Registering a Company in Nepal for IT and Software Businesses

Foreign entrepreneurs are increasingly eyeing Nepal as a hub for IT outsourcing, remote development centers, and SaaS support teams. The process of foreign company registration in Nepal for an IT or software business involves navigating Nepal’s legal framework, but recent reforms have made it more startup-friendly than ever. This comprehensive guide breaks down the legal and procedural steps to register a foreign-owned tech company in Nepal, aligned with the Companies Act 2063 and the Foreign Investment and Technology Transfer Act (FITTA) 2019. We also highlight tax incentives, government support for the IT sector, and practical tips for setting up an export-oriented operation – from obtaining a PAN/VAT to establishing a local bank account and even using virtual offices. Throughout the journey, we’ll show how Digital Consulting Ventures (DCV) can support foreign tech founders with compliance and growth in Nepal. The goal is a clear, non-technical roadmap for international founders, CTOs, and operations heads looking to tap into Nepal’s talent and favorable policies for IT companies.

Legal Framework: Companies Act 2063 and FITTA 2019

Registering a company in Nepal as a foreign entity means working within two key laws: the Companies Act, 2063 (2006 AD) and the Foreign Investment and Technology Transfer Act, 2019 (FITTA). The Companies Act 2063 is Nepal’s primary legislation governing company incorporation, outlining how any company (local or foreign-owned) is formed, structured, and managed. Under this Act, foreign investors can establish a Private Limited Company – the most common vehicle for IT and software businesses – with limited liability and a separate legal personality. The Act allows 100% foreign ownership in almost all sectors, including software and IT services. Unlike some neighboring countries, Nepal imposes no local shareholding requirements, meaning a foreign IT firm can own the company outright without a Nepali partner. The company is treated as a Nepali entity (often termed national treatment), enjoying the same rights and responsibilities as locally owned businesses.

FITTA 2019 complements the Companies Act by specifically regulating foreign investment. It ensures that foreign companies invest in permitted sectors and comply with approval processes. Under FITTA, IT and software development are permitted sectors (in fact, they are prioritized industries under Nepal’s development plans). FITTA 2019 introduced an easier approval regime: an “automatic route” for FDI where investments up to a certain amount can be approved quickly without heavy scrutiny. Notably, as of recent reforms, there is no minimum investment threshold for IT and technology-based industries. Previous rules required a minimum of NPR 20 million (around USD 150,000) for any foreign investment, but the government removed the minimum capital requirement for IT companies in 2023 to encourage startups. This means even a small software startup can enter Nepal with modest capital. FITTA also outlines a “negative list” of industries where foreign investment is restricted – but IT services and software development are on the positive list, fully open to 100% foreign investment.

In practice, aligning with these laws means a foreign IT business must obtain approval under FITTA and then register the company under the Companies Act. FITTA 2019 requires foreign investors to get consent from the government (through the Department of Industry or relevant authority) before incorporating the company. Once approval is granted, the incorporation at the Office of the Company Registrar proceeds similarly to a local company, with additional documentation to reflect foreign shareholders. Both laws work together to ensure foreign-owned companies are properly vetted (for sector and capital) and then legally established. The outcome is a Nepali Private Limited Company that can freely conduct IT and software business, export services, hire employees, and repatriate profits as allowed.

Companies Act 2063 highlights: Allows incorporation of Private Limited Companies (1 to 101 shareholders) with limited liability. Requires a unique company name, a local registered office address in Nepal, and constitutional documents (Memorandum and Articles of Association). Foreign directors are permitted, and there’s no requirement to have a Nepali citizen on the board by law (though having a local representative for practical purposes is wise). The company can commence business upon incorporation as a private limited, and must comply with ongoing requirements like annual general meetings and filings.

FITTA 2019 highlights: Governs how foreign investment enters Nepal. It sets the approval process, investment conditions, and ensures that foreign investors get protections such as the right to repatriate funds. FITTA explicitly guarantees that foreign investors can repatriate profits and dividends in foreign currency after paying taxes, and that they can remit their investment and any capital gains out of Nepal freely. This legal assurance is crucial for IT service exporters who will earn in foreign currency – you can convert and send your earnings back home as needed. FITTA also sets timelines for bringing in committed investment amounts (e.g. generally 70% of pledged capital before starting operations, and the rest within two years), though flexibility exists for IT startups with the removal of minimum capital. Additionally, if the foreign investor is a company (say an overseas parent corporation investing in Nepal), FITTA outlines that technology transfer agreements or royalty arrangements should be reported, aligning with Nepal’s push to bring know-how into the country.

In summary, the legal framework is welcoming and clear: foreign IT companies are allowed, protected, and encouraged in Nepal. By following the Companies Act for incorporation and FITTA for investment approval, you ensure your Nepal entity is fully compliant from day one. Next, we explore the options for structuring your presence and the detailed steps of registration.

Business Structure Options: Subsidiary vs. Branch Office

Foreign IT and software companies looking to set up in Nepal have two main options for their business structure: register a new local subsidiary company or establish a branch office of the foreign company. It’s important to choose the route that aligns with your business goals, as the registration process and compliance differ slightly for each.

