Private Limited Company Registration for NRNs in Nepal

Non-Resident Nepali (NRN) entrepreneurs often find Private Limited Company registration in Nepal daunting. The process involves multiple government agencies and laws – from the Companies Act (2006) and FITTA (2019) to labor and tax regulation, making it easy to overlook critical steps. In this guide, we break down the entire process for NRNs: you’ll learn the step-by-step incorporation procedure, required approvals (OCR, DOI, NRB, IRD), documentation, and ongoing compliance. By the end, you’ll understand Nepal’s company law framework and how to avoid common pitfalls. Let’s simplify company formation and compliance so you can focus on growing your business (with DCV as your trusted partner).

Overview: Private Limited Companies and NRNs in Nepal

A private limited company is a popular business entity in Nepal. It is a separate legal entity with limited liability, requiring at least one shareholder (up to 101 for a private company). NRNs, Nepali citizens living abroad, are treated as foreign investors under the Foreign Investment and Technology Transfer Act (FITTA) 2019. This means NRNs can hold up to 100% ownership in most sectors (subject to Nepal’s negative list). Key benefits of a private limited company include limited liability protection, credibility with banks and partners, and the ability to scale or bring in additional investors easily.

Primary benefits include:

• Limited Liability: Shareholders’ personal assets are protected (only company assets are at risk).

• Full FDI Allowed: NRNs can invest 100% in most industries (aside from a few restricted sectors on Nepal’s FDI negative list).

• Tax Efficiency: Private companies enjoy Nepal’s standard 25% corporate tax rate (general rate), and VAT at 13%. 

• Structured Growth: Formal audit and reporting requirements enforce good governance (e.g., annual financial statements and audits must be filed with the OCR).

• Single-Window Facilitation: Nepal offers a “One-Stop Service” for NRNs – DOI handles investment approvals and can coordinate OCR, NRB, and IRD interactions.

NRNs should note that while most sectors allow full foreign ownership, areas like mass media, retail, banking, and personal services are restricted by law (often capped at 51% foreign ownership or disallowed). Familiarize yourself with the negative list early. Overall, a private limited company offers NRNs a clear, reliable framework to invest in Nepal with full legal recognition under the Companies Act (2063 BS/2006).

Legal and Regulatory Framework

Nepal’s company formation and investment environment is governed by several key laws and authorities. Be aware of each as you proceed:

• Companies Act, 2006 (2063 BS) – The cornerstone of company law. It defines the legal form of companies, registration requirements, capital rules, director duties, and mandatory filings. All private limited companies must comply with this Act (and its rules). For example, you need a registered office, at least one director, and a prescribed minimum capital (usually NPR 100,000 for a Pvt. Ltd).

• Foreign Investment and Technology Transfer Act, 2019 (FITTA) – Governs foreign investment in Nepal. Under FITTA 2075 (2019), NRNs are explicitly defined as “foreign investors”, entitled to the same rights as international investors. FITTA allows 100% foreign/NRN investment in most industries, subject to the Negative List (some sectors cap or prohibit FDI). The Act also provides for automatic approvals in many cases and outlines the functions of Nepal’s Foreign Investment Board and Department.

• Department of Industry (DOI) – Under FITTA, the DOI (within the Ministry of Industry, Commerce & Supplies) is the single agency for FDI approval. All foreign investments (including those by NRNs) require DOI registration. DOI reviews your project, and once approved, it issues a foreign investment approval certificate. DOI also helps coordinate other approvals (like industry licenses) for new projects.

• Industrial Enterprises Act, 2020 (2076 BS) – Applies to the establishment and operation of factories and large industries. If your business involves manufacturing or processing (especially in factories), you may need additional licensing under this Act from the DOI or a one-window center.

• Nepal Rastra Bank (NRB) Directives – NRB regulates foreign currency flows. Under the Foreign Investment and Foreign Loan Bylaw (2021), after OCR/DOI approval, you must apply to NRB’s One-Stop Center for a certificate of recording foreign investment. NRB will review your compliance and issue a recording certificate within 7 working days. This certificate is required to open the company’s bank account and bring in foreign capital legally.

• Inland Revenue Department (IRD) Laws – After incorporation, register for taxes with IRD. Key laws include the Income Tax Act, 2002, and the VAT Act, 1996. The standard corporate income tax is 25% for most companies. Special higher rates (30%) apply to banks and insurance. VAT is charged at a flat 13% on goods and services.

