Registering a BPO or Outsourcing Company in Nepal: A Foreign Founder’s Guide

Nepal has emerged as a promising destination for Business Process Outsourcing (BPO) and IT services, offering a cost-effective, English-speaking workforce and favorable government policies. For foreign entrepreneurs aiming to establish a BPO or outsourcing company in Nepal, understanding the legal framework and registration process is crucial. This guide provides a detailed roadmap to navigate the complexities of foreign company registration in Nepal's outsourcing sector.

Why Choose Nepal for BPO and Outsourcing?

• Skilled Workforce: Nepal boasts a young, educated, and tech-savvy population proficient in English, making it ideal for customer support, IT services, and back-office operations.

• Cost Efficiency: Operational costs, including labor and infrastructure, are significantly lower compared to neighboring countries, providing a competitive edge.

• Government Support: The Nepalese government encourages foreign investment in the IT and BPO sectors, offering incentives and streamlined registration processes.

• Strategic Location: Situated between India and China, Nepal provides access to two of the world's largest markets.

Legal Framework for Foreign Investment

Foreign investment in Nepal is governed by several key legislations:

• Foreign Investment and Technology Transfer Act (FITTA), 2019: Outlines the provisions for foreign investment and technology transfer.

• Companies Act, 2006: Details the procedures for company registration and operation.

• Industrial Enterprises Act, 2020: Defines industrial classifications and related provisions.

• Foreign Exchange Regulation Act, 1962: Regulates foreign exchange transactions.

Under these laws, foreign investors can establish a company with full ownership, provided the sector is not restricted and the investment meets the minimum capital requirement.

Permissibility and Sector Classification

The BPO and IT sectors are classified under the "Information Technology-based Industries" in Nepal's Industrial Enterprises Act. These sectors are open to 100% foreign investment, provided they are not listed in the negative list of industries prohibited for foreign investment.

Minimum Investment Requirement

As per the current regulations, foreign investors are required to invest a minimum of NPR 20 million (approximately USD 150,000) in Nepal. However, this threshold has been waived for investments in the Information Technology sector, encouraging more foreign participation in this field.

Step-by-Step Registration Process

1. Obtain Foreign Investment Approval

Foreign investors must secure approval from the relevant authority:

• Department of Industry (DoI): For investments below NPR 6 billion.

• Investment Board Nepal (IBN): For investments above NPR 6 billion.

Submit the following documents:

• Application form.

• Project proposal and feasibility study.

• Company incorporation documents.

• Audited financial statements (last 3 years).

• Board resolution authorizing investment.

• Power of Attorney.

2. Reserve Company Name

Apply to the Office of the Company Registrar (OCR) to reserve a unique company name. Ensure the name aligns with the company's objectives and complies with naming conventions.

3. Register the Company

Submit the following to the OCR:

• Application for registration.

• Memorandum and Articles of Association.

• Passport copies of directors and shareholders.

• Foreign investment approval letter.

• Proof of registered office address in Nepal.

Upon verification, the OCR will issue a Certificate of Incorporation.

4. Tax Registration

Register with the Inland Revenue Department (IRD) to obtain:

• Permanent Account Number (PAN): Mandatory for all businesses.

• Value Added Tax (VAT) Registration: Required if annual turnover exceeds NPR 2 million or for specific sectors.

5. Industry Registration

For BPO or IT businesses, register with the Department of Industry to obtain an Industry Registration Certificate.

6. Foreign Exchange Approval

Coordinate with Nepal Rastra Bank (NRB) for:

• Remittance of investment capital.

• Repatriation of profits.

• Compliance with foreign exchange regulations.

Compliance and Reporting Obligations

Post-registration, companies must adhere to the following:

• Annual Financial Statements: Prepare and submit audited financial statements.

• Tax Filings: File periodic tax returns and pay applicable taxes.

• Renewals: Renew business licenses and registrations as required.

• Labor Compliance: Adhere to labor laws, including minimum wage and employee benefits.

Advantages of Establishing a BPO in Nepal

• Full Control: Complete decision-making authority without local shareholder involvement.

• Profit Retention: Ability to retain and repatriate profits without sharing with local partners.

• Brand Integrity: Maintain global brand standards and practices without compromise.

• Ease of Management: Streamlined operations aligned with the parent company's policies.

Challenges to Consider

• Regulatory Compliance: Navigating Nepal's bureaucratic processes can be time-consuming.

• Cultural Differences: Understanding local business etiquette and practices is crucial.

• Infrastructure Limitations: Certain regions may lack adequate infrastructure.

• Currency Exchange Fluctuations: Managing foreign exchange risks is essential.

Frequently Asked Questions (FAQs)

Q1: Can a foreigner own 100% of a BPO company in Nepal?

Yes, foreign investors can own 100% of a company in the BPO sector, subject to compliance with FITTA and other relevant laws.

Q2: What is the minimum investment required for foreign investors?

The minimum investment threshold is NPR 20 million (~USD 150,000). However, this requirement is waived for Information Technology-based industries.

Q3: Are there any sectors restricted for foreign investment?

Yes, certain sectors like retail trading (excluding international franchises), personal services, and small-scale agriculture are restricted.

Q4: How long does the registration process take?

Typically, it takes 4 to 6 weeks, depending on documentation and regulatory approvals.

Q5: Can profits be repatriated?

Yes, after fulfilling tax obligations and obtaining necessary approvals from Nepal Rastra Bank.

Conclusion

Establishing a BPO or outsourcing company in Nepal offers numerous advantages, including cost savings, access to skilled labor, and a supportive regulatory environment. By understanding the legal requirements and following the outlined registration process, foreign investors can successfully tap into Nepal's burgeoning outsourcing industry.