Can Foreigners Incorporate a Company in Nepal Laws & Process Explained

Company incorporation Nepal is no longer limited to local entrepreneurs. Over the past decade, Nepal has actively opened its economy to foreign investors, startups, and multinational companies. Today, foreigners can legally incorporate a company in Nepal, provided they follow the correct foreign investment framework.

If you are a foreign company or individual exploring South Asia for expansion, Nepal offers a compelling mix of cost efficiency, a young workforce, and growing digital and service sectors. This guide explains whether foreigners can incorporate a company in Nepal, the laws that apply, and the exact process to follow, written from a legal, tax, and compliance perspective.

This article is designed to be the most authoritative resource on company incorporation Nepal for foreign investors.

Can Foreigners Incorporate a Company in Nepal?

Yes. Foreigners can incorporate a company in Nepal, but only under the Foreign Direct Investment (FDI) framework.

Foreign ownership is regulated. You cannot incorporate a company in Nepal as a foreigner under the same rules as a Nepali citizen. Instead, you must comply with Nepal’s foreign investment laws, approvals, and sector restrictions.

Key takeaway

Foreigners may incorporate:
• A 100% foreign-owned company, or
• A joint venture with Nepali shareholders,

subject to FDI approval and sector eligibility.

Laws Governing Company Incorporation in Nepal for Foreigners

Foreign company incorporation in Nepal is governed by multiple overlapping laws. Understanding them is essential for compliance and risk management.

Core legislation you must know

1. Foreign Investment and Technology Transfer Act (FITTA) 2019
   Governs foreign ownership, capital thresholds, approvals, and repatriation rights.

2. Companies Act 2006
   Regulates incorporation, governance, directors, and shareholder obligations.

3. Industrial Enterprises Act 2020
   Classifies industries and determines which sectors are open to FDI.

4. Income Tax Act 2002
   Governs corporate tax, withholding tax, and profit repatriation tax.

5. Nepal Rastra Bank (NRB) Directives
   Regulate foreign currency inflow, share capital remittance, and dividends.

These laws collectively define how company incorporation Nepal works for foreign investors.

Who Is Eligible to Incorporate a Company in Nepal?

Foreign eligibility is broad, but not unlimited.

Eligible foreign investors include

• Foreign individuals
• Foreign companies or corporations
• Foreign investment funds
• Overseas Nepali citizens (NRNs)

Minimum investment threshold

As per FITTA 2019:
• Minimum FDI amount: NPR 20 million (approx. USD 150,000) per investor
• This amount must be injected as share capital or approved investment

Sectors Open and Restricted for Foreign Company Incorporation

Not all industries allow foreign ownership.

Sectors generally open to foreigners

• IT and software development
• Business process outsourcing (BPO)
• Consulting and professional services
• Manufacturing and light industry
• Tourism and hospitality
• Renewable energy
• Education and training services

Restricted or closed sectors

• Small retail trading
• Local personal services
• Certain media and cultural industries
• Cottage industries reserved for locals

Always verify sector eligibility before starting company incorporation in Nepal.

Types of Companies Foreigners Can Incorporate in Nepal

1. Private Limited Company (Most common)

This is the preferred structure for foreign investors.

Key features:
• Limited liability
• 1–101 shareholders
• Suitable for FDI and joint ventures
• Flexible governance

2. Public Limited Company

Used for large-scale projects and capital markets.

Less common for initial foreign entry.

3. Branch Office (Not incorporation)

A branch is not a separate legal entity. It is allowed only for:
• Short-term projects
• Infrastructure and donor-funded work

Foreigners seeking long-term operations usually choose incorporation, not branches.

Step-by-Step Process: Company Incorporation Nepal for Foreigners

This section explains the actual process foreign investors follow.

