Foreign Companies in Nepal: How Are They Classified

If you are a foreign business planning market entry, understanding the types of companies in Nepal is your first strategic decision. Nepal offers multiple legal structures for foreign companies. Each comes with different ownership rules, compliance obligations, and repatriation rights.

Choosing the wrong structure can delay approvals, restrict operations, or increase tax exposure. Choosing the right one can accelerate growth and reduce risk. This guide gives you the most authoritative, practical explanation available.

We focus on how foreign companies are classified in Nepal, not just local company law. You will learn what structure fits your goals, budget, and timeline.

Why Company Classification Matters for Foreign Companies

Foreign companies face different rules than domestic investors. Nepal distinguishes clearly between local ownership and foreign participation.

Your classification determines:

• Whether foreign ownership is allowed

• Minimum capital requirements

• Approval authorities

• Permitted business activities

• Tax treatment and repatriation rights

Most foreign investors interact with three regulators:

• Office of Company Registrar (OCR)

• Department of Industry (DOI)

• Nepal Rastra Bank

High-Level Overview: Types of Companies in Nepal for Foreign Investors

From a foreign investor’s lens, Nepal recognizes five practical entry structures.

The five main company types for foreign companies

1. Foreign Direct Investment (FDI) Private Limited Company

2. Public Limited Company with foreign investment

3. Branch Office

4. Liaison Office

5. Representative Office

Each serves a different strategic purpose. Let’s break them down.

1. Foreign Direct Investment (FDI) Private Limited Company

This is the most common and flexible option.

What it is

A Private Limited Company incorporated in Nepal with foreign shareholding under FDI laws.

Key features

• Separate legal entity in Nepal

• Foreign ownership up to 100 percent in permitted sectors

• Limited liability protection

• Eligible for profit repatriation

Typical use cases

• IT and software companies

• Outsourcing and shared services

• Manufacturing and assembly

• Consulting and professional services

Compliance snapshot

• Minimum paid-up capital applies

• Annual audit required

• Monthly and annual tax filings

• Social Security Fund compliance

FDI Private Limited Companies are the backbone of Nepal’s foreign investment ecosystem.

2. Public Limited Company with Foreign Investment

This structure is suitable for large-scale or capital-intensive ventures.

What it is

A Public Limited Company incorporated in Nepal that allows foreign shareholders.

Key features

• Minimum seven shareholders

• Higher capital threshold

• Shares can be publicly issued

• Strong regulatory oversight

When it makes sense

• Infrastructure projects

• Hydropower and energy

• Banking and insurance

• Large manufacturing

This structure offers scale but requires heavier governance.

3. Branch Office of a Foreign Company

A Branch Office is not a separate legal entity.

What it is

An extension of the foreign parent company registered in Nepal.

Characteristics

• No separate legal personality

• Parent company bears full liability

• Limited scope of activities

• Usually project-based

Typical approvals

• Government of Nepal approval

• Sectoral ministry clearance

• Central bank approval for inward funds

Branch Offices work well for time-bound projects, not long-term operations.

4. Liaison Office (Contact Office)

This is the most restricted structure.

What it is

A non-commercial presence used only for coordination.

Permitted activities

• Market research

• Brand promotion

• Communication with headquarters

Restrictions

• No revenue generation

• No invoicing

• No commercial contracts

A Liaison Office is ideal for early-stage market exploration.

5. Representative Office

Often confused with liaison offices, but more narrowly defined.

What it is

A presence to represent a foreign company’s interests in Nepal.

Key limitations

• Cannot conduct business

• Cannot earn income

• Funded entirely by the parent company

This structure is common for NGOs, chambers, and trade bodies.

Comparison Table: Choosing the Right Company Type in Nepal

This table highlights why most foreign companies choose FDI Private Limited companies in Nepal.

Sector Restrictions Foreign Companies Must Know

Not all sectors are open to foreign investment.

Common restricted or conditional sectors

• Small retail trading

• Certain media activities

• Domestic courier services

• Personal services

Always check the latest negative list before structuring your investment.

Regulatory Framework Governing Foreign Companies

Foreign companies operate under multiple laws.

Key legislation includes:

• Companies Act

• Foreign Investment and Technology Transfer Act

• Industrial Enterprises Act

• Income Tax Act

• Central bank foreign exchange directives

These laws collectively define how the types of companies in Nepal operate for foreign investors.

Step-by-Step: How Foreign Companies Choose the Right Structure

Here is a practical decision framework.

1. Define your business activities

2. Confirm sector eligibility

3. Decide ownership and control

4. Assess capital and timeline

5. Choose compliance capacity

Most strategic investors move from liaison office to FDI company as confidence grows.

Common Mistakes Foreign Companies Make

Avoid these costly errors.

• Registering a liaison office when revenue is planned

• Underestimating compliance timelines

• Choosing a branch office for long-term presence

• Ignoring repatriation planning

Professional structuring advice saves time and capital.

Taxation Overview for Foreign-Owned Companies

Tax obligations vary by structure.

General highlights

• Corporate tax applies to FDI companies

• Withholding taxes on dividends and services

• Branch profits taxed differently

• Repatriation requires regulatory clearance

Early tax planning is essential.

Repatriation of Profits and Capital

One major advantage of FDI companies is repatriation.

Foreign investors can repatriate:

• Dividends

• Royalties

• Loan repayments

• Sale proceeds

Approval is routed through commercial banks under central bank oversight.

Why FDI Private Limited Companies Dominate Foreign Entry

More than 90 percent of active foreign businesses choose this route.

Reasons include:

• Operational flexibility

• Legal certainty

• Scalable structure

• Investor-friendly exit

This makes it the default recommendation for most foreign companies entering Nepal.

Practical Examples by Industry

Technology and IT

FDI Private Limited Company with 100 percent ownership.

Manufacturing

FDI Company or Public Company depending on scale.

Engineering and Infrastructure

Branch Office for projects. FDI Company for long-term presence.

Consulting and Professional Services

FDI Private Limited Company.

Future Outlook for Foreign Companies in Nepal

Nepal continues to liberalize foreign investment.

Key trends include:

• Faster digital approvals

• Improved repatriation processes

• Greater sectoral openness

Understanding the types of companies in Nepal positions you ahead of regulatory change.

Frequently Asked Questions (People Also Ask)

What is the best company type for foreign investors in Nepal?

Most foreign investors choose an FDI Private Limited Company. It allows revenue, profit repatriation, and full operational control.

Can a foreign company own 100 percent of a Nepali company?

Yes. Many sectors allow up to 100 percent foreign ownership under FDI regulations.

Is a branch office better than a subsidiary in Nepal?

Branch offices suit short-term projects. Subsidiaries are better for long-term operations and scalability.

Can liaison offices earn income in Nepal?

No. Liaison offices cannot conduct commercial activities or generate revenue.

How long does it take to register a foreign-owned company in Nepal?

An FDI Private Limited Company typically takes four to eight weeks, depending on approvals.

Conclusion: Choosing the Right Types of Companies in Nepal

Understanding the types of companies in Nepal is the foundation of a successful market entry. Foreign companies must align structure with strategy, compliance capacity, and growth plans.

For most investors, an FDI Private Limited Company offers the best balance of control, flexibility, and compliance.

Call to Action

Planning to enter Nepal?
Book a free market-entry consultation to determine the right company structure, approvals, and compliance roadmap for your business.