Incorporating a Tech Company in Nepal: What Foreigners Should Know

Introduction: Nepal’s Rising Tech Scene

Nepal is quietly emerging as South Asia’s next digital frontier. With a young, educated, and English-speaking population, increasing internet penetration, and a rapidly growing startup ecosystem, Nepal is drawing the attention of international tech entrepreneurs. For those exploring company incorporation in Nepal, the tech industry offers immense untapped potential.

Whether you’re launching a software firm, outsourcing company, fintech startup, or digital product platform, Nepal offers a cost-effective and strategically located base for innovation.

Why Incorporate a Tech Company in Nepal?

• 100% Foreign Ownership Allowed in IT, software, and BPO sectors

• Skilled Tech Talent Pool at competitive wages

• Proximity to India and China with lower business setup costs

• Growing Startup Ecosystem supported by incubators and hubs

• Tax Incentives for IT Sector including exemptions on software and hardware imports

According to the Department of Industry, IT and software services were among the top three sectors for foreign direct investment (FDI) in 2023. This signals strong regulatory support and rising global interest.

Legal Framework: What Foreigners Can and Cannot Do

Under the Foreign Investment and Technology Transfer Act (FITTA) 2019, foreign nationals and companies can fully own tech companies in Nepal. Key legal permissions include:

• Full foreign ownership for software, SaaS, BPO, and IT-enabled services

• Repatriation of profits with proper regulatory compliance

• Option to lease or buy property for office space

• Eligibility to hire both local and international staff

Note: Certain industries like retail trading, agriculture, and small-scale domestic services are restricted for foreign investors.

Minimum Investment Requirements for Foreigners

Foreigners must bring in a minimum capital of NPR 20 million (approximately USD 150,000) to register a private limited company in Nepal. This investment must be verifiably transferred through formal banking channels and registered with the Nepal Rastra Bank (NRB).

Step-by-Step Guide to Incorporate a Tech Company in Nepal

Step 1: Prepare a Business Proposal

This includes:

• Nature of the tech business

• Technology to be used or transferred

• Capital structure and funding sources

• Operational and staffing plan

Step 2: Get Approval from the Department of Industry (DoI)

Submit your proposal for foreign investment registration. If approved, you'll receive a Foreign Investment Approval Letter.

Step 3: Register Your Company with the Office of the Company Registrar (OCR)

Documents needed:

• Articles and Memorandum of Association

• Director/shareholder IDs and resolutions

• Capital commitment details

Once approved, a Company Registration Certificate will be issued.

Step 4: Register with Nepal Rastra Bank (NRB)

You must declare your investment and obtain approval from NRB to ensure:

• Recognition of foreign capital

• Legal protection for future profit repatriation

• Foreign exchange compliance

Step 5: Tax Registration with the Inland Revenue Department (IRD)

You’ll receive:

• PAN (Permanent Account Number)

• VAT registration (if turnover exceeds NPR 2 million)

Step 6: Open a Business Bank Account

This is essential for capital injection, payroll, and tax payments.

Taxation for Tech Companies in Nepal

• Corporate Tax Rate: 25% (standard)

• Withholding Tax on Dividends: 5–15% depending on residency

• Software and IT Exemptions: No customs duty on imported IT equipment for registered tech companies

• Repatriation of Profits: Permitted through NRB with proper tax clearance

Many tech startups also benefit from tax holidays for up to 5 years, especially those located in Special Economic Zones (SEZs).

Post-Incorporation Compliance

To stay in good standing:

• Submit audited annual financials to OCR

• File monthly VAT returns and annual income tax returns

• Renew business license and tax certificates annually

• Maintain transparent payroll and social security contributions for local staff

Failure to comply can delay capital repatriation or trigger penalties.

Popular Tech Business Models for Foreigners in Nepal

• SaaS Platforms

• IT Outsourcing & Staff Augmentation

• Web & App Development Agencies

• Digital Marketing Firms

• Cloud-Based ERP & CRM Solutions

• Cybersecurity & DevOps Services

• AI and Data Analytics Startups

All of the above are eligible for 100% foreign ownership and qualify under FITTA.

Opportunities & Challenges

Opportunities:

• Access to lower development costs

• Strategic time zone for US, EU, and APAC clients

• Expanding local demand for digital transformation

• Youth-dominated workforce eager to work in tech

Challenges:

• No formal digital nomad visa yet

• Regulatory paperwork may require local support

• Tech infrastructure, while improving, is still developing in some regions

Conclusion: Nepal as Your Next Tech Launchpad

For tech entrepreneurs, investors, and global startups looking to establish a foothold in South Asia, company incorporation in Nepal offers strategic, financial, and operational advantages. The legal pathway is clear, and the market is primed for innovation.

Whether you’re building your development hub, outsourcing center, or a full-fledged product company, Nepal offers a fertile ground — and getting started is easier than many expect with the right guidance and local expertise.