FDI Nepal: entity choices and compliance guide 2025 for investors

Thinking about company registration in Nepal in 2025? You’re in the right place. This guide gives foreign investors a clear, practical roadmap. You’ll compare entity options, approvals, taxes, payroll, visas, and repatriation. The goal is simple: reduce risk, cut delays, and move to revenue fast. Every step reflects current law, regulator practice, and board-level controls.

How to use this guide

• Skim the entity comparison table to shortlist a structure.

• Follow the step-by-step sequence to avoid rework.

• Use the checklists to keep filings clean and audit-ready.

• Save the FAQ and JSON-LD for your site or internal wiki.

Why Nepal for FDI in 2025

Nepal now offers faster digital processes and clearer FDI routes. Labor is cost-competitive. The workforce is young. Infrastructure is improving. Hydropower, tourism, manufacturing, and ICT remain attractive. Repatriation pathways exist with the central bank. Compliance is manageable with good planning. You get access to a growing South Asian market at lower operating cost.

Sources by name: Foreign Investment and Technology Transfer Act, 2019 (FITTA); Foreign Investment and Technology Transfer Regulations, 2021 (FITTR); Companies Act, 2063 (2006); annual Finance Acts; Labour Act, 2017; Social Security Fund Act, 2018; sectoral guidelines.

Company registration in Nepal: your four main entity choices

Below are the most used structures for foreign investors. Pick based on activity, control, tax treatment, and speed.

1) Private Limited Company 

• 100% foreign ownership is allowed in most sectors.

• Separate legal personality and limited liability.

• Eligible for VAT registration and input tax credits.

• Full commercial scope with board control and local governance.

• Best for long-term operations, hiring, and scaling.

Compliance highlights: Incorporation with the Office of Company Registrar (OCR). FDI approval with Department of Industry (DOI) or Investment Board Nepal (IBN) for very large projects. Capital remittance and repatriation approvals with Nepal Rastra Bank (NRB). PAN and possible VAT registration with Inland Revenue Department (IRD).

2) Branch Office 

• Extends the parent’s existing business into Nepal.

• Contracts are in the parent’s name through the branch.

• Profits are taxable in Nepal as a permanent establishment.

• Profit remittance is available after compliance steps.

• Useful for execution of parent services or EPC contracts.

Compliance highlights: Sector permission if required. NRB registration for foreign currency transactions. Tax filings as a permanent establishment. Regular audits and profit repatriation documentation.

3) Liaison (Representative) Office

• No commercial activity and no local revenue.

• Market research, promotion, networking, and coordination only.

• Expenses are funded by the parent through inward remittances.

• Lower setup complexity, but strict non-revenue scope.

• Good for early market study or partner support.

Compliance highlights: Approval to establish. Annual expense audit and renewals. No VAT registration since there is no taxable supply.

4) Project Office / Special Purpose Setup

• Time-bound presence for a specific contract or project.

• Common in hydropower, engineering, and infrastructure.

• Licensing and contract terms drive the structure.

• FX and tax processes align with the project timelines.

• Suits EPC contractors and consortia.

Compliance highlights: Contract backed approvals. NRB route for inward remittances. Project-specific registrations and tax filings.

Quick comparison table 

Acts and rules referenced by name: FITTA 2019, FITTR 2021, Companies Act 2063, NRB circulars, Finance Acts.

Approvals and who does what

• DOI: Handles most FDI approvals, including automatic route sectors.

• IBN: Handles very large investments above defined thresholds.

• OCR: Name reservation and incorporation of companies.

• NRB: Capital remittance in and repatriation out, FX accounts.

• IRD: PAN, VAT, TDS, returns, and audits.

• Immigration & Labor Departments: Business visas, work visas, and work permits.

Citations by name only, no links: Department of Industry procedures; Investment Board Nepal project thresholds; OCR incorporation rules; NRB foreign investment bylaws; Inland Revenue guidelines; Immigration and Labor directives.

The step-by-step setup sequence 

1. Name reservation and scope definition
   Draft object clauses that match sector permissions. Keep scope consistent across the charter and FDI file.

2. FDI application (automatic route where applicable)
   Prepare investor KYC, UBO declarations, a simple term sheet, and a business plan. Submit digitally to DOI. Use standard templates and consistent numbers.

3. Company incorporation at OCR
   File MOA, AOA, promoter IDs, and registered office details. Obtain the Certificate of Incorporation.

4. NRB inward remittance approval
   Open the capital collection account. Remit capital from the investor’s bank in convertible currency. Keep SWIFT copies and source-of-funds evidence.

5. PAN and VAT
   PAN is mandatory. Register for VAT if your activity and turnover require it. Keep invoices compliant. File returns on time to protect refunds.

6. Local licenses and registrations
   Check sector-specific rules for health, telecom, finance, or energy. Obtain municipal or ward registrations where required.

7. HR and payroll readiness
   Map salary structures. Enroll staff into the Social Security Fund (SSF). Set TDS, VAT, and monthly payroll calendars.

8. Visas and work permits
   Owners and executives may use Business Visas. Employees use Work Visas plus Labor Work Permits. Align renewals with tax compliance.

9. Operational controls
   Implement approval matrices, document retention, and board calendars. Build a “repatriation pack” from day one.

Taxes that matter to investors

Numbers below reflect common, headline treatments and may change each fiscal year. Always confirm your specific case under the current Finance Act.

• Corporate income tax: A standard corporate rate commonly applied to resident companies. Certain sectors may enjoy incentives by statute.

