Nepal is rapidly positioning itself as a regional hub for cross-border investment, particularly in sectors such as hydropower, tourism, IT services, and manufacturing. With the government welcoming foreign investment through policy reforms and streamlined procedures, more international firms are exploring foreign company registration in Nepal.
One of the first and most important decisions for any foreign investor is this: Should we open a branch office or set up a subsidiary? While both structures enable foreign companies to operate in Nepal, they differ significantly in terms of liability, taxation, governance, and strategic flexibility.
This guide provides an in-depth comparison of foreign branches and subsidiaries in Nepal—helping foreign companies make a well-informed, compliant, and strategic choice.
A branch is an extension of a foreign parent company, not a separate legal entity. It operates in Nepal under the name and control of the overseas parent.
A subsidiary is a locally incorporated company in Nepal with its own legal identity, even though it may be 100% foreign-owned. It functions independently, subject to Nepalese law.
| Criteria | Branch | Subsidiary |
|---|---|---|
| Legal Entity | Not separate from parent | Separate legal entity |
| Incorporation | Registered under Companies Act + FITTA | Registered under Companies Act + FITTA |
| Ownership | 100% foreign-owned | 100% foreign-owned or joint venture |
| Name | Same as parent | Can have a distinct name |
| Approval Needed | From DoI and NRB | From DoI and NRB |
Both entities must be registered with the Department of Industry (DoI) and approved by Nepal Rastra Bank (NRB) to operate legally and repatriate profits.
One of the most critical distinctions between a branch and a subsidiary in Nepal is how they are taxed.
Taxed on Nepal-sourced income only
Corporate Tax Rate: 25% of net profits
No dividend tax (since profits are not distributed as dividends)
Subject to withholding tax on service fees, interest, royalties
Taxed as a resident company (on worldwide income if applicable)
Corporate Tax Rate: 25% (standard), 20% (for special industries)
5% Dividend Tax when profits are distributed to the foreign parent
Can claim deductions and depreciation like a domestic firm
For foreign companies that want to avoid dividend taxes, a branch may seem advantageous. However, subsidiaries offer tax planning flexibility, especially for expanding operations or reinvesting profits.
Profits remitted to the parent company are not taxed as dividends
Repatriation allowed after:
Annual audit
Tax clearance
NRB approval
Must declare dividends through a board resolution
Pay 5% withholding tax on dividends
Require NRB approval after tax clearance
While both entities can remit profits legally, the process is slightly easier for branches, especially for companies offering services or short-term projects.
Entirely controlled by the parent
Can only engage in approved activities listed in FITTA approval
Cannot raise capital from local market or issue shares in Nepal
Operates independently with its own board
Greater flexibility to expand operations, hire staff, lease property
Can raise local funding, participate in tenders, and diversify services
For companies aiming for long-term growth or localization, a subsidiary offers broader flexibility.
Unlimited liability: Parent company is directly liable for branch’s debts, taxes, and legal obligations in Nepal
Limited liability: Parent company’s risk is limited to capital invested
Cannot automatically bind the parent to local contracts or disputes
From a legal risk perspective, subsidiaries offer greater protection, especially for high-risk industries.
| Step | Branch | Subsidiary |
| Name Approval | Required | Required |
| DoI Approval | Required | Required |
| Company Registration | Simple process | Requires MoA, AoA, local registration |
| NRB Approval | Required for both | Required for both |
| PAN/VAT Registration | Required | Required |
| Time to Register | 4–6 weeks | 6–8 weeks (typically) |
Branch setup is generally faster, but both involve multiple agencies: Company Registrar, DoI, NRB, and Inland Revenue Department.
Maintain NFRS-compliant financial statements
Undergo annual audits
File corporate tax returns, VAT returns, and TDS
Contribute to Social Security Fund (SSF) if they employ local staff
Hold board and shareholder meetings
Maintain statutory records and share registers
Prepare and file annual general meeting (AGM) resolutions
A branch might be ideal when:
You want a temporary or representative presence
Your operations are limited in scope (e.g., consulting, project-based work)
You prefer minimal administrative overhead
You wish to avoid dividend taxes
A subsidiary may be better when:
You are planning long-term operations in Nepal
You need to hire a full local team or expand locations
You want to limit legal risk and separate liabilities
You aim to raise funds locally or apply for large tenders/contracts
Hydropower / Infrastructure: Often structured as subsidiaries to secure local licenses and funding
IT / Software: Branch may be sufficient for remote service delivery, but subsidiaries offer better scalability
Tourism / Hotels: Subsidiaries are preferred for real estate ownership and long-term operations
Trading / Import-Export: Subsidiary often needed for warehousing, inventory, and VAT compliance
| Expense Category | Branch | Subsidiary |
| Legal & Advisory | Medium | High (MoA, AoA, resolutions) |
| Tax Registration | Similar | Similar |
| Annual Compliance | Lower | Higher (board governance, filings) |
| Audit Costs | Similar | Similar |
Over time, subsidiaries incur higher administrative costs but also offer more autonomy and benefits.
Foreign company registration in Nepal is a promising move—but only if you choose the right structure. A branch offers simplicity and fast setup for limited engagements. A subsidiary offers legal protection, operational freedom, and room for growth.
| Factor | Best for Branch | Best for Subsidiary |
| Entry Speed | Yes | No |
| Risk Protection | No | Yes |
| Long-Term Strategy | No | Yes |
| Profit Repatriation Simplicity | Yes | No |
| Market Expansion | No | Yes |
Ultimately, your decision should align with:
Business duration in Nepal
Capital investment strategy
Compliance capacity
Risk appetite
Tax planning goals
Both branches and subsidiaries are legitimate options under Nepal’s investment law. The Nepalese government supports either structure, provided compliance is maintained. If you’re unsure, consult a local legal and accounting advisor to assess the best fit for your operational and financial goals.
The right decision at this early stage will not only simplify your market entry—but also shape the long-term success of your investment in Nepal.