Foreign company registration in Nepal is often the first strategic decision global businesses face when entering the Nepali market. Should you register as a foreign company or incorporate a local company with foreign ownership? The choice affects control, taxes, compliance, and scalability. In this definitive guide, I break down foreign company vs local company in Nepal, explain legal frameworks, costs, timelines, and risks, and help you choose the structure that best fits your growth plan.
This guide is written for founders, CFOs, and expansion leaders who want clarity, speed, and compliance—without surprises.
In Nepal, a foreign company is an overseas entity that establishes a presence without incorporating a new Nepali company. It typically operates through a branch, liaison office, or project office, and is governed by foreign investment and sectoral regulations.
By contrast, a local company is a Nepal-incorporated entity (usually a Private Limited Company) that may be fully or partially foreign-owned under the Foreign Investment and Technology Transfer Act (FITTA).
Understanding the legal landscape is essential for risk-free entry.
Companies Act, 2006 – Governs incorporation and compliance of local companies.
Foreign Investment and Technology Transfer Act (FITTA), 2019 – Regulates foreign ownership, approvals, and repatriation.
Industrial Enterprises Act, 2020 – Sector classification and thresholds.
Income Tax Act, 2002 – Corporate tax, withholding, and permanent establishment rules.
Nepal Rastra Bank (NRB) Directives – Capital inflow, banking, and repatriation approvals.
Labour Act, 2017 – Employment and HR compliance.
Regulatory oversight is primarily handled by the Department of Industry and the central bank.
Before diving deep, here’s a quick snapshot.
| Aspect | Foreign Company | Local Company (FDI) |
|---|---|---|
| Legal identity | Overseas parent | Separate Nepali entity |
| Ownership | 100% foreign | 100% or JV |
| Approval process | Higher scrutiny | Structured FDI route |
| Tax treatment | Permanent establishment risk | Resident company |
| Profit repatriation | Restricted | Clearly permitted |
| Scalability | Limited | High |
| Investor confidence | Lower | Higher |
Branch Office
Operates commercial activities linked to the parent company.
Liaison Office
Non-commercial presence for coordination and representation.
Project Office
Temporary setup for a specific contract or project.
No separate legal personality in Nepal.
Activities are tightly linked to the parent company.
Typically approved for specific purposes and durations.
Short-term infrastructure or donor-funded projects.
Market testing without revenue generation.
Government-backed or EPC contracts.
A local company is incorporated in Nepal as a Private Limited Company and may be fully foreign-owned where permitted.
Separate legal entity under Nepali law.
Eligible for long-term operations and local contracts.
Clear rights to hire staff, open bank accounts, and repatriate profits.
Tech startups and SaaS providers.
Manufacturing and processing industries.
BPO, IT services, and consulting firms.
Consumer-facing businesses.
Sector eligibility confirmation.
Detailed parent company documentation.
Approval from the Department of Industry.
NRB clearance for bank accounts.
This process is case-by-case and may take longer.
FDI approval under FITTA.
Company incorporation with the Office of the Company Registrar.
Capital injection via NRB-approved channels.
This pathway is more predictable and standardized.
Foreign companies are often treated as Permanent Establishments.
Corporate tax applies to Nepal-sourced income.
Higher scrutiny on transfer pricing.
Limited treaty benefits in practice.
Local companies are treated as resident entities.
Corporate tax generally ranges around 25 percent.
Withholding taxes are clearly defined.
Eligible for sector-specific incentives.
According to government guidelines, resident companies enjoy clearer compliance and fewer disputes.
Repatriation is often restricted or conditional.
Requires multiple approvals and justifications.
Capital exit may be complex.
Dividends, royalties, and exit proceeds are explicitly allowed under FITTA.
NRB approvals are procedural, not discretionary.
Investor exits are more straightforward.
This difference alone often drives the decision.
Annual reporting to regulators.
Activity-based renewals.
Tight operational boundaries.
Annual filings and audits.
Labour, tax, and social security compliance.
Predictable obligations aligned with growth.
Lower upfront incorporation costs.
Higher advisory and compliance costs over time.
Timelines vary widely.
Moderate setup costs.
Lower long-term compliance risk.
Typical setup: 30 to 60 days.
You need a temporary presence.
Revenue will not be generated locally.
The project scope is fixed and time-bound.
You plan to scale in Nepal.
You want revenue, hiring, and contracts locally.
You care about clean exits and repatriation.
Use this checklist before deciding.
Nature of activities.
Expected duration in Nepal.
Revenue generation plans.
Capital investment size.
Exit and repatriation strategy.
If more than two answers point to long-term operations, a local company is usually superior.
Choosing a liaison office for revenue activities.
Ignoring permanent establishment risks.
Underestimating repatriation complexity.
Delaying labour and tax compliance.
These mistakes are costly and avoidable.
In practice, many foreign companies start lean and later convert to local entities because:
Banks prefer resident companies.
Clients demand local contracts.
Investors require equity clarity.
Compliance becomes simpler.
Foreign company registration in Nepal can work for narrow, short-term objectives. However, for most foreign investors seeking growth, stability, and exit flexibility, a locally incorporated company with foreign ownership offers superior advantages. The right structure at entry saves years of restructuring later.
Planning market entry or restructuring in Nepal?
Book a strategic consultation to assess the best structure for your business and receive a clear regulatory roadmap.
Yes. Nepal permits foreign companies through branches, liaison offices, and project offices, subject to approvals and sector rules.
Only branch and project offices may earn revenue. Liaison offices cannot conduct commercial activities.
For long-term operations, yes. Local companies offer clearer tax treatment, easier repatriation, and higher scalability.
Timelines vary. Expect several weeks to months, depending on sector and documentation.
Yes. Many investors restructure into local companies once operations expand.