Licenses and Permits Required to Start a Business in Nepal

If you plan to start a business in Nepal, understanding the country’s licensing and permit framework is critical. Nepal welcomes foreign investment, but it operates under a structured regulatory regime. Foreign companies must secure the right approvals before trading, hiring, or repatriating profits.

This guide explains every license and permit required to start a business in Nepal, when each applies, and how to obtain them efficiently. It is written specifically for foreign founders, multinational firms, and overseas investors seeking a compliant and scalable entry into Nepal.

Why Licensing Matters When You Start a Business in Nepal

Licenses and permits are not administrative formalities in Nepal. They define your legal right to operate.

Without the correct approvals, foreign companies face:

• Delayed bank account activation

• Inability to hire local staff

• Restrictions on capital repatriation

• Tax penalties and forced closure

Nepal’s regulators link licensing directly to foreign exchange control, tax registration, and labor compliance.

Core Authorities Regulating Business Licenses in Nepal

Foreign companies interact with several government bodies. Each plays a distinct role.

• Department of Industry (DOI)

• Office of Company Registrar (OCR)

• Nepal Rastra Bank (NRB)

• Inland Revenue Department (IRD)

• Department of Labour

Each license is connected. Missing one often blocks the next.

Types of Licenses Required to Start a Business in Nepal

Not all businesses require the same approvals. Licensing depends on ownership structure, sector, and scale of operation.

The Four Core License Categories

1. Company incorporation licenses

2. Foreign investment approvals

3. Tax and revenue registrations

4. Sector-specific operational permits

1. Company Registration License (Mandatory)

Every business must first exist as a legal entity.

Issuing Authority

• Office of Company Registrar

What This License Covers

• Legal incorporation under Nepal’s Companies Act

• Recognition as a juridical person

• Authority to enter contracts

Common Structures for Foreign Companies

• Private Limited Company (FDI subsidiary)

• Branch Office

• Liaison Office

Company registration alone does not authorize commercial operations for foreign firms. Additional permits are required.

2. Foreign Investment Approval (FDI License)

Foreign ownership triggers mandatory approval under Nepal’s investment laws.

Governing Law

• Foreign Investment and Technology Transfer Act (FITTA 2019)

Issuing Authority

• Department of Industry

When It Is Required

• Any foreign equity participation

• Technology transfer agreements

• Profit repatriation rights

Key Approval Outcomes

• Authorized shareholding structure

• Approved capital amount

• Eligibility for profit repatriation

Without this approval, banks will not recognize foreign capital.

3. Industry Registration Certificate

After FDI approval, the business must be classified by industry type.

Why It Matters

• Determines compliance obligations

• Defines applicable tax incentives

• Enables operational licenses

Industry Categories

• Service

• Manufacturing

• Tourism

• IT and outsourcing

This certificate is often requested by banks and landlords.

4. Tax Registration and PAN/VAT Licenses

No business may operate without tax registration.

Issuing Authority

• Inland Revenue Department

Required Registrations

• Permanent Account Number (PAN)

• Value Added Tax (VAT), if applicable

VAT Threshold

VAT is mandatory once turnover exceeds the statutory threshold or if operating in VAT-eligible sectors.

5. Nepal Rastra Bank (NRB) Approval

Foreign companies must comply with Nepal’s foreign exchange regime.

Issuing Authority

• Nepal Rastra Bank

Required For

• Inward remittance of capital

• Dividend and profit repatriation

• Royalty and service fee payments

NRB approval ensures funds can legally move in and out of Nepal.

6. Sector-Specific Licenses and Permits

Some industries require additional approvals.

Common Examples

• IT and software export registration

• Tourism and hospitality permits

• Manufacturing environmental clearance

• Financial and fintech licensing

Sectoral permits are issued by line ministries or regulators.

Licensing Requirements by Business Model (Comparison Table)

This comparison helps foreign firms choose the least restrictive structure.

Step-by-Step Licensing Process to Start a Business in Nepal

Foreign companies should follow this sequence.

Numbered Process Overview

1. Name reservation and incorporation

2. Foreign investment approval

3. Industry registration

4. Tax registration (PAN/VAT)

5. Bank account activation

6. NRB foreign exchange clearance

7. Sector-specific licensing

Skipping steps often leads to rejection.

Common Licensing Mistakes Foreign Companies Make

• Applying for VAT too early

• Under-declaring capital commitments

• Selecting the wrong business structure

• Missing labor-related registrations

These errors delay operations by months.

Licensing Timelines in Nepal

Typical processing periods:

• Company registration: 3–7 working days

• FDI approval: 2–4 weeks

• NRB clearance: 1–2 weeks

Timelines depend on documentation quality.

Compliance Obligations After Licensing

Licenses require ongoing compliance.

Ongoing Obligations

• Annual company filings

• Tax returns and VAT filings

• Labor and Social Security registration

• Renewal of sector permits

Non-compliance risks suspension.

How Professional Advisors Reduce Licensing Risk

Foreign companies often appoint local advisors to:

• Prepare compliant documentation

• Liaise with regulators

• Structure FDI efficiently

• Ensure repatriation rights

This significantly reduces approval time.

Why Nepal Is Still Attractive Despite Licensing Complexity

Nepal offers:

• Competitive labor costs

• English-speaking workforce

• Strategic access to India and China

• Favorable long-term investment policies

Licensing is structured, not hostile.

Conclusion: Start a Business in Nepal the Right Way

To start a business in Nepal, foreign companies must treat licensing as a strategic foundation, not an afterthought. Correct permits unlock banking, hiring, tax compliance, and profit repatriation.

With the right structure and expert guidance, Nepal becomes a low-risk, high-potential market for foreign expansion.

Call to Action

Planning to start a business in Nepal?
Book a compliance consultation to receive a customized licensing roadmap, timelines, and cost breakdown for your sector.

Frequently Asked Questions

Do all foreign companies need FDI approval to start a business in Nepal?

Yes. Any foreign ownership or capital contribution requires approval under FITTA 2019.

Can a foreign company operate without NRB approval?

No. NRB approval is mandatory for capital inflow and profit repatriation.

How long does licensing take in Nepal?

Most foreign businesses complete licensing within four to six weeks.

Is VAT mandatory for all businesses?

No. VAT applies based on turnover and business sector.

Can licenses be transferred between entities?

No. Licenses are entity-specific and non-transferable.