Can I Open a Business in Nepal as a Foreigner? Here’s How

Nepal is fast becoming an emerging destination for international investors seeking strategic entry into South Asia. With its growing infrastructure, expanding digital economy, young workforce, and pro-investment government policies, many foreign companies are exploring company incorporation in Nepal to unlock new business potential.

But the question remains: Can foreigners open a business in Nepal?

The answer is: Yes, under specific legal conditions. Here’s a step-by-step guide that breaks it all down.

1. Is Foreign Investment in Nepal Legal?

Yes. Foreign investment is legally permitted in Nepal under the Foreign Investment and Technology Transfer Act (FITTA) 2019, which clearly outlines how international investors can incorporate and operate businesses.

There are, however, restrictions on certain sectors (like retail trading and poultry farming), but for most industries such as IT, manufacturing, tourism, hydropower, and services, 100% foreign ownership is allowed.

2. Business Structures Available to Foreigners

Foreigners in Nepal can register under the following structures:

• Private Limited Company (most common for SMEs)

• Public Limited Company

• Branch Office

• Liaison Office

• Joint Venture with Local Partners

The Private Limited Company is the most practical and flexible structure for foreign investors looking for full ownership, limited liability, and streamlined operations.

3. Minimum Investment Requirements

According to FITTA 2019, the minimum foreign investment threshold is NPR 20 million (approx. USD 150,000). This applies to both individuals and companies seeking to incorporate in Nepal.

This capital must be brought into Nepal through formal banking channels and documented with the Nepal Rastra Bank (NRB).

4. Step-by-Step Guide to Company Incorporation in Nepal

Step 1: Prepare a Detailed Business Proposal

This includes:

• Business objectives

• Capital structure

• Ownership details

• Technology transfer plans (if applicable)

Step 2: Obtain Approval from the Department of Industry (DoI)

The Department evaluates:

• Industry eligibility

• Capital structure

• Legal compliance

Once approved, you’ll receive a Foreign Investment Approval Letter.

Step 3: Register Your Company at the Office of the Company Registrar (OCR)

You must submit:

• Articles and Memorandum of Association

• Details of shareholders and directors

• Notarized identification documents

Once reviewed, the Company Registration Certificate will be issued.

Step 4: Register with Nepal Rastra Bank (NRB)

You must register your capital inflow and get an NRB Foreign Investment Approval, which is critical for:

• Repatriation of profits

• Tax clearance

• Compliance with national banking laws

Step 5: Tax and VAT Registration

You must register your company with the Inland Revenue Department (IRD) to receive:

• PAN (Permanent Account Number)

• VAT registration (if applicable)

Step 6: Open a Business Bank Account

This is necessary for operations and to inject your approved foreign capital.

5. Taxation for Foreign Companies in Nepal

Foreign companies incorporated in Nepal are treated the same as local companies under the Income Tax Act.

• Corporate Tax Rate: 25% for most companies

• Withholding Tax: Applies on dividends, royalties, and interest payments

• Repatriation of Profits: Allowed with proper NRB clearance and tax clearance

Tax incentives are available for sectors like hydropower, tourism, agriculture, and IT.

6. Why Foreigners Are Choosing Nepal for Incorporation

• Strategic Location: Gateway to both India and China

• Young, Skilled Labor Pool: Median age under 25

• Growing Digital Infrastructure

• Tax Holidays & Incentives in Certain Sectors

• Liberal Foreign Ownership Policies

7. Key Industries Open to Foreign Investment

• Information Technology & BPO

• Hydropower and Energy

• Infrastructure & Construction

• Manufacturing & Agro-processing

• Hospitality and Tourism

• Education and Health Services

8. Important Compliance to Maintain Post-Incorporation

• Timely renewal of company registration annually

• Submission of audited financials to OCR

• Income Tax and VAT returns to IRD

• Compliance with NRB for foreign capital and profits repatriation

Failure to comply can lead to penalties or revocation of investment licenses.

Final Thoughts: Is Nepal the Right Choice for Your Business?

Company incorporation in Nepal is not only legally viable for foreigners but also offers access to a dynamic and growing market. With strategic government reforms, investor protection frameworks, and rising consumer demand, Nepal presents a compelling case for forward-thinking foreign businesses.

Whether you're launching a startup, a regional office, or a scalable investment venture, Nepal offers the legal infrastructure and market potential to thrive — provided you're ready to navigate the regulatory landscape professionally.