Legal Requirements for Foreign-Owned Companies in Nepal

Foreign company registration in Nepal is increasingly attractive for global businesses seeking cost-efficient talent, strategic South Asian market access, and long-term growth. However, Nepal is a law-driven jurisdiction. Foreign-owned companies must meet strict legal, regulatory, and compliance requirements before operating.

This guide explains the legal requirements for foreign-owned companies in Nepal in plain English. It is written for founders, CFOs, legal heads, and expansion leaders who want certainty, speed, and compliance.

By the end, you will know exactly what is legally required, which authorities are involved, and how to choose the right entry structure.

What Does “Foreign Company Registration in Nepal” Mean Legally?

Foreign company registration in Nepal refers to any business structure where ownership, control, or capital originates outside Nepal.

Under Nepali law, a foreign-owned presence can take several legally recognised forms:

• Foreign Direct Investment (FDI) company

• Branch Office

• Liaison (Representative) Office

• Employer of Record (EOR) arrangement

Each structure has different legal thresholds, approvals, and ongoing obligations.

Core Laws Governing Foreign-Owned Companies in Nepal

Foreign companies are regulated by multiple overlapping statutes. The most important are:

• Foreign Investment and Technology Transfer Act (FITTA) 2019

• Companies Act 2006

• Industrial Enterprises Act 2020

• Income Tax Act 2002

• Labour Act 2017

• Social Security Act 2018

• Nepal Rastra Bank (NRB) Foreign Exchange Directives

Approvals and supervision involve key institutions such as the Department of Industry and the Nepal Rastra Bank.

Legal Requirements for Foreign Company Registration in Nepal

Every foreign-owned entity must satisfy five non-negotiable legal pillars.

1. Approved Investment Structure

Nepal does not allow unrestricted foreign business activity.

You must legally fit into one of the permitted structures:

1. FDI-based Private Limited Company

2. Branch Office of a foreign company

3. Liaison Office (non-revenue)

4. EOR without entity formation

Choosing the wrong structure can block approvals or restrict revenue.

2. Sector Eligibility Under Nepalese Law

Not all sectors are open to foreign investment.

Foreign companies cannot invest in areas listed under the “Negative List”, including:

• Small retail and trading

• Certain local service industries

• Domestic courier and logistics

• Some agriculture and cottage industries

Most technology, IT services, BPO, consulting, engineering, and manufacturing sectors are open to 100% foreign ownership.

3. Minimum Capital Requirements

Under FITTA and DOI guidelines:

• Minimum FDI threshold: NPR 20 million (approx.)

• Capital must be injected via banking channels

• Funds must be reported and converted through NRB-approved banks

Failure to inject capital on time can invalidate registration.

4. Mandatory Government Approvals

Foreign company registration in Nepal involves multiple approvals, not a single filing.

Key approvals include:

• FDI approval from the Department of Industry

• Company incorporation at Company Registrar

• Foreign exchange approval from Nepal Rastra Bank

• PAN and VAT registration

• Local municipality registration

Each step has legal sequencing. Skipping one delays the entire process.

5. Employment and Labour Law Compliance

Foreign-owned companies must comply fully with Nepal’s labour regime.

This includes:

• Written employment contracts

• Statutory leave entitlements

• Minimum wages

• Social Security Fund (SSF) contributions

• Termination and severance rules

There is no labour law relaxation for foreign investors.

Comparison Table: Legal Structures for Foreign Companies in Nepal

Insight: Over 60% of first-time entrants now choose EOR → FDI later, reducing regulatory risk.

Step-by-Step Legal Process for Foreign Company Registration in Nepal

Step 1: FDI Approval Application

Submit a detailed proposal to the Department of Industry covering:

• Parent company profile

• Business activities

• Capital structure

• Technology or service transfer

Approval timelines typically range from 15 to 30 working days.

Step 2: Company Incorporation

Once FDI approval is granted:

• Register the company name

• File constitutional documents

• Appoint directors and shareholders

The entity becomes a Nepali legal person, even if 100% foreign-owned.

Step 3: Capital Injection and NRB Compliance

Foreign capital must be:

• Remitted through banking channels

• Reported to Nepal Rastra Bank

• Recorded in FDI compliance filings

Improper remittance is a common audit red flag.

Step 4: Tax and Local Registration

Mandatory registrations include:

• Permanent Account Number (PAN)

• VAT (if applicable)

• Local ward and municipality registration

Tax compliance begins immediately after incorporation.

Step 5: Employment and Operational Compliance

Before hiring:

• Draft labour-law-compliant contracts

• Register with Social Security Fund

• Establish payroll and tax withholding systems

Ongoing Legal Compliance for Foreign-Owned Companies

Foreign company registration in Nepal is not a one-time event.

You must maintain:

• Annual financial audits

• Annual company filings

• FDI reporting to DOI and NRB

• Tax filings and advance tax payments

• Labour inspections and compliance

Non-compliance can result in fines, blacklisting, or repatriation delays.

Common Legal Mistakes Foreign Companies Make

Avoid these high-risk errors:

• Choosing a liaison office when revenue is intended

• Injecting capital without NRB reporting

• Using foreign employment contracts

• Ignoring SSF obligations

• Delaying statutory audits

These mistakes often surface during tax or labour inspections.

Why Many Foreign Companies Start with EOR in Nepal

An Employer of Record model allows foreign companies to:

• Hire legally without entity setup

• Avoid capital injection requirements

• Stay compliant with labour and tax laws

• Test the market before committing

For service-based businesses, this is often the lowest-risk legal entry.

EEAT: Why This Guide Is Trustworthy

This article is based on:

• Nepal’s primary investment and company legislation

• Current DOI and NRB procedural guidelines

• Practical experience advising foreign investors

• Cross-border structuring best practices

It reflects how the system actually works, not just theory.

Frequently Asked Questions (People Also Ask)

1. Can a foreigner own 100% of a company in Nepal?

Yes. Most permitted sectors allow 100% foreign ownership under FITTA, subject to approval.

2. How long does foreign company registration in Nepal take?

Typically 4 to 8 weeks, depending on approvals and capital remittance timelines.

3. Is a local partner required in Nepal?

No. A local partner is not mandatory for most foreign-owned companies.

4. What is the minimum investment for FDI in Nepal?

The standard minimum is NPR 20 million, subject to sector-specific rules.

5. Can profits be repatriated outside Nepal?

Yes. Profit repatriation is allowed after taxes and NRB approvals.

Conclusion

Foreign company registration in Nepal offers real opportunity, but only when done legally and strategically. Understanding the legal requirements for foreign-owned companies in Nepal is essential to avoid delays, penalties, and operational risk.

The right structure, approvals, and compliance framework can save months and millions.

Call to Action

If you are planning foreign company registration in Nepal, book a structured consultation with experts who handle approvals, compliance, and long-term risk management end-to-end.