• Labor Act, 2017 (2074 BS) – Governs employment standards. Companies must comply with the Labor Act (2017), Bonus Act (1974), and Social Security Act (2018) for wages, working hours, employee benefits, and contributions. For example, working hours are capped at 8 per day (48 per week). Employers must contribute 8.33% of salary to a gratuity fund and enroll in the Social Security Fund (SSF) for health, pension, and other benefits (20% employer + 11% employee contributions).

• Immigration Rules – NRNs hold the special NRN card, which grants multiple-entry visa privileges. Foreign investors (non-NRNs) can get business visas for their authorized investment (FITTA grants a visa valid for the duration of the investment). Those investing over USD 1 million qualify for a residential visa (for the investor and immediate family). For key foreign staff, a Nepalese company must sponsor employment visas/work permits.

All laws interlock: e.g., the DOI (Industry) enforces the FITTA and the Industrial Act; the OCR (Company Registrar) enforces the Companies Act; the IRD enforces tax laws; the Department of Labor enforces the Labor Act. Understanding each authority’s role (OCR, DOI, NRB, IRD, DOE) is crucial for a smooth setup.

Step-by-Step Registration Process

1. Name Reservation (OCR): Go online to the OCR’s CAMIS portal and reserve a unique company name. Ensure it meets naming rules (no offensive or identical names).

2. Prepare Documents: Draft the Memorandum of Association (MoA) and Articles of Association (AoA), complete registration forms, and gather shareholder IDs. NRNs or foreign shareholders must provide passport copies and visa documents. If there are both Nepali and foreign shareholders, prepare citizenship certificates for locals and passports for foreigners. If foreign investment is involved, include evidence of funds or financial sources.

3. Bank Deposit (if required): For foreign investment, it’s common to open a temporary escrow account and deposit the committed foreign capital (subject to NRB guidelines). Obtain a bank certificate of deposit as proof of capital.

4. Company Registration Application: Submit all documents and fees through the CAMIS portal or at an OCR branch. This includes the MoA/AoA, name reservation slip, notarized documents, shareholder signatures/thumbprints, and prescribed fees. Fees vary by authorized capital (e.g., starting ~NPR 10,000 and rising for higher capital). 

5. OCR Review & Approval: OCR will verify documents within a few days. If all is in order, the OCR issues the Certificate of Incorporation under the Companies Act, officially creating the company. 

6. Department of Industry (DOI) Approval (for FDI): If any shareholders are NRNs (i.e., foreign investors), apply to the DOI for a Foreign Investment Registration. Submit project details, partnership agreements, and financials as required. DOI will evaluate compliance with FITTA. Once approved, DOI issues an industry registration or FDI approval letter.

7. Record Foreign Investment with NRB: After DOI clearance, apply to the NRB One-Stop Service Center to record the foreign currency investment. Submit the DOI approval, the company incorporation certificate, and bank deposit evidence. NRB must record the investment and will issue a Certificate of Recording (usually within 7 working days). This is required before repatriating profits or dividends abroad.

8. Tax Registration (IRD) and Local Permits: Register the company with the Inland Revenue Department. Obtain a Permanent Account Number (PAN) immediately, and register for VAT if annual turnover is expected to exceed NPR 5 million. Also ,register with the Social Security Fund (SSF) for employee benefits, and register with the local Ward Office.

9. Business Visa / Work Permits: NRN promoters should ensure they have valid NRN documents and visas. If non-NRN foreigners are involved, secure the needed Nepal business visas (via the Department of Immigration) using the DOI approval, and apply for work permits for any foreign staff.

10. Post-Registration Compliance: Once operational, comply with Nepalese laws: file audited financial statements and annual returns with OCR, hold required meetings, and file monthly/quarterly tax returns with IRD. Register for additional licenses if industry-specific (for example, export/import, health certificates, etc.). DCV’s comprehensive services can guide you through each of these steps.

Documents & Requirements

Key documents you will need include:

• OCR Forms: Official company registration forms (available online).

• MoA & AoA: Drafted by lawyers per Companies Act requirements.

• Name Reservation Slip: From OCR’s CAMIS portal.

• Identity Documents: Citizenship or NID copies for Nepali shareholders; valid passport copies for NRNs/foreigners. 

