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.
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.
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.
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: 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.
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.
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.
Follow this exact order. It prevents rework and delays.
Project scoping and structure
Define business model, capital, and intercompany flows. Draft a Nepal entity chart. Pre-clear sector constraints.
Name reservation at OCR
Propose two or three names. Keep a fallback ready. Prepare short objectives matching the business plan.
FDI application under FITTA
File the investment proposal with DOI or IBN. Include parent KYC and sector details. Attach draft MoA and AoA.
NRB position planning
Map currency, tranche amount, and timing. Identify the remitting bank. Prepare a capital remittance plan.
Company incorporation at OCR
After FDI approval, finalize MoA/AoA. File director consents and registered office proof. Obtain the certificate of incorporation.
Bank account opening
Open a capital account with a commercial bank. Provide FDI and incorporation papers. Confirm signatories and e-banking.
Capital remittance
Remit capital through banking channels. Label the purpose as FDI capital. Ensure NRB records capture the inflow.
PAN registration
Apply for Permanent Account Number. Align legal name, address, and directors. Prepare a tax representative resolution.
VAT registration (if applicable)
Register if you exceed the turnover threshold. Register earlier if clients require VAT invoices. Set up e-Tims where applicable.
Social Security Fund (SSF) setup
Register the company and employees with SSF. Configure payroll and contribution codes.
Labor office and local registrations
Register employment agreements. Align leave, overtime, and insurance. Post mandatory notices at the office.
Operational go-live
Activate invoicing and collections. File TDS from day one. Start board and accounting calendars.
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.
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.
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.
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.
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.
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.
| 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.
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.
Wrong sequence of approvals. File FDI before OCR.
Thin capitalization. Underfunding slows operations.
NRB gaps. Missing inflow records block repatriation.
Weak intercompany files. TP adjustments hurt margins.
Late VAT or TDS. Penalties add up fast.
No board discipline. Minutes and resolutions must exist.
Ignoring labor rules. SSF and contracts are mandatory.
Bad address proof. Leases must match filings.
Outdated KYC. Keep director and parent KYC current.
Over-promising timelines. Build buffers and track tasks.
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.
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.
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.
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.
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.
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.