Foreign investors often ask one question first: Which vehicle should we use to incorporate a company in Nepal? A private limited subsidiary? A branch office? Or something lighter? Choosing well reduces approvals, taxes, and risk. Choosing poorly creates delays. This guide compares private limited companies, subsidiaries, and branch offices so you can incorporate a company in Nepal with confidence.
Your legal form sets your tax, compliance, banking, and hiring rules. It shapes your FX inflows, profit repatriation, and exit. The right form also speeds regulator approvals. The wrong form can block simple tasks like invoicing or importing gear.
Key goals to balance:
Ability to trade and invoice in Nepal.
Speed of setup and approval risk.
Control of local HR, assets, and IP.
FX, capital, and profit repatriation options.
Corporate tax profile and withholding exposure.
Regulatory scope for your sector.
Private Limited Company (Nepal-incorporated): A Nepal company limited by shares. It can be 100% foreign-owned in most open sectors.
Subsidiary: In practice, this is a private limited company where a foreign parent holds the shares. Most “subsidiaries” are Nepal private limited companies with foreign shareholding.
Branch Office: An extension of a foreign company registered in Nepal for approved activities. Separate permissions apply.
In everyday use, “private limited” and “subsidiary” overlap. The subsidiary is the group relationship. The private limited is the local legal shell.
| Factor | Private Limited (Nepal-incorporated subsidiary) | Branch Office of Foreign Company |
|---|---|---|
| Legal status | Separate Nepal legal person | Not separate; extension of foreign company |
| Activities | Broad, per MoA and licensed sector | Limited to activities approved for the branch |
| Invoicing | Can sell locally and export, if licensed | Can invoice where approved; scope often narrower |
| Approvals | Company registration + foreign investment approvals where relevant | Branch registration + sector and foreign investment approvals |
| Banking & FX | Own NPR and FCY accounts per NRB rules | Accounts in branch name per NRB rules |
| Capital | Paid-up capital as per project and sector; FDI threshold applies | No “share capital”; funds remitted from head office |
| Taxes | Corporate income tax as resident company | Tax as a Nepal permanent establishment; profit attribution rules apply |
| Liability | Limited to company assets | Parent exposed through PE risk and guarantees |
| HR & visas | Employ staff; sponsor work permits as employer | Employ staff as branch; similar labor rules |
| Compliance | Annual filings, audits, tax returns, BO reporting | Annual filings, audited branch accounts, PE returns |
| Repatriation | Dividends and service fees allowed per NRB | Profit remittance to head office per NRB |
| Brand & tenders | Favored for local procurement and leases | Sometimes less flexible for leases and tenders |
| Typical use | Full-scale market entry, sales, ops, manufacturing | Project execution, narrow scope services, regulated sectors |
| Time-to-live | Predictable once approvals granted | Often more review and document legalization |
This table provides general guidance. Final scope depends on your sector license and written approvals.
Your decision touches several core instruments and agencies in Nepal. Know these names; you will meet them during approvals.
Companies Act, 2063 (2006): Governs company registration and ongoing corporate compliance.
Foreign Investment and Technology Transfer Act, 2019 (FITTA 2019): Sets eligibility, investor rights, sectors, and the foreign investment process.
Foreign Investment and Foreign Loan Management Bylaws (latest edition): Implements FITTA for procedures, thresholds, and timelines.
Nepal Rastra Bank (NRB) circulars and FX directives: Control capital inflow, valuation, pricing, and repatriation.
Industrial Enterprises Act, 2076 (2019/2020): Sector incentives and classifications for industries.
Income Tax Act, 2058: Corporate taxation and permanent establishment rules.
Line ministries and regulators: Sector approvals (e.g., telecoms, finance, education, health, energy).
For most foreign investors, FITTA + NRB FX rules + Companies Act create the main path. Sector regulators add extra gates where needed.
A private limited is the default for trading, invoicing, hiring, and local procurement. It suits distributors, SaaS and IT services, BPO/KPO, e-commerce, manufacturing, and light assembly.
Strengths
Full legal personality and limited liability.
Flexible shareholding and board structure.
Banks, landlords, and buyers recognize it.
Simple to run once approvals settle.
Clear dividend and exit options per NRB rules.
Limitations
Requires initial capitalization and corporate housekeeping.
Director and beneficial owner disclosures apply.
Certain sectors need extra licenses.
Name reservation at the Office of the Company Registrar (OCR).
Foreign investment approval under FITTA for foreign shareholding.
Company registration at the OCR.
Tax registration with the Inland Revenue Department.
Bank account opening and capital remittance per NRB procedures.
Business licenses and sector permits as required.
Operational setup: payroll, social security enrollment, and leases.
Investors often handle steps 2–5 in parallel to compress timelines.
Paid-up capital aligns with your business plan and any sector rule.
Foreign equity can be 100% in many open sectors under FITTA.
Shareholder and director KYC and source-of-funds proof are standard.
The company pays corporate income tax as a Nepal resident.
Withholding applies on dividends and certain cross-border payments.
Dividends, service fees, and royalties can be repatriated. NRB documents each flow.
The company is the employer of record.
Work permits and business visas are possible where roles qualify.
Payroll tax, social security, and labor law compliance apply.
A subsidiary is usually a private limited whose shares are owned by the foreign parent. The term describes the group relationship, not a distinct Nepal law form.
Why this matters
If you say “we want a subsidiary,” regulators expect a Nepal private limited with foreign shareholding under FITTA.
All rights and obligations mirror the private limited path above.
You still follow NRB FX rules for capital and dividends.
When “subsidiary” is the right internal label
You need ring-fenced liability in Nepal.
You want clear transfer pricing and intra-group services.
