Legal Requirements for Company Incorporation in Nepal for Foreign Nationals (2025 Guide)

Nepal's strategic location between India and China, coupled with its evolving economic landscape, makes it an attractive destination for foreign investors. Understanding the legal requirements for company incorporation in Nepal is crucial for foreign nationals aiming to establish a business presence in the country. This guide provides a detailed overview of the legal framework, necessary procedures, and compliance obligations for foreign nationals seeking to incorporate a company in Nepal in 2025.

Legal Framework Governing Foreign Investment

Foreign investment in Nepal is primarily governed by the Foreign Investment and Technology Transfer Act (FITTA) 2019, the Companies Act 2006, and the Industrial Enterprises Act 2020. These laws outline the procedures for foreign investment approval, company registration, and operational compliance.

Key Regulatory Bodies:

• Department of Industry (DoI): Handles foreign investment approvals for projects with fixed assets up to NPR 2 billion.

• Investment Board Nepal (IBN): Responsible for approving large-scale investments exceeding NPR 2 billion or those in strategic sectors.

• Office of the Company Registrar (OCR): Oversees company registration and maintains the company registry.

• Nepal Rastra Bank (NRB): Regulates foreign exchange and monitors foreign investment inflows.

Permissible Business Structures for Foreign Nationals

Foreign nationals can establish various types of business entities in Nepal:

1. Private Limited Company

• Ownership: Allows up to 100% foreign ownership in most sectors.

• Shareholders: Minimum of one and a maximum of 50 shareholders.

• Capital Requirement: Minimum foreign investment of NPR 50 million (approximately USD 375,000) per investor.

2. Public Limited Company

• Ownership: Suitable for businesses intending to offer shares to the public.

• Shareholders: Minimum of seven shareholders; no maximum limit.

• Capital Requirement: Minimum paid-up capital of NPR 100 million (approximately USD 750,000).

3. Branch Office

• Function: Acts as an extension of the parent foreign company.

• Activities: Can conduct business activities similar to the parent company.

• Approval: Requires approval from the relevant regulatory authority based on the nature of business.

4. Liaison Office

• Function: Serves as a communication channel between the parent company and Nepalese entities.

• Activities: Cannot engage in income-generating activities.

• Approval: Requires registration with the OCR.

Step-by-Step Guide to Company Incorporation

Step 1: Obtain Foreign Investment Approval

• Application Submission: Submit an application to the DoI or IBN, depending on the investment size and sector.

• Required Documents:

  • Detailed project report.

  • Company incorporation documents.

  • Financial credibility certificate.

  • Copy of the investor's passport.

• Processing Time: Approximately 2-3 months for DoI; up to 6 months for IBN.

Step 2: Reserve Company Name

• Procedure: Apply for name reservation through the OCR's online portal.

• Considerations: Ensure the proposed name is unique and complies with naming guidelines.

Step 3: Register the Company

• Submission: Submit the required documents to the OCR, including:

  • Memorandum and Articles of Association.

  • Application form.

  • Copy of foreign investment approval.

  • Notarized copies of the investor's identification documents.

• Fees: Registration fees vary based on the authorized capital, ranging from NPR 1,000 to NPR 43,000.

• Processing Time: Typically 7-10 days.

Step 4: Register with Nepal Rastra Bank (NRB)

• Purpose: To facilitate the inflow of foreign investment.

• Requirements: Submit the foreign investment approval, company registration certificate, and other relevant documents.

Step 5: Tax Registration

• Procedure: Register for a Permanent Account Number (PAN) with the Inland Revenue Department.

• Additional Registrations: Depending on the nature of the business, Value Added Tax (VAT) registration may also be required.

Post-Incorporation Compliance

• Annual Filings: Submit annual financial statements and tax returns.

• Audit Requirements: Companies must appoint an auditor and submit audited financial statements annually.

• Renewals: Renew business licenses and registrations as required.

• Employment Compliance: Adhere to labor laws, including obtaining work permits for foreign employees.

Restricted Sectors for Foreign Investment

Foreign investment is prohibited or restricted in certain sectors, including:

• Retail trading (except through e-commerce).

• Personal services (e.g., barber shops, beauty salons).

• Cottage industries.

• Real estate business (excluding construction).

• Consultancy services with more than 51% foreign ownership.

It's essential to consult the latest Negative List under FITTA for comprehensive information.

Conclusion

Incorporating a company in Nepal as a foreign national involves navigating a structured legal framework and adhering to specific regulatory requirements. By understanding the legal landscape, selecting the appropriate business structure, and ensuring compliance with all procedural steps, foreign investors can establish a successful business presence in Nepal. Engaging with local legal and financial experts is highly recommended to facilitate the incorporation process and ensure ongoing compliance.