From Name Reservation to PAN: Key Steps in Nepal’s Company Registration

For foreign investors planning a business launch in Nepal, navigating the local company registration process is crucial. The journey—from reserving a unique company name to obtaining a Permanent Account Number (PAN)—involves multiple steps and compliance checks under the Companies Act 2006 and Foreign Investment and Technology Transfer Act (FITTA) 2019. In this blog, we detail the key steps and legal requirements, ensuring large enterprises have a clear roadmap to achieve full compliance and operational readiness.

1. Name Reservation with the Office of the Company Registrar (OCR)

1.1 Online Application

• Name Proposal: Submit one or more preferred company names through the OCR’s online portal.
• Uniqueness Check: The Registrar checks the proposed name against existing records to avoid duplication or trademark conflicts.

Pro Tip: Prepare alternative names in case your first choice is already taken or deemed incompatible with local regulations.

1.2 Name Approval Certificate

• Confirmation of Availability: Once the OCR verifies availability, you’ll receive a Name Approval Certificate.
• Validity Period: The name reservation is typically valid for a limited time, so complete your incorporation steps promptly.

2. Drafting Memorandum and Articles of Association

2.1 Legal Foundations

• Memorandum of Association (MoA): Outlines the scope of business, share capital details, and objectives.
• Articles of Association (AoA): Specifies governance structures, director powers, and operational guidelines.

2.2 Compliance with the Companies Act

Ensure your MoA and AoA align with:

• Companies Act 2006
• FITTA 2019 (if foreign investment is involved)
• Sector-Specific Regulations (e.g., banking, telecom)

Note: Foreign investors must incorporate minimum investment thresholds (generally USD 50,000) in their capitalisation plan.

3. Company Registration with OCR

3.1 Document Submission

After finalizing the MoA and AoA, submit the following to the OCR:

1. Application Form (as prescribed by OCR)
2. Name Approval Certificate
3. MoA and AoA (duly signed by promoters)
4. Identity Documents of shareholders/directors (passports for foreign nationals)
5. Address Proof of the registered office in Nepal

3.2 Payment of Registration Fees

• Authorized Capital-Based Fee: Fees vary according to the company’s proposed authorized share capital.
• Evidence of Payment: Keep your bank deposit voucher or official receipt for record-keeping.

3.3 Certificate of Incorporation

Upon successful verification:

• Company Registration Number is assigned.
• Certificate of Incorporation is issued, confirming legal existence under Nepali law.

4. Tax Registrations: Obtaining PAN and VAT

4.1 Permanent Account Number (PAN)

• Mandatory for All Entities: Required to engage in financial transactions and file tax returns.
• Issuing Authority: The Inland Revenue Department (IRD).
• Documentation: Provide company incorporation details, proof of address, and authorized signatories.

4.2 Value Added Tax (VAT) Registration

• Turnover Threshold: Mandatory if projected or actual annual turnover exceeds NPR 2 million.
• Monthly/Quarterly Filings: Depending on your turnover, VAT returns must be filed on time to avoid penalties.

Key Insight: Even if your annual turnover doesn’t meet the threshold, voluntary VAT registration can offer credibility and tax credit benefits.

5. Additional Approvals for Foreign Investors

5.1 Department of Industry (DoI) / Investment Board Nepal (IBN)

• Foreign Investment Approval: File a project proposal, business plan, and capital structure details.
• Sector-Specific Clearance: Certain industries (banking, insurance, telecom) may require extra vetting.

5.2 Nepal Rastra Bank (NRB) Compliance

• Capital Inflows: Register foreign equity or debt inflows with the NRB.
• Repatriation of Profits: Obtain clearance before distributing dividends or repatriating earnings abroad.

6. Post-Incorporation Obligations

6.1 Social Security Fund (SSF) Registration

• Employee Welfare: Mandatory for companies hiring local staff.
• Contributions: Employers and employees both contribute to pensions, insurance, and other benefits.

6.2 Statutory Audits

• Nepal Financial Reporting Standards (NFRS): Annual financial statements must comply with NFRS/IFRS principles.
• Licensed Auditor: Engage an Institute of Chartered Accountants of Nepal (ICAN)-recognized auditor.

6.3 Annual Returns

• Office of the Company Registrar Filings: Submit audited financials and annual returns on schedule.
• Inland Revenue Department Filings: Timely income tax, VAT, and any other applicable returns.

7. Common Pitfalls and How to Avoid Them

1. Incomplete Documentation: Always cross-check all required forms, attachments, and translations.
2. Delayed Registrations: Failing to meet OCR deadlines can invalidate your name approval or incur penalties.
3. Underestimating Sectoral Requirements: Thoroughly research capital prerequisites and licensing obligations in regulated industries.
4. Non-Compliance with NRB: Ensure every foreign equity injection or loan is properly documented and reported to the central bank.

Frequently Asked Questions (FAQ)

1. How long does it take to register a company in Nepal?
   - 2–8 weeks, depending on the completeness of your documentation and the responsiveness of government agencies.

2. Is there a minimum capital requirement for foreign investors?
   - Generally USD 50,000 under FITTA 2019, but certain industries may require higher thresholds.

3. Can I handle the registration remotely without visiting Nepal?
   - Yes, through a Power of Attorney given to a local representative. However, some processes (e.g., bank account opening) may need direct engagement.

4. When should I register for VAT?
   - If your turnover exceeds NPR 2 million, VAT registration is mandatory. You can also opt for voluntary registration if under the threshold.

5. Do I need an annual audit even if my company is small?
   - Yes, all registered companies in Nepal—regardless of size—must submit annual audited financials to OCR.

Conclusion

Successfully registering a company in Nepal involves securing your business name, establishing legal documentation, and meeting tax and foreign investment approvals. From reserving a name at the Office of the Company Registrar (OCR) to obtaining a PAN and ensuring NRB compliance, foreign investors should follow a systematic approach to avoid regulatory bottlenecks.

At Digital Consulting Ventures, our experts simplify your Nepal company registration journey. We offer end-to-end services covering legal documentation, regulatory approvals, accounting compliance, and beyond—ensuring your business hits the ground running in Nepal’s dynamic market.