You plan to raise local debt or win local tenders.
Branches work for project-based work, EPC contracts, or narrow services. The branch cannot exceed its approved scope. It is not a separate legal person.
Strengths
Recognizes the foreign company’s identity in Nepal.
May be faster for a defined project with a fixed contract.
Profit remittance to head office is recognized per NRB rules.
Limitations
Broader trading and retail activity is usually not suitable.
Parent company faces permanent establishment exposure.
Leases, utilities, and tenders may prefer a local company.
Branch registration and sector approvals as required.
Annual audited branch accounts and PE returns.
Profit attribution to the branch must be defensible.
Use this simple matrix to decide quickly:
Do you need to sell widely in Nepal?
Yes → Private limited (subsidiary).
No → Consider branch for a defined project.
Do you need to hire at scale and hold leases?
Yes → Private limited.
Limited headcount → Branch can still work.
Is your sector tightly regulated?
Yes → Check sector rules first; many still prefer a subsidiary.
Is the engagement a short, fixed contract?
Yes → Branch often fits better.
Do you plan profit reinvestment and future fundraising?
Yes → Private limited.
Feasibility and sector check. Confirm the activity is open to FDI.
Name reservation. Get a unique, compliant name at the OCR.
Shareholder KYC. Prepare constitutional docs and group board approvals.
FDI application. File under FITTA with project plan and capital plan.
Company registration. Submit signed MoA/AoA and forms to the OCR.
Tax registration. Obtain PAN/VAT where required.
Banking and capital. Open accounts; remit capital per NRB.
Licenses and premises. Secure sector licenses and leases.
HR setup. Register for social security; draft contracts and policies.
Operational launch. Start invoicing and compliance calendars.
Contract and scope. Define the Nepal work precisely.
Legalization. Legalize the parent’s charter docs for Nepal.
Regulatory filing. Apply for branch registration and sector nods.
Tax and PE setup. Register for PAN and PE filings.
Banking. Open branch accounts with NRB documentation.
HR and premises. Hire and lease as allowed.
Project execution. Track costs and profit attribution.
Remittance. Repatriate branch profits per NRB after taxes.
Using “branch” for general sales. Branches have narrow scopes.
Late capital remittance. NRB paperwork must match your approval.
Informal intercompany charges. Use written service agreements.
Ignoring PE risk. Head office exposure can widen tax audits.
Skipping BO disclosures. Beneficial ownership filings are mandatory.
Overlooking sector consents. Some permits are pre-trading gates.
Notarization and legalization of foreign documents.
Translation costs where needed.
Government fees for company or branch registration.
Sector license fees and security deposits.
Audit and monthly compliance retainers.
Office lease, utilities, and HR onboarding.
Capital inflow: Use an NRB-recognized channel and prove source.
Pricing and valuation: Follow NRB guidance for equity pricing.
Operational FX: Project-linked inflows and outflows must match approvals.
Dividends or profit remittance: Require audited accounts and tax clearance.
Exit: Share transfers or closures need NRB and agency filings.
Adopt a board charter and delegated authority matrix.
Sign intercompany agreements early.
Use local payroll and timekeeping tools.
Maintain a compliance calendar for all filings.
Run quarterly tax and FX reconciliations.
Most choose a private limited subsidiary. It supports export billing, local hiring, and vendor contracts. Protect IP with assignments and NDAs.
A branch can suit a fixed contract. Ensure the contract and approvals match the exact scope and period.
A private limited is standard. You will need sector clearances, environmental filings, and customs registrations.
Expect additional gates and capital rules. Map these early. In many cases, the private limited route still anchors the structure.
If you want broad operations, hire freely, and build a brand: choose a private limited subsidiary.
If you have a narrow, time-bound project under a head office contract: choose a branch.
If you say “subsidiary,” plan for a private limited with foreign shareholding under FITTA.
To help readers (and search engines), here are terms we use naturally:
company registration in Nepal, business registration, FDI approval, NRB approval, FITTA 2019 process, branch office registration, subsidiary setup, tax in Nepal, permanent establishment, repatriation, BO reporting, paid-up capital, sector license, due diligence, liaison vs branch vs subsidiary.
Parent board resolution approving the Nepal investment or branch.
Charter documents of the parent (certificate, MoA/AoA or bylaws).
Passports and KYC of directors and beneficial owners.
Detailed project plan and five-year financials.
Draft constitutional documents for the Nepal entity.
Lease intent or address proof for the registered office.
Auditor consent and professional appointments.
Intercompany service and IP agreements.
Bank reference letters and source-of-funds evidence.
Sector-specific qualifications and licenses.
Ownership split and director nominees.
Paid-up capital and remittance schedule.
Scope of business and sector codes.
Accounting policies and first fiscal year-end.
Transfer pricing model for intercompany services.
Data protection and IT security stack.
1) Can a foreign company own 100% of a Nepal private limited?
Yes, in many open sectors under FITTA 2019. Restricted or conditional sectors need special approvals. Always confirm sector-specific rules first.
2) What is the difference between a private limited and a subsidiary?
A subsidiary is a private limited where a foreign parent holds shares. “Subsidiary” describes the group relationship. The legal form in Nepal is still a private limited company.
3) When is a branch office better than a subsidiary?
For a defined, time-bound project under a head office contract. The branch’s scope must match the approval. Routine trading or retail often requires a subsidiary.
4) Can a branch send profits back to head office?
Yes. Profit remittance follows NRB procedures after audit and tax compliance. The branch must show proper profit attribution to Nepal.
5) How long does it take to set up?
Timelines vary by sector, document readiness, and approvals. A well-prepared file can move faster. Parallel workstreams (FDI, banking, licensing) help compress time.