Business registration in Nepal: FITTA 2019 updates 2025

Why Nepal and why 2025?

Foreign investors ask three things first: Can we own 100%? Can we repatriate profits? How long will it take? In most permitted sectors, 100% foreign ownership is possible, repatriation remains allowed after tax clearance and central bank compliance, and timelines are improving with better online coordination between approval and registration bodies. FITTA 2019 still anchors policy. In 2025, the focus is on better documentation, AML/KYC checks, and disciplined capital remittance tracking.

At-a-glance wins for 2025

• More predictable document standards across approval and registration bodies.

• Stronger emphasis on beneficial ownership and source-of-funds evidence.

• Tighter documentation for capital remittance and repatriation files.

• Wider use of e-filing for company changes post-incorporation.

FITTA 2019 in one page 

FITTA 2019 governs incoming foreign capital and technology transfer. It sets the approval architecture, investment forms, repatriation conditions, and dispute resolution pathways. Think of it as your FDI “gatekeeper law” that coordinates with the Companies Act, tax statutes, labor law, and central bank regulations.

What FITTA 2019 touches in your project

• Who approves your investment: Department of Industry (DoI) for most FDI; Investment Board Nepal (IBN) for large or strategic projects.

• What gets approved: equity, reinvested earnings, loans, and technology transfer agreements.

• When approvals are used: during incorporation, capital remittance, share allotment, and profit repatriation.

• Which limits matter: sector permissions, negative list, and any special sectoral regulator approvals.

What’s new-ish or tighter in 2025 

These are practice-level updates teams are encountering in 2025. They aren’t “new laws” line-by-line; they are how authorities interpret and sequence the rules this year.

• Beneficial Ownership clarity: Expect requests for BO declarations, passports of ultimate owners, and group charts.

• Source of funds narrative: Bank letters and trail evidence are reviewed more closely for initial capital.

• Consistent naming: The company name across FDI approvals, bank SWIFT receipts, and OCR filings must match exactly.

• Technology Transfer (TT) scrutiny: Service scopes, fee bases, and withholding taxes must align with FITTA and tax law.

• Capital remittance evidence: Keep SWIFT copies, bank credit memos, and purpose codes on file for share allotment.

• Repatriation hygiene: Dividends and fees need prior tax clearance, AGM approvals, and central bank compliance.

Your entity choices: subsidiary vs branch vs liaison

Most foreign investors choose a Private Limited subsidiary for operational flexibility. Branch suits service exporters with a parent ready to assume liabilities. Liaison is non-commercial; it promotes the parent brand and coordinates research, but it cannot trade.

Comparison table: choose the right vehicle

The end-to-end roadmap 

Use this numbered checklist to plan budgets, tasks, and stakeholders. Adjust steps if you’re in a regulated sector.

1. Investment structuring
   Decide equity, convertible debt, or pure services. Confirm sector eligibility and whether you fall under DoI or IBN.

2. Name reservation
   Reserve a compliant company name. Keep consistent spellings across all approvals and banking.

3. FDI approval under FITTA 2019
   File investor credentials, project profile, BO details, and draft constitutional documents. Include TT agreements if you’ll pay royalties or fees.

4. Banker onboarding
   Engage a local bank early. Align on capital remittance purpose codes, documentation, and FX steps.

5. Capital remittance
   Send initial capital from an eligible account. Keep SWIFT, credit advice, and bank memos. The remitter name must match the investor.

6. Company incorporation
   File MOA/AOA, board resolutions, IDs, and lease evidence if required. The approval letter anchors your incorporation.

7. Share allotment and register updates
   Allot shares against the remitted capital and update statutory registers and minutes.

8. Tax registrations
   Obtain PAN. Register for VAT if thresholds or your model require it. Set up withholding, TDS, and e-filing accounts.

9. Labor and payroll setup
   Register for social security (SSF) if applicable, draft contracts, and prepare payroll with TDS. Align leave, benefits, and minimum wages.

10. Licenses and sectoral approvals
    If you are in telecom, finance, energy, education, or healthcare, secure regulator licenses before launch.

11. Operational accounts and controls
    Open current accounts, configure ERP or accounting software, and implement AML/KYC policies.

12. Post-incorporation governance
    Hold AGMs, maintain minutes, file annual returns, and plan audits. Prepare repatriation files well before year-end.

Documents checklist 

• Investor passports and recent photos.

• Ultimate Beneficial Owner declaration and group chart.

• Parent board resolutions authorizing the investment.

• Project profile, business plan, and financial projections.

• Draft MOA/AOA and local address proof (lease or title).

• Bank comfort letters and AML/KYC packs.

• TT agreements (royalty, trademark, management services) if any.

• Capital remittance SWIFT, credit advice, and share allotment minutes.

• Tax and labor registrations (PAN, VAT, SSF).

• Annual compliance calendar and internal policies.

Capital, valuation, and pricing guardrails

Equity pricing: Use transparent valuation methods when issuing shares to foreign investors. Keep working papers ready.
Intra-group pricing: Royalties, management fees, and service charges must reflect arm’s length principles under tax rules.
Convertible instruments: Align conversion triggers with FITTA and company law. Keep shareholder approvals and filings tidy.
Reinvested earnings: Plowbacks often still need the FDI approval trail and board minutes to show lawful origin.

