How to Set Up a Foreign Representative Office in Nepal: Essential Steps

Nepal's strategic location between India and China, coupled with its evolving economic landscape, makes it an attractive destination for foreign companies seeking to establish a presence in South Asia. For businesses aiming to explore opportunities without engaging in direct commercial activities, setting up a representative (liaison) office is an ideal approach. This guide provides a detailed overview of the process, legal requirements, and compliance obligations for establishing a liaison office in Nepal.

Understanding a Liaison Office

A liaison office serves as a communication channel between the foreign parent company and entities in Nepal. It is not permitted to engage in any income-generating activities. Its functions are limited to:

• Promoting the parent company's business interests.

• Facilitating technical and financial collaborations.

• Acting as a communication bridge between the parent company and Nepalese businesses or government agencies.

• Conducting market research and providing information to the parent company.

Legal Framework

The establishment and operation of liaison offices in Nepal are governed by:

• Companies Act, 2006 (2063 B.S.): Outlines the registration process and compliance requirements for foreign companies.

• Foreign Investment and Technology Transfer Act (FITTA), 2019: Regulates foreign investments and technology transfers.

• Industrial Enterprises Act, 2020 (2076 B.S.): Provides guidelines for industrial operations and licensing.

Step-by-Step Registration Process

1. Obtain Approval from the Department of Industry (DoI)

Submit an application to the DoI with the following documents:

• Application form for liaison office registration.

• Board resolution authorizing the establishment of a liaison office in Nepal.

• Certified copies of the parent company's incorporation documents.

• Memorandum and Articles of Association of the parent company.

• Audited financial statements of the parent company for the last three years.

• Power of Attorney in favor of the authorized representative in Nepal.

• Passport copies of the parent company's directors.

• Proposed activities and objectives of the liaison office in Nepal.

• Commitment letter stating compliance with Nepalese laws and regulations.

• Bank reference letter from the parent company's bank.

• Curriculum Vitae of the proposed Chief of the liaison office.

Note: All documents must be translated into Nepali and notarized.

2. Register with the Office of the Company Registrar (OCR)

Upon receiving approval from the DoI, register the liaison office with the OCR by submitting:

• DoI approval letter.

• Certified copies of the parent company's incorporation documents.

• List of directors and their identification.

• Details of the local representative and registered office address in Nepal.

3. Tax Registration with the Inland Revenue Department (IRD)

Even though liaison offices are not permitted to generate income, they must register for tax purposes with the IRD. Submit:

• OCR registration certificate.

• DoI approval letter.

• Proof of local registered address.

4. Registration with Nepal Rastra Bank (NRB)

Register the liaison office with the NRB to facilitate any permissible financial transactions. Provide:

• NRB registration application.

• DoI and OCR approval letters.

• Details of the parent company's financial standing.

Timeline

The entire process typically takes between 6 to 10 weeks, depending on the completeness of the application and the efficiency of the relevant government departments.

Government Fees and Charges

The government fees for registering a liaison office in Nepal include:

• DoI Approval Fee: NPR 20,000

• Company Registration Fee: Varies based on authorized capital (minimum NPR 9,500)

• PAN Registration Fee: NPR 1,000

• NRB Registration Fee: NPR 5,000T

Additional charges may apply for notarization, translation, and other administrative processes.

Compliance Requirements

Post-registration, liaison offices must adhere to the following compliance obligations:

• Annual Reporting: Submit annual reports to the OCR and DoI detailing activities undertaken.

• Financial Statements: Maintain proper records of expenses and submit audited financial statements annually.

• Renewal of Registrations: Renew registrations with the OCR, IRD, and NRB as required.

• Notification of Changes: Inform relevant authorities of any changes in the parent company's structure or the liaison office's operations.

Restrictions on Liaison Offices

Liaison offices in Nepal are subject to the following restrictions:

• No Income-Generating Activities: Cannot engage in any commercial, trading, or industrial activities.

• No Invoicing: Cannot issue invoices or receive payments for services rendered.

• No Advertising: Prohibited from undertaking any advertising or promotional activities.

Conclusion

Establishing a liaison office in Nepal is a strategic move for foreign companies aiming to explore the Nepalese market without engaging in direct commercial activities. By adhering to the outlined legal procedures and compliance requirements, businesses can effectively maintain a presence in Nepal, facilitating communication and fostering potential future investments.