Step 1: Sector and investment feasibility check

Confirm:
• Sector is open to FDI
• Investment meets minimum threshold
• Business activity aligns with Nepal law

Step 2: FDI approval application

Submit an FDI proposal to:
• Department of Industry (DOI), or
• Investment Board Nepal (IBN) for large projects

Documents include:
• Business plan
• Investor profile
• Passport or corporate documents
• Shareholding structure

Step 3: Company registration at OCR

Once FDI approval is granted:
• Register the company at the Office of Company Registrar
• Reserve company name
• Submit Memorandum and Articles of Association

Step 4: Tax and local registrations

• PAN and VAT registration
• Local ward registration
• Industry registration certificate

Step 5: Capital injection via NRB

• Open a foreign investment bank account
• Remit share capital through approved banking channels
• NRB approval for capital verification

Step 6: Operational compliance

• Employment contracts
• Social Security Fund registration
• Annual filings and audits

This structured process ensures lawful company incorporation in Nepal.

Timeline for Foreign Company Incorporation in Nepal

Total estimated timeline: 30–60 days

Cost of Company Incorporation Nepal for Foreigners

Costs vary by investment size and complexity.

Typical cost components

• Government registration fees
• Legal and advisory fees
• Notarization and translation
• Capital remittance costs

Indicative overview

Costs should always be evaluated against long-term compliance savings.

Ownership, Directors, and Management Rules

Foreigners often ask about control and governance.

Ownership

• 100% foreign ownership allowed in eligible sectors
• Joint ventures permitted

Directors

• At least one director required
• Foreign directors allowed
• No mandatory Nepali director under company law

Management

• Work visas required for foreign staff
• Local hiring encouraged for operations

Taxation After Company Incorporation in Nepal

Corporate tax

• Standard corporate tax: 25%
• Certain industries receive concessions

Withholding taxes

• Dividends: 5%
• Service payments: varies

Repatriation

FITTA 2019 guarantees:
• Repatriation of dividends
• Repatriation of capital on exit
• Repatriation of royalties and fees

Subject to NRB approval and tax clearance.

Compliance Obligations Foreign Companies Must Maintain

After incorporation, compliance is ongoing.

Mandatory annual obligations

• Financial audit
• Annual return filing
• Tax returns
• SSF and labor compliance

Failure to comply can lead to penalties or restrictions on repatriation.

Why Nepal Is Attractive for Foreign Company Incorporation

Foreign investors choose Nepal for strategic reasons.

Key advantages

• Competitive operating costs
• English-speaking workforce
• Growing IT and services sector
• Access to South Asian markets
• Legal guarantees under FITTA

For service-based companies, Nepal offers strong ROI.

Common Mistakes Foreigners Make When Incorporating a Company in Nepal

Avoid these pitfalls:
• Choosing a restricted sector
• Underestimating compliance costs
• Improper capital remittance
• Poor structuring of shareholder agreements

Expert guidance significantly reduces risk.

Company Incorporation Nepal vs Employer of Record (EOR)

Some foreign companies test the market before incorporation.

Many companies start with EOR, then transition to incorporation.

Frequently Asked Questions (People Also Ask)

Can a foreigner own 100% of a company in Nepal?

Yes. Foreigners can own 100% of a company in Nepal if the sector is open to foreign investment and FDI approval is obtained under FITTA 2019.

What is the minimum investment for company incorporation in Nepal?

The minimum foreign investment is NPR 20 million per investor, as required by FITTA 2019.

How long does company incorporation in Nepal take for foreigners?

Typically 30 to 60 days, depending on FDI approval, documentation readiness, and banking processes.

Can profits be repatriated outside Nepal?

Yes. FITTA 2019 guarantees repatriation of dividends, capital, and approved payments after tax clearance and NRB approval.

Do foreigners need a Nepali partner to incorporate a company?

No. A Nepali partner is not mandatory unless the sector specifically requires local participation.

Conclusion

Company incorporation Nepal is fully accessible to foreign investors who follow the FDI framework. With the right structure, sector selection, and compliance support, Nepal offers a stable and cost-effective destination for regional expansion.

Foreigners who approach incorporation strategically can enjoy full ownership, profit repatriation, and long-term operational control.

Call to Action

If you are planning company incorporation in Nepal and want a clear legal, tax, and compliance roadmap, speak with our specialists.

👉 Book a free consultation to assess your eligibility, sector approval, and incorporation timeline.