Foreign Direct Investment (FDI) and Company Registration in Nepal

Foreign company registration in Nepal has become a strategic move for global businesses seeking access to South Asia’s fastest-opening frontier market. With liberalised Foreign Direct Investment (FDI) rules, improving infrastructure, and a young workforce, Nepal offers a compelling entry point for manufacturing, IT services, energy, tourism, and professional services.

This guide gives you the most authoritative, up-to-date explanation of FDI and company registration in Nepal, written for foreign founders, CFOs, and expansion leaders who want clarity, speed, and compliance from day one.

Why Foreign Companies Are Registering in Nepal

Nepal has steadily reformed its investment framework to attract overseas capital while protecting national interests. For foreign companies, the appeal lies in:

• Competitive operating costs compared to India and Southeast Asia

• Strategic access between India and China

• Government-backed incentives in priority sectors

• A clear, codified FDI approval and company registration system

Under Nepal’s investment regime, a foreign company can legally own equity, repatriate profits, and operate long-term with regulatory certainty.

Legal Framework Governing Foreign Company Registration in Nepal

Foreign company registration in Nepal is regulated through a coordinated framework of laws and regulators in Nepal.

Key laws and regulations

• Foreign Investment and Technology Transfer Act (FITTA) 2019

• Companies Act 2006

• Industrial Enterprises Act 2020

• Income Tax Act 2002

• Labour Act 2017 and Social Security Act 2018

Key authorities involved

• Department of Industry (DOI) or Investment Board Nepal (IBN)

• Office of the Company Registrar (OCR)

• Nepal Rastra Bank (NRB)

• Inland Revenue Department

Each authority plays a defined role. This separation reduces risk but requires coordinated compliance.

What Qualifies as Foreign Direct Investment (FDI) in Nepal

FDI in Nepal is broadly defined. It includes:

• Equity investment in a Nepali company

• Reinvestment of retained earnings

• Technology transfer, licensing, or franchising

• Share acquisition from an existing shareholder

The current minimum FDI threshold is NPR 20 million per investor, subject to sector-specific rules.

Permitted and Restricted Sectors for FDI

Nepal follows a negative list approach. This means all sectors are open unless expressly restricted.

Commonly approved sectors

• Information technology and software services

• Manufacturing and light industry

• Renewable energy and hydropower

• Tourism, hotels, and hospitality

• Professional and consulting services

Restricted or prohibited sectors

• Personal retail trading

• Cottage industries reserved for locals

• Real estate trading without development

• Certain defence-related activities

Sector eligibility is always checked at the FDI approval stage.

Forms of Foreign Company Registration in Nepal

Foreign investors can choose from multiple legal structures depending on control, tax planning, and market strategy.

1. Private Limited Company (FDI Company)

This is the most common route.

• Separate Nepali legal entity

• Foreign shareholding allowed up to 100 percent in most sectors

• Eligible for profit repatriation

2. Branch Office

• Extension of the foreign parent

• No separate legal personality

• Suitable for project-based or short-term operations

3. Liaison Office

• Non-revenue generating

• Market research and coordination only

• Cannot invoice locally

Step-by-Step Process: Foreign Company Registration in Nepal

Below is a simplified, practical overview of the process.

1. FDI approval

Application submitted to DOI or IBN with:

• Project report

• Shareholding structure

• Source of funds declaration

2. Company incorporation

Once FDI approval is issued:

• Name reservation at OCR

• Memorandum and Articles of Association

• Company registration certificate

3. Capital inflow and bank compliance

• Open local bank account

• Inject approved foreign capital

• NRB reporting and confirmation

4. Tax and labour registration

• PAN and VAT registration

• Social Security Fund enrolment

• Local municipality registration

Typical Timeline for Foreign Company Registration in Nepal

Total average timeline: 4–6 weeks with proper documentation.

Costs Involved in FDI and Company Registration

Foreign company registration in Nepal is cost-efficient compared to many jurisdictions.

Cost components include

• Government registration and filing fees

• Legal and professional advisory fees

• Capital commitment (minimum NPR 20 million)

• Ongoing compliance and audit costs

A transparent cost plan at the outset prevents delays and regulatory pushback.

Taxation for Foreign-Owned Companies in Nepal

Understanding taxation is critical for investment modelling.

Corporate taxes

• Standard corporate tax: 25 percent

• Special sectors may receive tax holidays or reduced rates

Withholding and repatriation

• Dividends subject to withholding tax

• Repatriation permitted after tax clearance

• NRB approval required for outward remittance

Nepal allows lawful profit repatriation, a major confidence signal for foreign investors.

Employment, Labour, and Social Security Compliance

Foreign companies must comply fully with Nepali labour law.

Key obligations include:

• Written employment contracts

• Minimum wage compliance

• Mandatory Social Security Fund contributions

• Statutory leave and termination procedures

Non-compliance here is one of the most common risks for new entrants.

Common Challenges Foreign Companies Face

Foreign investors often struggle with:

• Incomplete documentation during FDI approval

• Misalignment between parent-company expectations and local law

• Delays in capital verification

• Ongoing compliance after incorporation

These issues are avoidable with structured advisory support.

Strategic Comparison: Nepal vs Other South Asian Markets

For service-driven or cost-sensitive operations, Nepal offers a balanced entry profile.

Best Practices for Successful Market Entry

To succeed with foreign company registration in Nepal:

• Align your global structure with local compliance early

• Plan capital inflow and timelines conservatively

• Appoint local compliance and payroll experts

• Treat post-registration compliance as a priority, not an afterthought

Conclusion

Foreign company registration in Nepal is no longer a high-risk frontier move. With clear FDI rules, improving institutions, and strong investor protections, Nepal is emerging as a credible base for South Asian expansion.

Foreign companies that invest with a structured, compliant approach benefit from lower costs, long-term stability, and full profit repatriation rights.

Call to Action

Planning FDI and company registration in Nepal?
Book a consultation with our Nepal expansion specialists to receive a tailored investment structure, timeline, and compliance roadmap.

Frequently Asked Questions

Is 100 percent foreign ownership allowed in Nepal?

Yes. Most sectors allow full foreign ownership, except those on the negative list.

What is the minimum investment for FDI in Nepal?

The general minimum is NPR 20 million per foreign investor, subject to sector rules.

Can foreign companies repatriate profits from Nepal?

Yes. Profits, dividends, and capital can be repatriated after tax clearance and NRB approval.

How long does foreign company registration in Nepal take?

Typically 4–6 weeks with complete documentation and professional support.

Do foreign companies need local directors?

At least one local authorised representative is required, but directors can be foreign nationals.