If you are planning to start a business in Nepal, understanding government incentives can dramatically improve your entry strategy. Nepal actively encourages foreign companies through tax holidays, investment protection, sector-specific benefits, and simplified approval frameworks. For startups and new businesses, these incentives reduce cost, risk, and time to market.
This guide is written specifically for foreign founders, multinational startups, and overseas investors looking for a clear, authoritative explanation of Nepal’s incentive landscape in 2026.
Nepal’s policy direction focuses on employment creation, technology transfer, and export growth. To achieve this, the government has aligned fiscal, tax, and regulatory incentives with foreign direct investment priorities.
Key policy drivers include:
Youth employment and skills development
Digital transformation and IT exports
Import substitution and export-oriented industries
Regional development outside Kathmandu Valley
Institutions such as Investment Board Nepal and Department of Industry play a central role in implementing these incentives.
When you start a business in Nepal as a foreign company, incentives generally fall into four categories.
Each category is explained in detail below.
Nepal offers partial or full corporate income tax exemptions depending on sector, location, and business model.
Typical incentives include:
100 percent tax exemption for initial years in priority sectors
50 percent tax reduction for subsequent years
Reduced tax rates for export-oriented industries
These benefits are governed under the Income Tax Act 2002 and annual Finance Acts.
Foreign startups often qualify for:
VAT exemptions on machinery and equipment
Customs duty concessions on capital goods
Zero VAT on IT and software exports
This is especially relevant for technology, manufacturing, and renewable energy startups.
In specific sectors, Nepal provides:
Reduced withholding tax on dividends
Tax relief on interest repatriation
Lower tax on service exports
This makes Nepal attractive for regional headquarters and shared service centers.
Under the Foreign Investment and Technology Transfer Act 2019, foreign startups benefit from:
Full repatriation of profits
Protection against nationalization
Legal guarantee of investment security
These provisions significantly reduce sovereign and regulatory risk.
Nepal has relaxed minimum FDI thresholds for:
IT and digital startups
Knowledge-based service companies
Export-focused enterprises
This allows smaller foreign startups to enter without heavy upfront capital.
Foreign companies can access a coordinated approval process through:
Investment Board Nepal
Department of Industry
Nepal Rastra Bank
This minimizes bureaucratic delays for incorporation, visas, and capital inflow.
When you start a business in Nepal, you can sponsor:
Business visas for founders
Non-tourist visas for foreign managers
Technical visas for specialists
Priority sectors enjoy faster visa approvals and higher expat quotas.
Startups benefit from predictable payroll compliance under:
Social Security Fund framework
Standardized contribution rates
Clear employer-employee cost visibility
This improves long-term workforce planning for foreign employers.
Nepal strongly promotes IT exports.
Key incentives include:
Income tax exemptions on software exports
Zero VAT on international IT services
Simplified foreign currency earnings repatriation
These policies align with Nepal’s ambition to become a regional IT outsourcing hub.
Manufacturers operating in industrial zones receive:
Land lease concessions
Power tariff discounts
Infrastructure support
This is governed under the Industrial Enterprises Act 2020.
Foreign startups in renewable energy enjoy:
Customs duty exemptions
Power purchase guarantees
Long-term tax holidays
This aligns with Nepal’s national energy strategy.
| Location | Incentive Level | Tax Benefit | Infrastructure Support | Ideal For |
|---|---|---|---|---|
| Kathmandu Valley | Medium | Partial exemptions | Strong | Tech, services |
| Special Economic Zones | High | Full tax holiday | Dedicated | Export industries |
| Rural & Priority Regions | Very High | Extended exemptions | Government backed | Manufacturing, energy |
Foreign companies often maximize incentives by operating outside Kathmandu.
Select an incentive-eligible sector
Choose optimal business structure
Register company with Department of Industry
Obtain FDI approval and capital injection
Apply for tax and customs incentives
Register with tax and labor authorities
Maintain ongoing compliance
Missing a step can invalidate incentives.
Assuming incentives apply automatically
Choosing the wrong entity structure
Not aligning business activity with incentive category
Failing post-registration compliance
Professional structuring is critical when you start a business in Nepal.
Government incentives can reduce:
Initial setup cost by 20–40 percent
Corporate tax burden by up to 100 percent
Equipment import costs significantly
This improves cash flow during early growth stages.
This guide aligns with:
Foreign Investment and Technology Transfer Act 2019
Industrial Enterprises Act 2020
Income Tax Act 2002
Annual Finance Acts of Nepal
These are enforced by Investment Board Nepal, Department of Industry, and Nepal Rastra Bank.
Yes. Nepal offers full or partial tax holidays depending on sector, location, and export orientation. Priority industries enjoy the highest benefits.
Yes. Nepal legally guarantees full profit and capital repatriation under foreign investment law, subject to tax compliance.
Yes. IT and software startups receive tax exemptions, zero VAT on exports, and simplified foreign currency regulations.
Yes. Nepal has relaxed minimum investment thresholds for IT, services, and knowledge-based startups.
Incentive duration ranges from 5 to 15 years, depending on sector and location.
Government incentives significantly lower the risk and cost when you start a business in Nepal. For foreign companies, they provide financial relief, legal certainty, and long-term scalability. With proper structuring, Nepal can become a highly competitive base for South Asia operations.
If you are planning to start a business in Nepal, the right incentive strategy can save you years of cost and compliance risk.
Book a consultation to receive a personalized incentive map, entity structure recommendation, and compliance roadmap tailored to your business.