---
title: "Open a subsidiary in Nepal: directors, share capital and compliance"
description: Open a subsidiary in Nepal with confidence. Learn directors’ rules, share capital, FDI approvals, taxes, and a step-by-step compliance timeline.
---

[Insights](https://digitalconsultingventures.com/insights)

# [Open a subsidiary in Nepal: directors, share capital and compliance](https://digitalconsultingventures.com/insights/incorporate-a-company-in-nepal-open-a-subsidiary-directors-share-capital-compliance-2025)

 Written by [Pjay Shrestha](https://digitalconsultingventures.com/insights/author/pjay-shrestha) | Sep 17, 2025, 3:40:49 AM

If you plan to **incorporate a company in Nepal**, a local subsidiary is often best. It protects the parent company. It also enables VAT, payroll, and banking. Nepal welcomes foreign investment under a clear legal framework. Your success depends on sequence, documents, and compliance. This guide explains each stage with practical detail. It also shows timelines, costs, and director duties. Use it to plan fast, error-free market entry.

## Executive summary: the Nepal subsidiary at a glance

- Legal form: **Private limited company** with foreign shareholding.
- Governing laws: **Companies Act 2063** and **FITTA 2019**.
- Approvals: **FDI approval**, **NRB approval**, then **OCR registration**.
- Core IDs: **PAN** and **VAT** (as needed).
- Banking: **Capital remittance** through a commercial bank with **NRB** records.
- Taxes: **Corporate tax** (commonly 25%), **VAT** (13%), and **TDS**.
- People: At least **one director** and **one company secretary** recommended.
- Compliance: **Board minutes**, **statutory filings**, **audit**, and **SSF**.

> Tip: Map tasks by week. Delay in one step delays all later steps.

## Incorporate a company in Nepal: why a subsidiary often wins

A subsidiary is a separate legal person. It limits parent company risk. It also eases contracts, invoicing, and local hiring. Branch or liaison models are narrower. They suit short projects or limited scope. A subsidiary fits growth, sales, and investment. It also aligns with long-term tax planning.

## Foreign investment basics and regulator touchpoints

- **FITTA 2019** governs foreign investment entry.
- **Department of Industry (DOI)** handles most FDI approvals.
- **Investment Board Nepal (IBN)** handles large, strategic projects.
- **Nepal Rastra Bank (NRB)** records foreign currency inflows.
- **Office of the Company Registrar (OCR)** registers companies.
- **Inland Revenue Department (IRD)** issues **PAN** and **VAT**.

These authorities interact in sequence. Plan documents and timing carefully.

## Directors, shareholders, and share capital

### Minimum positions and practical norms

- **Directors:** At least one director is common. A **resident director** improves banking and admin speed.
- **Company Secretary:** Recommended for governance and filings.
- **Shareholders:** For a subsidiary, the parent often holds 100%. A minority local partner is optional.
- **Authorized vs issued capital:** Align issued capital with near-term cash needs.

### Share capital: how much is enough?

Use capital to fund setup, payroll, and first-year costs. Banks and authorities review capital realism. Avoid both undercapitalization and excess. Some sectors may need higher paid-in capital. Confirm current **minimum FDI threshold** during planning. Treat it as a hard gate for approvals.

### Director duties and liabilities

Directors must act in good faith and with care. They must maintain books and approve filings on time. They protect creditors and minority shareholders. They also prevent unauthorized distributions. Breaches can trigger penalties.

## Step-by-step: the full incorporation and FDI sequence

Follow this exact order. It prevents rework and delays.

