How Foreigners Can Start a Business in Nepal: Legal Pathways

If you are planning to start a business in Nepal, you are not alone. Nepal is emerging as a strategic hub for cost-efficient talent, South Asia market access, and long-term growth. For foreign companies, however, success depends on choosing the right legal pathway from day one.

This guide explains how foreigners can start a business in Nepal legally, covering FDI rules, entity structures, approvals, timelines, costs, and ongoing compliance. It is written for decision-makers who want clarity, not guesswork.

Why Foreign Companies Are Choosing Nepal

Foreign investors are increasingly looking at Nepal for regional expansion. Key drivers include:

• Competitive operating costs compared to India and Southeast Asia

• Large English-speaking graduate workforce

• Favorable time zone overlap with Australia, Europe, and Asia

• Liberalized Foreign Direct Investment (FDI) regime

• Guaranteed profit and capital repatriation under law

For companies in IT, professional services, BPO, fintech, engineering, and consulting, Nepal offers scale without complexity—if structured correctly.

Can Foreigners Start a Business in Nepal?

Yes. Foreigners can legally start a business in Nepal under the Foreign Investment and Technology Transfer Act (FITTA) 2019 and related regulations.

However, foreigners cannot operate as sole proprietors or partnerships. Every foreign-owned venture must be structured through an approved legal vehicle and registered under FDI rules.

Legal Pathways to Start a Business in Nepal as a Foreigner

When you start a business in Nepal, you must select one of the following approved structures.

1. Private Limited Company with FDI

This is the most common and scalable option.

Key features

• 100 percent foreign ownership allowed in most sectors

• Minimum FDI threshold: NPR 20 million (approx. USD 150,000)

• Can hire staff, invoice locally, and generate revenue

• Eligible for profit repatriation

Best for: Long-term operations, revenue-generating businesses, tech firms.

2. Branch Office

A branch office is an extension of the foreign parent company.

Key features

• No separate legal personality

• Can earn income in Nepal

• Requires sectoral approval and parent guarantees

Best for: Companies executing specific projects or contracts.

3. Liaison (Representative) Office

A liaison office is restricted in scope.

Key features

• No revenue-generating activity allowed

• Limited to coordination, marketing, and research

• Fully funded by the foreign parent

Best for: Market entry, feasibility studies, and relationship building.

4. Employer of Record (EOR) as a Pre-FDI Strategy

Many foreign companies enter Nepal through an EOR model before committing capital.

Why EOR works

• No entity or FDI approval required

• Immediate hiring of Nepali staff

• Payroll, tax, and labor compliance handled locally

Best for: Testing the market before formal FDI incorporation.

Comparison: Best Structure to Start a Business in Nepal

Step-by-Step: How to Start a Business in Nepal as a Foreigner

Below is the typical FDI company incorporation process.

Step 1: Sector Eligibility Check

Not all sectors are open to foreign investment. Retail trading, real estate brokerage, and some local services remain restricted.

Step 2: FDI Approval

Applications are filed with the Department of Industry or Investment Board Nepal, depending on investment size.

Step 3: Company Registration

Register the entity with the Office of the Company Registrar.

Step 4: Capital Injection

Foreign capital must be remitted through approved banking channels.

Step 5: Tax and Statutory Registration

• Permanent Account Number (PAN)

• VAT (if applicable)

• Social Security Fund (SSF)

Step 6: Bank Account and Compliance Setup

Operational bank accounts, payroll systems, and compliance calendars are finalized.

Documents Required to Start a Business in Nepal

Foreign investors should prepare:

• Certificate of Incorporation (parent company)

• Board resolution approving Nepal investment

• Passport copies of shareholders and directors

• Proposed business plan and investment amount

• Power of Attorney for local representatives

All documents must be notarized and, where required, apostilled.

Costs and Timelines to Start a Business in Nepal

Indicative timeline

• FDI approval: 3–5 weeks

• Company registration: 1–2 weeks

• Banking and tax setup: 1–2 weeks

Typical cost components

• Government fees

• Legal and compliance advisory

• Accounting and payroll setup

Total costs vary by structure, sector, and investment size.

Ongoing Compliance for Foreign-Owned Companies

Starting a business in Nepal is only the first step. Ongoing compliance is critical.

Foreign companies must manage:

• Monthly payroll tax and SSF filings

• VAT filings (if registered)

• Annual financial audits

• Annual returns to the Company Registrar

• FDI reporting and renewals

Non-compliance can delay profit repatriation and future approvals.

Profit and Capital Repatriation

One of the strongest incentives to start a business in Nepal is guaranteed repatriation.

Foreign investors may repatriate:

• Dividends and retained earnings

• Sale proceeds of shares

• Loan principal and interest

• Royalties and service fees

Repatriation is permitted after tax clearance and regulatory approval through Nepal Rastra Bank.

Common Mistakes Foreigners Make When Starting a Business in Nepal

Avoid these frequent pitfalls:

• Choosing the wrong entry structure

• Underestimating compliance obligations

• Delaying capital injection

• Using informal payroll arrangements

• Not planning repatriation upfront

Expert local guidance can prevent costly restructuring later.

Is Nepal Right for Your Expansion Strategy?

Nepal works best for foreign companies that value:

• Long-term cost efficiency

• Skilled offshore teams

• Regional South Asia access

• Regulatory certainty with the right partner

If speed matters, an EOR model can precede formal FDI incorporation.

Call to Action: Start Your Business in Nepal with Confidence

If you are ready to start a business in Nepal, the right structure and compliance partner make all the difference.

👉 Book a consultation to assess your sector eligibility, choose the optimal legal pathway, and launch with confidence.

Frequently Asked Questions (People Also Ask)

Can a foreigner fully own a company in Nepal?

Yes. Most sectors allow 100 percent foreign ownership under FDI laws, subject to minimum capital and approvals.

What is the minimum investment to start a business in Nepal?

The minimum FDI threshold is NPR 20 million, though certain sectors may have higher requirements.

How long does it take to register a foreign-owned company in Nepal?

Typically 6–10 weeks, including FDI approval, registration, and compliance setup.

Can a foreign company hire Nepali employees?

Yes. FDI companies, branches, and EOR models can legally employ Nepali staff.

Can profits be sent back overseas?

Yes. Nepal guarantees profit and capital repatriation after tax clearance and regulatory approval.

Conclusion

To start a business in Nepal as a foreigner, you need more than enthusiasm. You need the right legal pathway, compliant structure, and long-term plan. With proper setup, Nepal offers stability, talent, and growth opportunities that few emerging markets can match.