---
title: "Company registration in Nepal: branch office vs liaison office — which fits best?"
description: Branch vs liaison office in Nepal explained. Activities, approvals, taxes, timelines, and costs—so foreign companies choose the right entry model fast.
---

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# [Company registration in Nepal: branch office vs liaison office — which fits best?](https://digitalconsultingventures.com/insights/company-registration-in-nepal-branch-vs-liaison-office)

 Written by [Pjay Shrestha](https://digitalconsultingventures.com/insights/author/pjay-shrestha) | Sep 15, 2025, 8:27:58 AM

**Company registration in Nepal** is not one-size-fits-all.  
Foreign companies often start with a **branch office** or a **liaison office**. Both look similar from afar. They differ in what you can do, how you are taxed, and how fast you launch. This guide breaks down each option in plain language. You will see the exact approvals, compliance, and cost drivers. You will know which structure best fits your plan.

## Quick definition: branch office vs liaison office

- **Branch office**. An extension of your foreign company. It can earn revenue from permitted projects. It signs contracts. It pays taxes in Nepal.
- **Liaison office**. A non-commercial representative office. It cannot earn revenue in Nepal. It only conducts **marketing, coordination, and communication**.

## When to use each model at a glance

- Choose a **branch** if you will **invoice in Nepal**, deliver projects on the ground, hire staff at scale, and need a **bank account for operations**.
- Choose a **liaison** if you only need **market development** and **brand presence**, while keeping sales and invoicing offshore.

## Legal basis and government touchpoints

The frameworks most foreign investors rely on include:

- **Companies Act, 2063 (2006)** for registration and corporate compliance.
- **Foreign Investment and Technology Transfer Act (FITTA), 2019** for foreign investment approvals and safeguards.
- **Foreign Investment and Technology Transfer Rules, 2021** for procedures and documentation.
- **Industrial Enterprises Act, 2019** for sector rules and incentives.
- **Nepal Rastra Bank (NRB)** foreign exchange provisions for **repatriation** and **capital inflows**.
- **Inland Revenue Department (IRD)** for **PAN/VAT** registration and tax administration.
- **Department of Industry (DOI)** for branch/liaison permissions and FDI-related endorsements.
- **Office of the Company Registrar (OCR)** for legal presence and filings.
- **Labour Act, 2017** and **Social Security Fund (SSF)** for employment compliance.

These references keep your structure aligned with law and policy.

## Company registration in Nepal — deciding between a branch and a liaison office

The core trade-off is simple.  
**Revenue vs speed.**  
A **branch** earns local income but faces deeper compliance.  
A **liaison** launches faster and cheaper but cannot bill locally.

## Activities allowed

### Branch office: permitted scope

- Deliver your foreign company’s services or projects in Nepal.
- Sign local contracts and subcontracts.
- Invoice Nepal clients and receive payments.
- Import certain equipment or materials, where relevant and allowed.
- Hire staff and lease premises.

### Liaison office: permitted scope

- Market research, brand building, and partner engagement.
- Coordination between head office and Nepal stakeholders.
- Technical information sharing and supervision of local partners.
- No direct revenue, no invoicing, no commercial contracts.

## Permanent establishment and tax exposure

- A **branch** is usually a **permanent establishment** (PE) of the foreign company. It pays tax on Nepal-source income. It files returns locally.
- A **liaison** seeks to **avoid PE** status by **not** engaging in commercial activities in Nepal. It should keep clear boundaries. It still maintains basic filings and renewals.

> Tip: If your liaison starts negotiating and signing deals, it can trigger PE risk. Keep activities within the approved scope.

## Compliance map: who does what

- **DOI**: Grants permission for both branch and liaison offices.
- **OCR**: Registers the local presence.
- **IRD**: Issues **PAN** and, if needed, **VAT** for branches. Liaisons usually get PAN for administrative needs.
- **NRB**: Approves foreign currency matters. It oversees **repatriation** and capital inflows.
- **Municipality**: Local approvals like **house rent tax** registration and signage.
- **Labour authorities/SSF**: Employment and social security setup for hiring.