1. **Project scoping and structure**  
   Define business model, capital, and intercompany flows. Draft a Nepal entity chart. Pre-clear sector constraints.
2. **Name reservation at OCR**  
   Propose two or three names. Keep a fallback ready. Prepare short objectives matching the business plan.
3. **FDI application under FITTA**  
   File the investment proposal with **DOI** or **IBN**. Include parent KYC and sector details. Attach draft **MoA** and **AoA**.
4. **NRB position planning**  
   Map currency, tranche amount, and timing. Identify the remitting bank. Prepare a capital remittance plan.
5. **Company incorporation at OCR**  
   After FDI approval, finalize **MoA/AoA**. File director consents and registered office proof. Obtain the certificate of incorporation.
6. **Bank account opening**  
   Open a capital account with a commercial bank. Provide FDI and incorporation papers. Confirm signatories and e-banking.
7. **Capital remittance**  
   Remit capital through banking channels. Label the purpose as FDI capital. Ensure NRB records capture the inflow.
8. **PAN registration**  
   Apply for **Permanent Account Number**. Align legal name, address, and directors. Prepare a tax representative resolution.
9. **VAT registration** (if applicable)  
   Register if you exceed the turnover threshold. Register earlier if clients require VAT invoices. Set up **e-Tims** where applicable.
10. **Social Security Fund (SSF)** setup  
    Register the company and employees with **SSF**. Configure payroll and contribution codes.
11. **Labor office** and local registrations  
    Register employment agreements. Align leave, overtime, and insurance. Post mandatory notices at the office.
12. **Operational go-live**  
    Activate invoicing and collections. File TDS from day one. Start board and accounting calendars.

## Timeline: from reservation to VAT

**Week 1–2:** Name reservation and FDI filing prepared.  
**Week 3–5:** FDI approval cycle and document legalization.  
**Week 6:** OCR incorporation completed. Bank account opened.  
**Week 7:** Capital remitted and recorded.  
**Week 8:** PAN issued. VAT registration completed if needed.  
**Week 9:** Payroll, SSF, and labor compliance activated.

> Timelines vary by sector, volume, and holidays. Build buffers.

## Banking and NRB: doing capital remittance right

- Use a **single remitter** and consistent purpose codes.
- Keep the **FDI approval** and **incorporation certificate** handy.
- Ensure **NRB** records the inflow as **paid-in capital**.
- Keep **swift**, **advice**, and **credit voucher** copies.
- Any future **repatriation** relies on clean NRB paperwork.

## Tax and payroll essentials for new subsidiaries

- **Corporate income tax:** Often **25%** for standard sectors.
- **VAT:** **13%** on taxable supplies.
- **TDS:** Apply correct withholding on services, rent, and salaries.
- **Payroll:** Align with **Labor Act** and **SSF**.
- **Audit:** Annual statutory audit is expected for companies.
- **Transfer pricing:** Keep intercompany files and benchmarking.

> Early errors cause penalties. Automate filings and calendars.

## Your compliance calendar (year one)

- **Monthly:** VAT return (if registered), TDS, and payroll.
- **Quarterly:** Advance tax review and TP updates.
- **Annually:** Audit, financial statements, and corporate return.
- **Ad hoc:** Board meetings, share changes, or address updates.
- **On demand:** NRB filings for capital or loans.

## Intercompany mechanics: pricing, contracts, and cash

Set clear **intercompany agreements**. Define services and pricing. Use tested **transfer pricing** methods. Maintain **benchmark studies**. Align invoices with actual work. Keep working capital balanced. Track forex exposure and settlement timing.

## Employment, visas, and leadership presence

Hire local staff under Nepal labor rules. Use clear contracts and policies. Register all employees in **SSF**. Senior expatriates may need business visas or work permits. A local **authorized signatory** speeds daily operations. Invest in HR and compliance training.

## Subsidiary vs branch vs liaison: which fits your plan?

| Model | What it is | Allowed activities | Invoicing & VAT | Risk & liability | Good for |
| --- | --- | --- | --- | --- | --- |
| **Subsidiary** | Local private limited company | Full operations and sales | Yes, can register VAT | Liability ring-fenced | Long-term growth |
| **Branch** | Extension of foreign parent | Project execution per approval | Limited; depends on scope | Parent exposed to risks | Project contracts |
| **Liaison** | Representative office | Non-commercial liaison work | No sales; no VAT | Minimal, but narrow scope | Market research |

**Insight:** Choose a **subsidiary** for lasting presence. Pick a **branch** for short, defined projects. Use a **liaison** for research only.