• Dividend withholding: Dividends distributed by resident entities are subject to a low, final withholding.

• Permanent establishment (branch): Profit repatriation by a PE attracts a specific withholding on transfers in addition to income tax on profits.

• VAT: The standard rate applies to most goods and services, with defined exemptions. Registration depends on activity and turnover thresholds.

• TDS: Withholdings apply on salaries, services, rent, contractors, and cross-border payments, subject to law and treaties.

Cited by name: Income Tax Act and annual Finance Acts; VAT Act and VAT Rules; double tax treaties where applicable.

Funding in and repatriation out

Bringing capital in

• Remit from the investor’s bank in convertible currency.

• Ensure alignment across FDI approval, capital account, SWIFT, and share allotment.

• Update the share register and statutory filings after each tranche.

Taking money out

• You can repatriate dividends, disinvestment proceeds, capital gains, royalties, and technical fees.

• Prerequisites usually include audited financials, tax clearances, DOI or IBN recommendations where relevant, and NRB approval.

• Keep the “repatriation pack” current to cut questions and time.

Repatriation pack checklist

• Board resolution approving distribution or remittance.

• Latest audited financial statements and tax payment proofs.

• FDI approval letters, share allotments, and capital proof.

• NRB inward remittance evidence and bank confirmations.

• Contracts for royalties or technical fees, if applicable.

Referenced by name: NRB foreign investment bylaws; FITTA; DOI practice notes.

Payroll, HR, and visas

Contracts and minimum wage
Use written contracts with clear pay, benefits, and duties. Track the latest minimum wage notifications during budgeting and reviews.

Social Security Fund (SSF)
Enroll eligible staff. Budget for both employer and employee contributions on basic salary. File contributions monthly through the SSF portal. Reconcile with payroll reports.

Expatriate hiring
Secure work permits and work visas before joining. Link renewals to tax status and SSF compliance. Keep copies of qualifications, experience letters, and police clearances where required.

Referenced by name: Labour Act, 2017; SSF Act, 2018; Immigration Guidelines.

The “automatic route” in practice

Automatic route reduces pre-approval friction in opened sectors. Applications move through digital portals with standard sets. ICT investments often enjoy streamlined entry. You still need full KYC, UBO clarity, and consistent financials. Use the same names, addresses, and figures across all documents to prevent file queries.

Referenced by name: FITTA 2019; FITTR 2021; DOI process guidelines.

Original insight: a 90-day launch plan

Days 0–10

• Confirm entity type and shareholding.

• Lock the name and scope.

• Prepare FDI pack and draft charter.

Days 11–25

• File FDI digitally.

• Incorporate at OCR.

• Open the capital account.

• Prepare NRB inward remittance documents.

Days 26–45

• Remit capital and allot shares.

• Obtain PAN.

• Assess VAT registration.

• Lease office and order statutory registers.

Days 46–70

• Hire the first five to ten roles.

• Enroll staff in SSF.

• Set up accounting, e-invoicing, and tax calendars.

• Prepare visa and work permit files.

Days 71–90

• Issue first VAT invoices if registered.

• Close month-end and file returns.

• Assemble the repatriation pack skeleton.

• Schedule your first board meeting and policy approvals.

Common pitfalls 

• Mismatched scope: The charter says consulting but operations do trading. Align scope with the planned revenue lines.

• Fragmented data: KYC, addresses, and figures differ across forms. Keep one master source and copy from it.

• VAT thresholds confusion: Thresholds vary by activity and change by Finance Act. Confirm before issuing invoices.

• Late SSF onboarding: Missed enrollments trigger penalties. Configure payroll on day one.

• Weak document control: Missing board minutes or tax proofs delay repatriations. Maintain a secure document room.

Numbered list: key decisions before you invest

1. Choose your entity type and shareholding.

2. Confirm whether your sector is open under automatic route.

3. Map the tax profile and expected repatriation timeline.

4. Decide VAT registration timing and invoice flow.

5. Build a 12-month compliance calendar with owners.

Bulleted list: documents to prepare early

• Shareholder KYC and UBO disclosures

• Board resolutions and power of attorney

• Business plan and simple term sheet

• Draft MOA/AOA with accurate object clauses

• Lease draft and registered office evidence

• Auditor consent (where required)

• HR templates, payroll policy, and SSF onboarding plan

FAQ 

1) What is the easiest way to start investing in Nepal?
Form a private limited company under FITTA and the Companies Act. Use the automatic route if your sector is eligible. File investor KYC, incorporate at OCR, remit capital through NRB, and register for PAN (and VAT if needed). Keep one master document set to avoid data mismatches.

2) Can a foreign investor fully own a Nepal company?
Yes, in most open sectors. Some activities are restricted or prohibited. Check the negative list and sector rules first. If in doubt, seek a written confirmation before you commit capex or sign leases.

3) What’s the difference between a branch and a subsidiary?
A branch is a permanent establishment of the foreign parent. Profits are taxed in Nepal and profit remittance is regulated. A subsidiary is a separate company. It has its own board, filings, VAT eligibility, and dividend repatriation route.

4) Do I need VAT registration from day one?
Not always. PAN is mandatory. VAT depends on planned supplies and turnover thresholds. Assess your activity and pricing model. Register when required to claim input credits and avoid penalties.

5) How do dividends or royalties leave Nepal?
Prepare audited accounts, pay taxes, and collect department recommendations if needed. Apply to NRB with a complete repatriation pack. After approval, funds can be remitted in convertible currency to the investor’s account.