FAQs About Starting a Business in Nepal (2026 Edition)

If you plan to start a business in Nepal in 2026, you are not alone. Nepal is attracting foreign companies seeking cost-effective talent, regional market access, and long-term growth. Yet, regulations, approvals, and compliance can feel complex at first glance. This guide answers the most common, high-intent questions foreign founders ask when starting operations in Nepal—clearly, practically, and with legal accuracy.

You will learn how to choose the right structure, understand FDI rules, estimate costs, comply with tax and labor laws, and avoid common mistakes. The goal is simple: help you start a business in Nepal smoothly and compliantly.

Why Foreign Companies Are Starting a Business in Nepal

Nepal offers a rare mix of affordability and capability. For many global firms, it functions as a strategic delivery hub rather than just a local market.

Key advantages include:

• Competitive operating costs compared to India or Southeast Asia.

• A young, English-speaking workforce with strong technical skills.

• Favorable time zone overlap with Australia, Europe, and parts of Asia.

• Liberalized foreign investment policies under modern FDI laws.

Foreign companies in IT, professional services, engineering, accounting, and outsourcing benefit the most.

Legal Framework for Starting a Business in Nepal (2026)

Before you start a business in Nepal, you must understand the core legal instruments governing foreign companies.

Core Laws and Authorities

• Companies Act Nepal 2006
  Governs company registration, shareholding, and directors.

• Foreign Investment and Technology Transfer Act 2019
  Regulates foreign direct investment, technology transfer, and repatriation.

• Department of Industry (DOI)
  Approves FDI and large-scale investments.

• Company Registrar Office (CRO)
  Handles company incorporation and filings.

• Inland Revenue Department (IRD)
  Oversees VAT, corporate tax, and withholding tax.

These authorities define how you start a business in Nepal and remain compliant.

Business Structures Available to Foreign Companies

Choosing the right structure is the first strategic decision.

1. Private Limited Company (FDI Company)

The most common structure when you start a business in Nepal.

Best for: Long-term operations, hiring staff, generating revenue locally.

Key features:

• Up to 100 percent foreign ownership (sector-dependent).

• Minimum FDI threshold: NPR 20 million.

• Separate legal entity.

2. Branch Office

An extension of the foreign parent company.

Best for: Contract execution, limited operations.

Limitations:

• Cannot undertake unrelated commercial activities.

• Higher regulatory scrutiny.

3. Liaison Office

A non-revenue presence.

Best for: Market research and relationship management.

Restrictions:

• No income generation allowed.

• Fully funded by the parent company.

Comparison: Which Structure Fits Your Expansion Plan?

This comparison helps foreign firms start a business in Nepal with clarity.

Step-by-Step: How to Start a Business in Nepal

Here is a simplified, practical roadmap.

Step 1: Name Reservation

Apply at the Company Registrar Office.

Step 2: FDI Approval

Submit investment proposal to the Department of Industry.

Step 3: Company Incorporation

File constitutional documents and register the entity.

Step 4: Capital Injection

Bring in foreign capital through approved banking channels.

Step 5: Tax Registration

Obtain PAN and VAT registration with the IRD.

Step 6: Operational Licenses

Secure sector-specific permits if required.

Most foreign companies complete this process in 4–8 weeks.

Minimum Investment and Capital Requirements

When you start a business in Nepal as a foreign investor, capital thresholds matter.

Current rules (2026):

• Minimum FDI: NPR 20 million.

• Capital must be injected within the approved timeline.

• Funds must enter Nepal through formal banking channels.

Failure to comply can delay operations or repatriation later.

Taxation Overview for Foreign-Owned Companies

Understanding taxes is essential when you start a business in Nepal.

Corporate Taxes

• Standard corporate tax: 25 percent.

• Certain sectors may enjoy concessions.

VAT

• Standard VAT rate: 13 percent.

• Mandatory registration if turnover exceeds thresholds.

Withholding Taxes

• Applies to salaries, dividends, royalties, and service fees.

Nepal has double taxation avoidance agreements with several countries, reducing tax friction.

Hiring Employees and Labor Compliance

Foreign companies often underestimate labor compliance.

Key Labor Laws

• Labour Act Nepal 2017

• Social Security Act Nepal 2018

Employer Obligations

• Social Security Fund contributions.

• Statutory leave and benefits.

• Written employment contracts.

Many foreign firms use Employer of Record models before full incorporation.

Banking, Repatriation, and Profit Transfers

One frequent concern when you start a business in Nepal is moving money out.

Good news:
FITTA guarantees profit, dividend, and capital repatriation—subject to tax clearance and central bank procedures.

Banks require:

• Audited financials.

• Board resolutions.

• Tax compliance certificates.

Common Mistakes Foreign Companies Make

Avoid these pitfalls when you start a business in Nepal:

1. Choosing the wrong entity structure.

2. Underestimating approval timelines.

3. Poor documentation for FDI.

4. Non-compliant employment practices.

5. Delayed tax registrations.

Expert local guidance prevents most of these issues.

Frequently Asked Questions About Starting a Business in Nepal

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

Yes. Many sectors allow full foreign ownership under FITTA, subject to FDI approval.

How long does it take to start a business in Nepal?

Typically 4–8 weeks, depending on approvals and documentation quality.

Is Nepal friendly to startups and tech companies?

Yes. IT, software, and service exports enjoy policy support and tax incentives.

Can profits be repatriated freely?

Yes, after tax compliance and central bank procedures are completed.

Do I need a local director?

No. Foreign nationals can serve as directors, subject to visa rules.

Why Professional Support Matters

Regulations evolve. Documentation standards tighten. Authorities expect precision.

Foreign companies that succeed in Nepal rely on:

• Local legal and tax expertise.

• Structured compliance frameworks.

• Ongoing regulatory monitoring.

This is where experienced advisors add disproportionate value.

Clear Next Step: Get Expert Guidance

If you are ready to start a business in Nepal in 2026, the fastest and safest path is expert support.
Book a consultation to receive:

• Structure recommendation.

• Cost and timeline breakdown.

• Compliance roadmap tailored to your country and sector.

Conclusion

To start a business in Nepal successfully, foreign companies must balance opportunity with compliance. Nepal offers strong fundamentals, but the right structure, approvals, and execution matter. With proper planning and expert guidance, Nepal can become one of your most efficient and profitable expansion destinations.