## Sector approvals and restricted areas

Some sectors require special permits. Others limit foreign shareholding. Review **FITTA schedules** and any **sectoral guidelines**. Examples include finance, telecom, energy, and media. Manufacturing may need **environmental** filings and **SEZ** approvals. Always confirm current rules before filing.

## Common mistakes and how to avoid them

1. **Wrong sequence of approvals.** File FDI before OCR.
2. **Thin capitalization.** Underfunding slows operations.
3. **NRB gaps.** Missing inflow records block repatriation.
4. **Weak intercompany files.** TP adjustments hurt margins.
5. **Late VAT or TDS.** Penalties add up fast.
6. **No board discipline.** Minutes and resolutions must exist.
7. **Ignoring labor rules.** SSF and contracts are mandatory.
8. **Bad address proof.** Leases must match filings.
9. **Outdated KYC.** Keep director and parent KYC current.
10. **Over-promising timelines.** Build buffers and track tasks.

## Realistic budget planning

- **Legal and advisory:** Scope dependent. Plan an initial retainer.
- **Government fees:** Vary by capital and filings. Budget modestly.
- **Bank charges:** Account opening and remittance fees apply.
- **Accounting and payroll:** Monthly bundle recommended.
- **Audit:** Annual fee based on turnover and complexity.
- **Office and HR:** Lease, fit-out, and basic HR tooling.

> Treat these as planning ranges. Confirm current fee schedules during kickoff.

## Documentation checklist

- Parent **certificate of incorporation** and **board resolution**.
- Parent **MoA/AoA** or charter.
- Director **passports** and **photos**.
- **Registered office** lease and utility proof.
- Draft **MoA/AoA** for the subsidiary.
- **FDI application** pack and sector notes.
- **Bank KYC** and **NRB** templates.
- **PAN/VAT** forms and specimen signatures.
- **Employment** contracts and **SSF** forms.
- **Board minute** templates and registers.

## Governance and record-keeping

Adopt a **board calendar** and **policy pack**. Keep **statutory registers** updated monthly. Record all **share movements**. Approve **related-party** transactions in minutes. Ensure **auditor independence**. Back up digital records and email approvals.

## Risk controls and internal audit

Create a **delegation of authority** matrix. Segregate bank and payment duties. Reconcile VAT and TDS monthly. Review payroll and SSF data. Test controls each quarter. Use an **internal audit** checklist.

 

## How DCV helps foreign investors

- **Entity design:** Structure, capital, and intercompany blueprint.
- **End-to-end filings:** FDI, NRB, OCR, PAN, and VAT.
- **Banking setup:** Account opening and remittance guidance.
- **Tax engine:** VAT, TDS, and corporate tax workflows.
- **People ops:** Contracts, SSF, and policy handbooks.
- **Governance:** Board packs and compliance calendars.
- **Ongoing care:** Accounting, audit support, and secretarial work.

## FAQ

**1) How long does the full process take?**  
Eight to ten weeks is common. Complex sectors can take longer. Buffers for holidays help.

**2) Do I need a local partner?**  
No. A 100% foreign-owned subsidiary is possible in many sectors. Check sector rules first.

**3) Can I repatriate profits and capital?**  
Yes, if NRB records are clean. Dividends, capital, and service fees can be remitted.

**4) What taxes should I budget for?**  
Expect corporate tax, VAT where applicable, and TDS. Payroll and SSF also apply.

**5) Is a branch simpler than a subsidiary?**  
A branch can be faster for a project. A subsidiary fits long-term, full operations.

[View full post](https://digitalconsultingventures.com/insights/incorporate-a-company-in-nepal-open-a-subsidiary-directors-share-capital-compliance-2025)

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