## Comparison table: branch vs liaison office

| Dimension | Branch Office | Liaison Office |
| --- | --- | --- |
| Legal nature | Extension of foreign company; can be a PE | Representative office; non-commercial |
| Revenue in Nepal | Allowed, subject to sector rules | Not allowed |
| Contracts & invoices | Yes | No |
| Taxation | Corporate income tax on Nepal-source profits; WHT, VAT where applicable | No corporate tax on revenue (no revenue allowed); basic compliance only |
| Approvals | DOI permission, OCR registration, IRD PAN/VAT, NRB where applicable | DOI permission, OCR registration, IRD PAN (often), no VAT |
| Bank account | Operational current account; foreign currency rules apply | Administrative account only; funding from head office |
| Repatriation | Profits remitted under NRB rules after audits and taxes | Unused funds returned to head office per NRB norms |
| Employment | Full hiring possible; labor compliance required | Limited headcount typical; still observe labor rules if hiring |
| Reporting | Annual filings, audit, tax returns | Annual renewals; simple filings; no tax on income as no income |
| Duration | Usually project- or permission-based; renewable | Time-bound permission; renewable |
| Conversion path | Often upgraded to a subsidiary later | Can transition to branch or subsidiary when commercial phase begins |
| Setup speed | Moderate (more steps) | Faster (fewer steps) |
| Typical use case | Project delivery, local sales, service contracts | Market entry, partner management, early stage scouting |

## Process steps and realistic timelines

### Branch office — step-by-step

1. **Define scope and sector**. Confirm the activity is allowed.
2. **Prepare documents**. Charter docs, board resolution, parent registration, power of attorney, financial statements, and Nepal representative details.
3. **DOI permission**. File the application with supporting documents.
4. **OCR registration**. Register the branch after DOI permission.
5. **Tax setup**. Obtain PAN. Register for **VAT** when relevant.
6. **Banking**. Open current account. Fulfill KYC.
7. **NRB**. Manage foreign currency inflows and, later, profit repatriation.
8. **Employment setup**. Contracts, SSF, payroll, local registrations.
9. **Operational launch**. Lease office, sign supplier and customer contracts.

**Indicative timeline:** 6–10 weeks, depending on sector, documentation, and responsiveness.

### Liaison office — step-by-step

1. **Define non-commercial scope**. Marketing, liaison, and coordination only.
2. **Prepare documents**. Similar base set, lighter on financials if permitted.
3. **DOI permission**. Apply with a clear activity statement.
4. **OCR registration**. Complete the legal presence.
5. **PAN**. Obtain PAN for administrative needs.
6. **Banking**. Open account for head-office remittances.
7. **Staffing**. Hire minimal team if needed. Keep roles aligned to non-commercial scope.

**Indicative timeline:** 3–6 weeks, typically faster than a branch.

> These ranges assume complete documentation and standard sectors. Specialized or regulated sectors may take longer.

## Document checklist

### Core documents

- Parent company **certificate of incorporation** and **charter**.
- **Board resolution** approving Nepal office setup.
- **Power of Attorney** in favor of local representative.
- **Latest audited financial statements** of parent.
- **Passport** and **address** of authorized signatories.
- **Lease intent** or office address details.
- **Activity note** describing scope (commercial vs non-commercial).
- **Compliance undertakings** required by DOI/OCR.

### Branch extras

- **Project contracts** or pipeline evidence if available.
- **VAT applicability note** and accounting plan.
- **Employment plan** and local vendor list (if ready).

### Liaison extras

- **No-revenue undertaking**.
- **Reporting template** for periodic updates to DOI (if requested).

## Costs and budget drivers

- **Government fees**. DOI and OCR filings, notarization, and translation.
- **Professional fees**. Legal, tax, and registration support.
- **Accounting and audit**. Heavier for branches due to revenue and tax.
- **Office and HR**. Branches usually need larger space and headcount.
- **Banking**. Account opening and FX documentation.

Branches cost more to launch and maintain. Liaisons are leaner but constrained.

## Tax and finance essentials

### Branch office

- **Corporate income tax** applies to Nepal-source profits.
- **Withholding tax** applies on certain payments.
- **VAT** applies if your supplies are VAT-able.
- **Audit** is standard for branches.
- **Profit repatriation** is allowed after tax clearance, audit, and NRB procedures.

### Liaison office

- **No revenue**, thus no **corporate tax on profits**.
- **PAN** may still be needed.
- **Expense funding** comes from the head office under FX rules.
- **Annual renewals** and basic filings remain.

> Keep records clean. Use clear cost centers. It simplifies audits and renewals.

## Banking and foreign exchange

- **Inward remittances** fund setup and operations.
- **NRB** procedures govern inflows and **repatriation**.
- **KYC** is strict. Provide parent documents and signatory proofs.
- **Branch** accounts handle revenue and expenses.
- **Liaison** accounts handle head-office transfers and local expenses.

## Substance, staffing, and contracts

- Branches should show **real substance**. Staff, an office, and local contracts help.
- Liaisons must **avoid commercial terms** in any local letters or emails. Keep **sales offshore** if using a liaison model.