• Visa/NRN Cards: NRN identity card or foreigner visa, as applicable.

• Approval Letters: DOI foreign investment approval (if applicable).

• Bank Certificates: Proof of capital deposit if foreign funds are brought in.

• Other Permits: Depending on business (e.g., trade license, industrial permit), additional approvals from local or line agencies.

Highlights / Compliance Requirements:

• Minimum share capital for a private limited company is generally NPR 100,000. Higher authorized capital incurs higher fees (e.g., up to NPR 45,000 or more in OCR fees).

• Foreign (NRN) shareholders must meet any prescribed minimum investment (currently USD 0.5 million for most FDI) under FITTA; otherwise, the application may require extra review.

• One director must be a Nepali resident (though this is often relaxed for NRNs with NRN cards).

• All signatures on legal documents must be notarized or consularized if executed abroad.

• After incorporation, any change (like adding a foreign shareholder) must be updated with OCR and (if FDI) with DOI/NRB.

Fees, Timeline & Authorities

Authorities Involved:

• OCR (Office of Company Registrar): Handles name reservation and incorporation. Approval typically takes 1–5 working days if documents are complete.

• DOI (Department of Industry): Handles foreign investment registration (FITTA) and industrial licenses. If required, expect 1–4 weeks for approval, depending on project complexity.

• NRB (Nepal Rastra Bank): Must record foreign currency inflows. Certification is mandated to be issued within 7 working days of receiving a complete application.

• IRD (Inland Revenue): Registers tax accounts (PAN, VAT). PAN/VAT registration can be done online in a few days after incorporation.

• Local/Ward Office: For local business license notification.

Costs (Approximate Range):

• OCR Registration: NPR 10k–45k (based on authorized capital).

• DOI/FDI Fees: Varies by investment size (often a refundable deposit, e.g., ~NPR 20,000 for small projects). Consult the DOI’s current fee schedule.

• NRB Fees: Minimal processing fees at a commercial bank (often waived or nominal for recording investment).

• Government Stamp and Notary: Small fixed charges (hundreds of NPR per document).

• Lawyer/Consultant Fees: DCV provides all-inclusive packages; the typical range can be discussed during consultation.

Timeline: The entire registration can often be completed in 2–4 weeks for simple cases. OCR approval is fast (within a week), but waiting for DOI and NRB can extend it. Proper planning (e.g., simultaneous filing with DOI and NRB) can speed up the process. DCV helps align these steps to minimize delays.

Tax, Labor & Accounting Compliance

Once registered, a private limited company must meet Nepal’s ongoing compliance requirements:

• Income Tax: Companies pay a flat 25% corporate tax on profits. Special sectors like banks/insurance pay 30%. Annual filings and advance tax payments are required under the Income Tax Act, 2002.

• VAT/GST: At a 13% rate, VAT applies to most sales/services above the threshold. Monthly or quarterly VAT returns must be filed with IRD.

• Social Security Fund: Employers must register with the SSF and contribute monthly. The law sets a 20% contribution from employers and 11% from employees (31% total) of basic salary. Early registration is mandatory – failure can lead to penalties.

• Provident Fund: Deduct 10% of salary from employees and match with another 10% (as per the Labor Act). Deposit these funds into each employee’s provident fund account in the SSF.

• Gratuity (Bonus Act): Employers must allocate 8.33% of salary per month as “gratuity” for employees, to be disbursed at the end of service or through the SSF.

• Working Conditions: The Labor Act (2017) limits work to 8 hours/day (48/week), mandates breaks and paid leave (weekly, public holidays, sick leave, maternity leave, etc.). Compliance with labor provisions (e.g., written contracts, termination rules) is essential to avoid fines.

• Accounting & Audit: Maintain books in Nepali and produce annual financial statements in Nepali (audited by a Nepali Chartered Accountant). Even a small private company must hold an AGM and file annual returns/audited accounts with the OCR. Companies often outsource bookkeeping and auditing to avoid errors.

Practical tip: Create an organized compliance calendar. For example: corporate tax returns due by mid-July, VAT returns monthly/quarterly, SSF remitted by the 25th of each month, etc. DCV can handle these filings on your behalf to ensure timely compliance.

