Company Incorporation Laws in Nepal: Explained for New Business Owners

If you plan to incorporate a company in Nepal, this guide gives you a clear, practical path. You will understand the Companies Act, foreign investment rules under FITTA, the OCR e-services process, and the tax registrations that follow. We also compare branch vs liaison vs subsidiary, share realistic timelines, and list the documents you need. Sentences are short. Jargon is explained. You stay in control.

Quick summary (read this first)

• Law stack: Companies Act 2063 governs companies. FITTA 2019 and FITTR 2021 govern foreign investment. Nepal Rastra Bank guidelines cover FDI recording and repatriation.

• Vehicles: Private Limited, Public Limited, Branch Office, or Liaison Office.

• FDI threshold: Minimum foreign equity threshold commonly referenced as NPR 50 million under FITTA. Check sector exceptions before you commit capital.

• Taxes: PAN is mandatory. VAT registration depends on turnover thresholds.

• E-filing: Use the OCR e-services portal for name reservation and incorporation.

Nepal’s legal framework at a glance

Companies Act, 2063 (2006)

Defines company forms, shareholder rules, governance, filings, and foreign company registration. It also prescribes penalties for non-compliance and sets record-keeping standards.

Foreign Investment and Technology Transfer Act (FITTA), 2019

Sets out who can invest, the forms of investment, the approval process, and investor rights. It also recognizes technology transfer and royalty arrangements.

Foreign Investment and Technology Transfer Rules (FITTR), 2021

Operational rules for FITTA. They define documents, timelines, reporting, and the mechanics of approvals, renewals, and changes.

Nepal Rastra Bank (NRB) directives for FDI and foreign loans

Lay out FDI recording requirements, banking procedures for inward remittances, and repatriation rules for dividends, capital gains, and loan interest.

Choosing the right entry vehicle

Option 1: Private Limited Company (subsidiary)

• Shareholders: 1 to 101.

• Use case: Wholly owned subsidiary, services, distribution, or SaaS.

• Capital: Based on your MOA. Sector laws may impose minimums.

• Pros: Control, limited liability, broad sector access, brand protection.

• Cons: Cannot offer shares to the public.

Option 2: Public Limited Company

• Promoters: Minimum 7.

• Use case: Larger operations and future public offerings.

• Pros: Can raise capital from the public.

• Cons: Stricter governance, disclosure, and compliance.

Option 3: Branch Office of a Foreign Company

• Nature: Extension of the parent entity.

• Revenue: Can earn local revenue where permitted.

• Pros: Faster market entry. No separate share capital.

• Cons: Parent bears liabilities directly. Contracts sit on the parent balance sheet.

Option 4: Liaison (Representative) Office

• Nature: Non-commercial presence.

• Revenue: Not allowed to invoice or generate revenue in Nepal.

• Pros: Light footprint to test the market and coordinate.

• Cons: No sales. Limited scope of activities.

Comparison table: which structure fits your plan?

How to incorporate a company in Nepal: step-by-step

1) Plan your structure and shareholders

Decide between subsidiary, branch, or liaison. Confirm sector eligibility and any negative list restrictions. Decide on shareholding, capital, and directors.

2) Prepare documents

• Proposed name, objectives, and registered address.

• Shareholder and director IDs (passport for foreign nationals).

• MOA and AOA drafts.

• Board resolution for investment and appointment of a local authorized representative.

• Power of Attorney if using an agent.

• Sector approvals if required.

3) Reserve your company name (OCR e-services)

Create an account and submit a Name Reservation Request. Choose a unique and non-conflicting name. Avoid names too close to existing trademarks or public bodies.

4) File incorporation application online

Log in to the portal and complete the application. Upload the MOA and AOA, KYC documents, and supporting papers. Track queries and respond promptly.

5) Verification and certificate collection

After online approval, submit originals as instructed. Collect your Certificate of Incorporation. Keep multiple certified copies for bank and tax.

6) Post-registration within the first 30 days

• PAN registration with the Inland Revenue Department.

• VAT registration if you meet thresholds or opt in early.

• Local ward registration, if applicable.

• Open a bank account with the certificate, board resolution, KYC, and tax registration.

• File the first share allotment return within statutory timelines.

The FDI path: approvals, recording, and repatriation

Minimum investment threshold

Authorities have set a minimum foreign equity threshold of NPR 50 million per project under FITTA. Some sectors have separate minimums or additional conditions. Always check the latest notices and any sector caps before wiring funds.

Who approves FDI

The Department of Industry processes most FDI approvals in practice. Large or sensitive projects may involve higher bodies under specific laws. The process aims to be single-window in spirit, with sector regulators engaged when needed.

Forms of foreign investment recognized

• Equity shares or reinvested earnings.

• Foreign loans that meet prudential rules.

• Technology transfer arrangements with royalty caps and reporting.

• Lease financing and venture capital in permitted sectors.

FDI recording with NRB

After inward remittance, record the investment with NRB. This protects repatriation rights. Keep bank advice, SWIFT messages, shareholder registers, allotment returns, and auditor certifications in order.

Repatriation of dividends and capital

With NRB recording and tax compliance, dividends, sale proceeds, and loan interest are repatriable. Maintain clear documentation and board approvals. Plan for reasonable processing time at banks and regulators.

Taxes you must plan for

PAN: mandatory for all companies

Register for PAN immediately after incorporation. You need PAN for invoicing, banking, payroll, and customs if importing.