## Risk and control: how to stay compliant

**For branches**

- Match **contracts, invoices, and tax filings**.
- File returns on time. Keep VAT and withholding in order.
- Document **transfer pricing** if dealing with related parties.

**For liaisons**

- Maintain a **no-revenue** policy.
- Keep **activity logs**: meetings, reports, and market notes.
- Avoid price negotiations and deal closure in Nepal.

## Sector notes and edge cases

- **Construction/engineering** often use **project-based branches**.
- **Software and IT** can start with a liaison for **BD** and shift to a branch as sales grow.
- **Education, healthcare, and finance** may need **extra licenses**.
- **NGO-type outreach** is a different path; do not use branch/liaison for not-for-profit work.

## Numbered checklist: choose your path in 10 steps

1. Define your **12-month plan** for Nepal.
2. Decide if you must **invoice locally**.
3. Map your **sector approvals**.
4. Pick **branch** (commercial) or **liaison** (non-commercial).
5. Prepare parent **corporate documents**.
6. Draft **board resolution** and **PoA**.
7. Get **DOI permission**.
8. Register at **OCR**.
9. Obtain **PAN** and, if needed, **VAT**.
10. Open your **bank account** and start operations.

## Bulleted quick wins that reduce delays

- Use **notarized and apostilled** documents.
- Keep **names and addresses** consistent across all papers.
- Draft a **clear activity note** (commercial vs non-commercial).
- Line up a **lease** and **local representative** early.
- Prepare **FAQ memos** for bankers and reviewers.
- Build an **internal compliance calendar**.

## Common mistakes and how to avoid them

- **Starting sales** through a liaison office. This triggers PE risk.
- **Mismatched documents**. Minor typos cause major delays.
- **Late VAT planning** for branches. Fixing it later is costly.
- **Weak audit trails**. Keep clean books from day one.
- **No plan for repatriation**. Align accounting with NRB rules early.

## Case-style scenarios

- **You need to invoice a Nepal customer next quarter.**  
  Pick a **branch**. A liaison cannot issue invoices.
- **You want to test the market for six months.**  
  Start with a **liaison**. Keep deals offshore.
- **You won a technical services contract in Kathmandu.**  
  Set up a **branch** with VAT, payroll, and project accounts.
- **You only need a small team for partnerships.**  
  A **liaison** works. Track activities and avoid pricing talks.
- **You plan to scale to 30+ staff within a year.**  
  Consider a **branch** now, then upgrade to a **subsidiary** later.

## Governance and internal controls

- Approve a **Nepal playbook** at board level.
- Appoint a **local compliance lead**.
- Set **dual-control** on bank payments.
- Review **liaison activity logs** monthly.
- Run **quarterly internal audits**.
- Keep **board minutes** for key decisions.

## What happens at renewal time?

- **Branches** file audited accounts, tax clearances, and renewal requests.
- **Liaisons** file activity summaries and funding proofs.
- Maintain **good standing** with DOI, OCR, and IRD.

## Exit and conversion

- Convert a **liaison** to a **branch** when you start commercial work.
- Consider migrating a **branch** to a **subsidiary** for limited liability and branding.
- On exit, **close accounts**, settle taxes, and **repatriate** funds under NRB rules.

## Sample internal timeline

- **Days 1–10**: Document prep and board approvals.
- **Days 11–30**: DOI permission filing and queries.
- **Days 31–45**: OCR registration and seal/stamps.
- **Days 46–60**: PAN and VAT (branch) and banking.
- **Days 61–90**: Hiring, lease finalization, and go-live controls.

## Frequently Asked Questions

**1) Can a liaison office in Nepal sign sales contracts?**  
No. A liaison office cannot engage in commercial activities. It cannot sign sales contracts, issue invoices, or receive customer payments in Nepal.

**2) Do branches pay corporate tax in Nepal?**  
Yes. A branch is a permanent establishment for tax purposes. It pays tax on Nepal-source profits and files local returns and audits.

**3) How fast can we set up a liaison office?**  
Typical timelines range from three to six weeks. This depends on document readiness, sector, and review cycles at DOI and OCR.

**4) Can a branch repatriate profits?**  
Yes. After audits and tax clearance, branches can remit profits under Nepal Rastra Bank foreign exchange procedures and documentation rules.

**5) Can we upgrade from a liaison to a branch later?**  
Yes. Many investors begin with a liaison for market entry. They upgrade to a branch once local contracting and invoicing become necessary.

[View full post](https://digitalconsultingventures.com/insights/company-registration-in-nepal-branch-vs-liaison-office)

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