Banking and foreign currency controls you must respect

• Use correct purpose codes for capital versus loans versus service fees.

• Record FX gains/losses for audit and tax.

• Repatriation needs tax clearance, board approvals, audited accounts, and central bank compliance.

• Loan servicing (interest and principal) must follow approved terms, withholding tax, and reporting schedules.

Tax basics for foreign-owned companies in Nepal

• Corporate income tax: Pay on Nepal-source profits at the applicable rate for your sector.

• VAT: Register and collect VAT when required; timely file and reconcile input credits.

• Withholding tax: Apply correct rates on cross-border fees, royalties, interest, and certain local payments.

• Permanent Establishment (PE): Branches may trigger PE rules; subsidiaries are separate taxpayers.

• Dividends: Withhold tax on dividends paid to foreign shareholders as per the prevailing rate.

Labor, HR, and global mobility

• Employment contracts with clear probation, leave, and termination clauses.

• Social Security Fund (SSF) registration if thresholds apply.

• Work permits and visas for expatriates; align job descriptions with permit approvals.

• ESG and safety: Keep basic health, safety, and anti-harassment policies on record.

Technology transfer (TT) and IP payments

If you license trademarks, software, or know-how to your Nepal entity:

• Contract precision: Define scope, fee base, territory, and support.

• Tax: Confirm withholding and VAT treatment.

• Regulatory match: Keep TT registrations or acknowledgments with the FDI file.

• Transfer pricing: Maintain benchmarking or rationale for fees.

Timeline and cost expectations 

Every project varies by sector and file quality. These indicative ranges help set expectations.

• FDI approval (FITTA): Plan several weeks from a complete file.

• Company incorporation: Often within days after approvals and remittance proofs.

• Tax registrations: PAN usually quick; VAT depends on site verification.

• Banking: Onboarding can be parallel; remittance proofs must match filings.

• Repatriation: Allow weeks for tax clearance and central bank steps.

Budget for: legal and translation, government fees, auditor retainer, payroll software, and contingency for additional evidence requests.

The compliance calendar you should follow 

• Quarterly: VAT returns, TDS filings, and management accounts.

• Half-year: Board meetings, share register reviews, and statutory updates.

• Annual: Audit, AGM, corporate tax return, and FDI compliance review.

• Event-based: Share changes, director changes, address changes, and new licenses.

The most common pitfalls 

• Name mismatches across approval letters, bank SWIFTs, and OCR filings → Use one canonical name.

• Late share allotment after remittance → Prepare minutes and registers in advance.

• Missing TT alignment (contract vs tax vs FDI file) → Reconcile terms across all documents.

• Weak BO/AML pack → Provide full BO details and bank letters up front.

• Rushed repatriation → Start tax clearance and central bank file early, not after dividend approval.

“Is my sector open?”—the quick sense-check

Nepal maintains a negative list for certain sectors and may impose conditions for others. Many service and technology models are open with 100% foreign ownership. Manufacturing has broad pathways under industrial policy. Highly regulated sectors need separate licenses and capital norms. Always verify your sector code and the precise activity description before filing.

Step-by-step: the operational launch sequence 

Pre-launch

• Reserve name, secure office lease, and identify directors.

• Prepare BO declaration, group chart, and source-of-funds memo.

• Draft MOA/AOA with clear business objects and share structure.

FDI and banking

• File FITTA approval with complete packs.

• Onboard with a local bank; align purpose codes and documentary trail.

• Remit capital; collect SWIFT and credit advices.

Incorporation and tax

• Incorporate company or register branch/liaison.

• Obtain PAN, then evaluate VAT registration.

• Configure withholding accounts and e-filing.

People and operations

• Register employees; set up SSF if applicable.

• Sign employment contracts; implement payroll and TDS.

• Launch accounting system; set approval matrix and expense policy.

Post-launch governance

• Allot shares, update registers, and issue share certificates.

• Schedule AGM and audit.

• Prepare repatriation dossier templates for year-end.

Original insight table: approvals vs filings vs money flow

Frequently Asked Questions (2025)

1) Can a foreign company own 100% of a Nepal subsidiary?
Yes, in many permitted sectors. Check the negative list and any sectoral caps. Some licensed industries require extra approvals or capital norms.

2) How long does business registration in Nepal take?
Allow several weeks end-to-end. FDI approval timing depends on file quality. Incorporation and tax IDs can follow quickly after capital remittance proof.

3) What is required to repatriate dividends?
Audited accounts, tax clearance, board approval, and central bank compliance. Keep dividend minutes, withholding evidence, and bank forms ready.

4) Do we need VAT registration?
Register if your activity and turnover trigger it, or if your model needs input credit. Some exports of services may have special treatment—confirm before filing.

5) What is a liaison office allowed to do?
It cannot trade. It can promote the parent, conduct research, and coordinate. Expenses are funded by the parent; no revenue is recognized locally.