VAT: thresholds and timing

• Goods: Mandatory VAT registration when annual taxable turnover exceeds NPR 5 million.

• Services and mixed supplies: Mandatory at NPR 3 million.

• Rate: Standard VAT rate is 13%.
  Many B2B firms register early to claim input VAT and to meet customer procurement requirements.

Corporate income tax

• General rate: Commonly 25% for many corporate taxpayers, subject to sectoral variations and incentives.

• Advance tax and TDS: Factor withholding and advance payments into cash-flow planning.

• Audit: Maintain proper books. Appoint a statutory auditor as required by law.

Governance and ongoing compliance

• Board and meetings: Follow MOA and AOA for quorum and notice. Public companies must meet higher governance standards and appoint independent directors where required.

• Registers and minutes: Maintain shareholder register, share certificates, and minutes of meetings.

• Annual return and financial statements: File on time with OCR and tax authorities.

• Change filings: Notify OCR of changes in name, address, capital, objectives, directors, or share transfers within statutory deadlines.

• Tax filings: Monthly or quarterly VAT, TDS returns, and annual income tax filings.

• Audit trail: Preserve invoices, contracts, import papers, and bank advice for at least the statutory retention period.

Sector-specific approvals and special regimes

Some activities need additional approvals before or after incorporation:

• Banking, insurance, capital markets: Sector regulators impose licenses and capital rules.

• Education, health, telecom, aviation, energy: Line ministry approvals apply.

• Manufacturing and SEZs: SEZ Authority rules may grant incentives and require export ratios.

• Restricted or negative list activities: Arms and ammunition, security printing, and currency minting are examples that need special treatment or are restricted.

Employment, visas, and payroll basics

• Hiring expatriates: Obtain work permits and stay visas through the Department of Labor and immigration authorities when local candidates are not available.

• Payroll setup: Enroll for social security where applicable, set up TDS and payroll processes, and issue compliant payslips.

• Employment contracts: Use clear contracts with probation, leave, confidentiality, and IP clauses.

Banking and capital inflows

• Bank account opening: Provide the incorporation certificate, board resolution, KYC, PAN, and beneficial ownership details.

• Inward remittance: Use banking channels with proper purpose codes and SWIFT messages.

• Share issuance and allotment: Issue shares upon receipt of funds and file returns. Keep cap tables current.

Intellectual property and brand protection

• Company name vs trademark: Company name protection is not the same as trademark protection.

• Trademark: File for trademark registration to protect your brand in Nepal.

• IP in contracts: Ensure IP ownership and confidentiality provisions in employment and vendor agreements.

Data protection and compliance hygiene

• Data handling: Map personal data flows if you process customer or employee data.

• Record retention: Follow retention schedules and keep digital backups of key records.

• Internal policies: Adopt policies for AML and KYC where relevant, whistleblowing, conflict of interest, and expense control.

How to incorporate a company in Nepal the right way (checklist)

Numbered steps (at a glance)

1. Choose the vehicle: subsidiary, branch, or liaison.

2. Confirm sector eligibility and any negative list issues.

3. Draft MOA and AOA with clear objectives.

4. Reserve the company name on the OCR portal.

5. File the incorporation application with supporting documents.

6. Respond to OCR queries and obtain the certificate.

7. Register for PAN and VAT if applicable.

8. Open the bank account and fund initial capital.

9. Record FDI with NRB where applicable.

10. File share allotments and annual returns on time.

Bullet essentials

• Keep objectives precise and aligned with sector rules.

• Maintain documentation for source of funds and inward remittances.

• Align VAT registration timing with contracts and imports.

• Set up an internal compliance calendar for filings and audits.

Common pitfalls and how to avoid them

• Confusing company name: Too close to a trademark or public body. Do a broad search before name reservation.

• Missing VAT threshold change: Monitor turnover for services and mixed supplies.

• Skipping NRB recording: Without NRB recording, repatriation can be delayed or denied.

• Wrong vehicle choice: If you need to contract and invoice, a liaison office will not work. Use a subsidiary or branch.

• Weak paper trail: Keep SWIFT copies, bank advice, and board approvals for every inflow or outflow.

Practical timeline and cost planning

• Preparation: 2 to 5 working days for documents and drafts.

• Name reservation: Often 1 to 2 working days if the name is unique.

• Incorporation review: 3 to 7 working days for straightforward cases.

• Post-incorporation: PAN and bank account within a week, VAT registration based on threshold or voluntary timing.

• FDI recording: Plan for bank processing and NRB review time after remittance.

• Professional fees and government fees: Vary by structure, capital, and sector. Obtain a tailored quote with a scope and inclusions list.

Frequently Asked Questions

1) What is the minimum foreign investment to start a company in Nepal?
NPR 50 million is the commonly referenced minimum under FITTA. Some sectors have different criteria. Always check the latest notices before investing.

2) Can a single foreign shareholder form a private limited company?
Yes. A private company can be formed by one or more persons. The shareholder cap is up to 101.

3) What is the difference between a branch and a liaison office?
A branch can conduct business and earn local revenue. A liaison is non-commercial and cannot invoice or sign revenue contracts.

4) How soon should I register for VAT?
Register when your taxable turnover is projected to cross NPR 5 million for goods or NPR 3 million for services or mixed supplies in any rolling 12 months. Many B2B firms register early.

5) Can I repatriate dividends and sale proceeds?
Yes. If you record FDI with NRB and maintain tax compliance, repatriation of dividends, capital gains, and loan interest is permitted with proper documentation.