Government Rules for Foreign Company Setup in Nepal

Foreign company registration in Nepal is governed by a structured legal and regulatory framework designed to protect investors while aligning with national economic priorities. For foreign companies, Nepal offers a growing consumer market, competitive labour costs, and a clear foreign investment regime.

That said, success depends on understanding government rules, approvals, and compliance obligations from day one. This guide explains the exact process, laws, timelines, and risks so you can enter Nepal with confidence and avoid costly delays.

Why foreign companies are choosing Nepal

Nepal has steadily improved its investment climate. According to government data, foreign direct investment has increased across sectors such as IT services, hydropower, tourism, manufacturing, and professional services.

Foreign investors are attracted by:

• Strategic location between India and China

• Liberal repatriation rules for profits and capital

• Competitive operational costs

• 100 percent foreign ownership in most permitted sectors

• Dedicated government bodies for FDI facilitation

Legal framework governing foreign company registration in Nepal

Foreign company setup in Nepal is not based on one single law. It is regulated through multiple statutes and government authorities.

Core laws every foreign investor must know

• Foreign Investment and Technology Transfer Act (FITTA 2019)

• Companies Act

• Industrial Enterprises Act

• Income Tax Act

• Nepal Rastra Bank foreign exchange directives

These laws collectively govern entry approval, company incorporation, taxation, profit repatriation, and foreign exchange compliance.

Foreign company registration in Nepal – permitted entry routes

Foreign companies cannot operate informally in Nepal. One of the following government-approved structures must be used.

1. Foreign Direct Investment company (Private Limited)

This is the most common and flexible route.

• Minimum investment threshold set by government policy

• Allows revenue-generating activities

• Eligible for profit repatriation

• Suitable for IT, consulting, manufacturing, and services

2. Branch office

A branch is an extension of the foreign parent company.

• Allowed only for approved activities

• No separate legal personality

• Requires prior approval for contracts or projects

• Limited revenue scope

3. Liaison or representative office

This structure is for market presence only.

• No commercial or income-generating activity

• Used for coordination, research, or promotion

• Lower compliance burden

Government approval authorities involved

Foreign company registration in Nepal involves coordination with several government bodies.

• Department of Industry – FDI approval

• Office of Company Registrar – Company incorporation

• Inland Revenue Department – Tax registration

• Nepal Rastra Bank – Foreign exchange and repatriation approval

Step-by-step process for foreign company registration in Nepal

Below is the exact sequence followed by successful foreign investors.

1. Investment structure and sector assessment

Authorities first assess whether your proposed activity is:

• Fully open

• Conditionally allowed

• Restricted or prohibited

This assessment avoids rejection later.

2. FDI approval from Department of Industry

An application is filed with:

• Investor details

• Proposed investment amount

• Business plan

• Shareholding structure

Approval timelines typically range from 15 to 30 working days.

3. Company incorporation

Once FDI approval is granted:

• Company name is reserved

• Memorandum and Articles are filed

• Company is registered as a Nepal entity

4. Capital injection through banking channels

Foreign capital must enter Nepal via:

• Approved commercial bank

• Inward remittance in foreign currency

• Proper FDI reporting

5. Tax and local registrations

Post-incorporation compliance includes:

• Permanent Account Number registration

• VAT registration if applicable

• Local ward office registration

Documents required for foreign company setup

Foreign companies should prepare documents carefully to avoid delays.

Key documents include:

• Certificate of incorporation of parent company

• Board resolution approving Nepal investment

• Passport and identification of shareholders

• Business plan and financial projections

• Power of attorney for local representative

All foreign documents must be notarised and, in many cases, consularised.

Comparison table: Entry options for foreign companies

Compliance obligations after registration

Foreign company registration in Nepal does not end at incorporation.

Ongoing obligations include

• Annual tax filing

• Monthly payroll and withholding tax

• Social Security Fund contributions

• Annual audit by licensed Nepali auditor

• Regulatory reporting for foreign exchange

Failure to comply can affect profit repatriation and renewal approvals.

Repatriation of profits and capital

One of the strongest advantages of Nepal’s FDI regime is repatriation certainty.

Foreign investors can repatriate:

• Dividends

• Sale proceeds of shares

• Loan repayments

• Technology transfer fees

All repatriation must follow Nepal Rastra Bank procedures with audited financials.

Common mistakes foreign companies make

Avoiding these errors saves months of delay.

• Choosing the wrong entry structure

• Underestimating documentation formalities

• Injecting capital before approval

• Ignoring payroll and labour compliance

• Not planning repatriation documentation early

Why expert guidance matters

Foreign company registration in Nepal is rule-driven, not discretionary. Authorities expect precision, legal clarity, and compliance from day one.

Working with specialists ensures:

• Correct structure selection

• Faster approvals

• Bank-compliant capital inflow

• Audit-ready compliance systems

Frequently Asked Questions

Is 100 percent foreign ownership allowed in Nepal

Yes. Most sectors permit full foreign ownership unless listed as restricted under prevailing industrial policy.

How long does foreign company registration in Nepal take

Typically 4 to 8 weeks, depending on sector and document readiness.

What is the minimum investment required

Government policy sets a minimum threshold, which may vary by sector and revision.

Can profits be repatriated freely

Yes, subject to tax clearance and Nepal Rastra Bank approval.

Is a local director mandatory

A local authorised representative is required, but foreign directors are permitted.

Conclusion: Is Nepal the right destination for your expansion

Foreign company registration in Nepal offers a legally secure and commercially attractive entry into South Asia. With the right structure, documentation, and compliance partner, foreign investors can operate smoothly and repatriate profits without friction.

If you are planning foreign company registration in Nepal, early strategic guidance makes all the difference.

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