Common Mistakes & Tips

• Skipping DOI/NRB Steps: Many assume that once the OCR certificate is issued, the job is done. Don’t forget: any foreign/NRN equity requires DOI approval (under FITTA) and NRB registration. Missing these can invalidate your foreign capital and incur fines.

• Underestimating Documents: Prepare all paperwork carefully. Common omissions: proof of share transfers, power of attorney for signatories abroad, or DOI clearance letters. Use legal experts (like DCV) to pre-check docs.

• Ignoring the Negative List: Don’t assume your business is allowed. Review Nepal’s restricted industries list early. For instance, personal services or local retail may cap foreign shareholding at 51%. Even if your industry is allowed, DOI may ask questions if the business model overlaps a restricted sub-sector.

• Late Tax/SS Registration: Register for PAN/VAT immediately upon incorporation, and enroll employees in SSF within 3 months of hiring. Late registration incurs penalties and interest (e.g., 1.5%/month on late taxes).

• Wrong Capital Structure: Setting too low authorized capital can require costly amendments later. Estimate your funding needs (both equity and debt). Remember, paid-up capital must reflect real investment, especially if you plan NRB remittance.

• Neglecting Labor Rules: Treat employees according to law from day one. Even if the staff is small, comply with written agreements, social security, and leave rules to avoid labor disputes.

• Not Seeking Professional Help: The interplay of OCR, DOI, NRB, and IRD can be confusing. Companies that DIY often face delays from simple paperwork mistakes. Solution: Work with experts (like DCV) who manage end-to-end incorporation and compliance. Their “one-stop” services can greatly reduce errors and expedite approvals.

In short, plan ahead, double-check requirements for NRN investors, and keep thorough records. Proactively addressing these points will save time and cost in the long run.

FAQ

Q: Can NRNs register a private limited company in Nepal?
Yes. Non-Resident Nepalis (NRNs) are treated as “foreign investors” under Nepal’s laws. You can incorporate a private limited company just like any other investor. The procedure is the same, but NRNs also need to obtain DOI approval (FITTA) and an NRB foreign investment certificate if investing foreign currency.

Q: What are the steps to register a company in Nepal?
The basic steps are: (1) Reserve a unique company name online with the OCR portal; (2) Prepare the MoA, AoA, and documents; (3) Submit forms and fees to OCR; (4) Obtain the incorporation certificate; (5) Register for PAN/VAT with IRD; and (6) Comply with post-registration filings. NRN investors additionally secure DOI/NRB approvals and relevant visas.

Q: What approvals are needed for NRN investment?
Beyond OCR registration, NRN (foreign) investors must get DOI approval under FITTA and then apply to NRB to record the foreign currency inflow. DOI issues an FDI approval/industry license, and NRB issues a foreign investment certificate. These approvals ensure compliance with Nepal’s investment laws.

Q: What taxes do private companies pay in Nepal?
Nepal’s standard corporate income tax is 25% for most businesses. Certain sectors (banks, insurance, and petroleum) pay a higher rate (30%). There’s also a 13% VAT on taxable goods and services. Additionally, companies withhold taxes (e.g., TDS on payments) and contribute to employee taxes and social security.

Q: Do I need to register for VAT and SSF?
Yes. If your company’s annual sales exceed NPR 5 million (roughly USD 40,000), VAT registration with IRD is mandatory. Regardless of size, you must register with the Social Security Fund for any employees and make monthly contributions (20% employer, 11% employee). Failure to do so results in penalties and compliance issues.

Setting up a Nepalese private limited company as an NRN involves many moving parts, but with the right guidance, it can be straightforward. In summary: ensure your proposed business is not on the restricted list, follow the OCR incorporation steps, secure DOI and NRB clearances for any foreign investment, and stay on top of tax and labor compliance (25% corporate tax, 13% VAT, SSF contributions, labor rules,  etc). With every requirement addressed, you’ll benefit from Nepal’s open market and investor-friendly climate.

For NRN and foreign enterprises, Digital Consulting Ventures (DCV) is the proven partner for company registration. Our experienced team handles the entire process — from legal documentation to regulatory approvals, ensuring a smooth setup and compliance thereafter. Why DCV? We streamline approvals with OCR, DOI, NRB, and IRD, saving you time and avoiding errors. Our end-to-end support means your business launches faster and is fully compliant. Ready to start? Book a consultation with DCV today and turn your Nepal investment into reality.