if your services or revenue cross the legal thresholds.

Step 11: Open Capital Account

• Create a special FDI capital account with your bank to receive inward remittances.

Step 12: Remit Paid-Up Capital

• Transfer capital through official banking channels.

• Keep swift messages and compliance proofs.

Step 13: Share Allotment and Filings

• Record share allotments and update statutory registers.

• Submit capital proof and related compliance filings.

Step 14: Post-Incorporation Setup

• Enroll the company and staff in the Social Security Fund (SSF).

• Establish payroll, contracts, NDAs, and TDS workflows.

Step 15: Operational Banking

• Activate current accounts and enable online banking for daily operations.

Step 16: Intercompany Agreements

• Sign a master services agreement with your parent entity.

• Prepare a transfer pricing policy to support intercompany billing.

Step 17: Compliance Calendar

• Map out monthly, quarterly, and annual compliance tasks to avoid penalties.

Step 18: Kick Off Hiring

• Start with key roles: lead engineer, HR manager, and finance support.

Documents you will typically prepare 

• MOA and AOA reflecting software and export services.

• FDI application forms and sponsor IDs.

• Board resolutions and notarized passports.

• Sample service scope and pricing annexures.

• Lease intent letter for a future office.

• Bank KYC and FATF compliance forms.

• HR templates: offer, NDA, IP assignment, and handbook.

Keep sentences short in your files. It aids review and translation.

FDI approvals and where they sit

You will deal with three main bodies.

• Department of Industry (DOI). Handles most FDI approvals.

• Investment Board Nepal (IBN). Handles large or strategic investments.

• Nepal Rastra Bank (NRB). Regulates foreign currency, remittances, and loans.

Core legal rails you should know:

• Companies Act 2063 (2006). Governs incorporation and compliance.

• FITTA 2019 and Rules 2020. Cover FDI approvals and reporting.

• NRB Foreign Investment and Foreign Loan Bylaw 2078 (as amended).

• Income Tax Act 2058 and VAT Act 2052 for tax treatment.

• Labour Act 2017 and Social Security Act 2017 for employment basics.

• Electronic Transactions Act 2063 for e-commerce and data offenses.

Note: Investment thresholds and “negative list” items can change. Confirm the latest position during filing.

Banking, capital inflow, and profit repatriation

Open an FDI capital account first. Use it for capital remittances and share subscriptions.
Send capital through official banking channels. Keep swift messages and FIRC copies.
Complete share allotment after funds land. Update statutory registers and the ROC.

For dividends, you will need:

• Audited accounts and tax clearance.

• Board resolution and shareholder resolution.

• NRB approval for remittance documents.

• Bank’s compliance review and outward remittance form.

For intercompany service fees, use:

• Executed master service agreement.

• Invoices with clear scope, milestones, and rates.

• Transfer pricing policy and local file support.

• Proof of service delivery and acceptance.

Tip: Keep a digital “remittance binder.” Include approvals, invoices, and bank proofs. Your audits will be faster.

Tax, VAT, and withholding: the essentials

Corporate tax applies to profits. VAT is generally 13% in Nepal.
Exported services may be outside VAT scope, if conditions are met.
You will deduct TDS on salaries and certain vendor payments.
Employees need PAN. Your payroll must compute TDS monthly.
Register for Social Security Fund contributions when employees join.

Build a tax calendar:

• Monthly: VAT and TDS filing and payments.

• Quarterly: advance tax reviews and TP true-ups.

• Annual: audit, tax return, and thin capitalization checks.

Ask your advisor to map any tax treaty relief for your parent jurisdiction.

Employment, visas, and HR setup

Draft clear employment contracts with probation, notice, and IP terms.
Issue NDAs and invention assignment agreements at onboarding.
Adopt a remote and office hybrid policy to widen your talent pool.
Enroll employees in Social Security Fund before first payroll.
Set up leave, overtime, and expense policies in your HRIS.

Expat staff:
Use the Department of Immigration process for work and non-tourist visas.
Keep role justifications and local training plans.
Maintain timely renewals and address updates.

Data protection, IP, and client confidence

Use robust NDAs with all staff and vendors.
Assign copyright and invention rights to the company.
Adopt secure coding and access control practices.
Limit PII access to a need-to-know basis.
Run background checks within local law.

Recommended policies: information security, data retention, BYOD, and incident response.
Map your client data flows. Keep them out of personal devices.
Use auditable tools for code, secrets, and deployment keys.

Your first 90 days: an operating playbook

Days 1–15:

• Incorporation, PAN, and bank accounts.

• FDI application and capital planning.

• Draft HR and finance templates.

Days 16–45:

• Capital remittance and share allotment.

• VAT registration, if required.

• Hire HR, a finance associate, and the first tech lead.

Days 46–90:

• Execute the master service agreement with the parent.

• Start two delivery pods.

• Close SOC-like controls for clients’ due diligence.

Intercompany pricing and transfer pricing hygiene

Price services at arm’s length. Use a transparent rate card.
Allocate management fees only with support and logs.
Document your functional analysis and comparables.
Retain timesheets, code reviews, and acceptance notes.
Update files annually or when scope changes.

Outcome: clean tax audits and smooth remittances.

Risk and compliance checklist 

• Entity registered and constitution aligned with IT exports.

• FDI approval in place and capital tracked.

• Bank remittance files organized and updated.

• VAT and TDS calendar configured and tested.

• Social Security Fund registration complete.

• Signed HR pack: offer, NDA, IP, handbook, and code of conduct.

• Intercompany MSA and transfer pricing file ready.

• Data security policies active and enforced.

• Annual audit plan and board meeting calendar fixed.

• Disaster recovery and incident response plan documented.

Practical budgets and cost planning

Avoid guesswork. Build a simple, defensible model.

Revisit assumptions every quarter. Track burn and delivery margins.

Governance that clients love

Hold monthly board-style reviews with actions and owners.
Adopt OKRs for delivery, quality, and security.
Publish a two-page scorecard. Keep it simple and honest.
Invite key clients to quarterly showcases.
This builds trust and supports rate increases.

Common mistakes to avoid

• Using a liaison office to deliver billable work.

• Delaying FDI approvals after capital entry.

• Skipping VAT registration when required.

• Paying salaries without proper TDS.

• Weak NDAs and no IP assignment.

• No transfer pricing file to support fees.

• Remitting dividends without tax clearance.

• Not documenting service delivery evidence.

Template: Internal Compliance Calendar

Monthly: VAT, TDS, payroll, SSF, vendor TDS, and bank reconciliations.
Quarterly: board meeting, TP review, and provisioning.
Annually: audit, tax return, AGM, and dividend planning.
Ad-hoc: FDI amendments, director changes, and bank KYC updates.

Frequently asked questions (2025)

1) How long does incorporation usually take?
Incorporation itself is fast with complete files. FDI and bank steps add time. Plan several weeks for end-to-end setup.

2) Can my subsidiary bill the parent for services?
Yes. Use a master service agreement, rate cards, and arm’s length pricing. Keep delivery evidence and acceptance notes.

3) Do I need VAT for exported services?
It depends on the service and where it is consumed. Many exports sit outside VAT. Confirm facts and register when needed.

4) Can I repatriate profits every year?
Yes, with audited accounts and tax clearance. Your bank and NRB will check documents. Keep a complete remittance binder.

5) Is a branch office better than a subsidiary?
Branches fit narrow project scopes. Subsidiaries suit long-term teams and growth. Ownership, hiring, and IP are cleaner there.