1. Wholly Foreign-Owned Subsidiary (Private Limited Company): This is the most common choice for tech businesses. It involves creating a new Nepali company, typically a Private Limited Company, in which the foreign investor (individual or company) holds up to 100% of the shares. The subsidiary is an independent legal entity, even if fully owned by the foreign parent. For example, if ABC Software Inc. (USA) sets up “ABC Software Nepal Pvt. Ltd.”, that Nepali company is distinct but under the foreign ownership of ABC Inc. The subsidiary route is straightforward under the Companies Act 2063 – you will draft a Memorandum and Articles of Association, specifying the company’s objectives (e.g. software development, IT consulting, export of IT services) and list the foreign shareholders. A minimum of one shareholder and one director is required (they can be the same person), and these can be foreign nationals. No Nepali partner is required by law. Choosing a subsidiary allows you to enjoy local benefits and incentives as a Nepali company (e.g. tax exemptions for IT exporters) while maintaining foreign control. It also limits liability to the company’s assets, protecting the foreign parent beyond its invested capital. Most foreign IT outsourcing companies opt for the subsidiary model due to these advantages and simpler long-term operation.

2. Branch Office of a Foreign Company: Nepal’s law permits a foreign company to register a branch office in Nepal, which is essentially an extension of the foreign legal entity. A branch can undertake activities in Nepal that the parent company is authorized to do in its home country. For instance, if your parent company’s memorandum says it provides IT consulting, the branch in Nepal can only provide IT consulting. Branch registration is governed by Section 154 of the Companies Act and requires special approval. In the case of an IT company, the foreign business must get approval from the Ministry of Communication and Information Technology (since this ministry oversees the IT sector) to establish the branch. Unlike a subsidiary, a branch is not a separate legal person – the foreign company is directly responsible for the branch’s liabilities. Branch offices also typically must appoint a local authorized representative to interface with Nepali authorities. One benefit of a branch is that no separate minimum capital requirement applies – the branch can bring in funds as needed for operations. However, branches may face higher taxation on remitted profits (branches are usually taxed similarly to companies but any repatriated profit might be subject to a remittance tax). Compliance for a branch includes submitting annual reports of the parent company and any local accounts to regulators. Branch offices are less common for small to mid-sized IT firms; they are more often used by large multinational tech companies who want a presence without incorporating a new entity.

Which to choose? For most foreign startups and midsize IT service providers, setting up a fully foreign-owned subsidiary (Nepal Pvt. Ltd.) is recommended. It provides easier access to local incentives, simpler banking and hiring (since the company is local), and clear separation of the Nepal unit’s finances. A branch can be useful if you intend only a temporary project or if corporate policy dictates not creating new entities, but it involves navigating ministry approvals and tying the operations closely to the parent’s oversight. Digital Consulting Ventures (DCV) typically advises tech clients on the optimal route – often the subsidiary – and assists in the required filings for either option. In the rest of this guide, we will focus mostly on the process for incorporating a new company (subsidiary), while noting branch specifics where relevant.

Step-by-Step Registration Process for a Foreign IT Company in Nepal

Setting up an IT or software company as a foreign entity in Nepal involves several sequential steps. Below is a detailed walkthrough of the process, from planning and approvals to post-incorporation setup. By following these steps – and with local support from firms like DCV – foreign founders can ensure a smooth and compliant registration.

Step 1: Preliminary Planning and Name Reservation

Before diving into paperwork, do some groundwork:

• Business Plan & Structure: Clarify your business activities (software development, BPO, IT consulting, etc.) and ensure they fall under permitted categories. IT services are fully allowed for foreign investment, as confirmed by FITTA’s positive list, so you’re on safe ground. Decide on your company structure (likely a Private Limited subsidiary) and identify who will be the shareholders and directors. For a software startup, you might be the sole owner, whereas an outsourcing firm might have a couple of foreign co-founders as shareholders.

• Company Name Reservation: Nepal requires that your company name be unique and not too similar to existing company names. Come up with a desired name (often ending with “Pvt. Ltd.” for a private company). You can reserve the name through the Office of the Company Registrar (OCR) – Nepal has an online portal where you can search and apply for name reservation. The process is quick (usually a couple of days) and ensures you have exclusivity on the chosen name. For example, if you plan to name the company “TechSolutions Nepal Pvt. Ltd.”, you’ll submit an application to OCR to reserve that name. It’s wise to have a few alternatives in case your first choice is taken or doesn’t meet naming guidelines (avoid offensive terms, and names must typically be in English or Nepali).

• Local Registered Address: Every company in Nepal must have a registered office address within Nepal. At this pre-registration stage, decide what address you will use. If you’re new to Nepal and not ready to lease a full office, you can use a virtual office or co-working space address as your registered office. Many foreign companies initially go this route to keep costs low – DCV, for instance, can provide assistance in arranging a virtual office address in Kathmandu for official registration purposes. The address will be used in all documentation and government records, so it should be a real, reachable location (for receiving official correspondence).

• Document Preparation: Start gathering the necessary documents. For individual foreign investors, this means valid passport copies and personal details. For corporate investors (if your foreign company is investing in the Nepali subsidiary), you’ll need notarized/certified copies of that company’s Certificate of Incorporation, Memorandum and Articles, and a Board Resolution authorizing the Nepal investment. You’ll also need a basic project proposal or business plan outlining what your IT company will do in Nepal, how much you plan to invest, and projected operations – this will be needed for the foreign investment approval in the next step. Additionally, prepare a Financial Credibility Certificate (FCC), which is usually a letter from your bank stating that you (or your company) have a sound financial standing or have X amount of funds available for investment. This assures Nepali authorities that the foreign investor has the means to bring in the proposed capital.

With these preliminaries in place (name reserved, address, documents in hand), you are ready to move to the formal approval stage.

Step 2: Foreign Investment Approval under FITTA

The crucial first formal step for any foreign-owned business in Nepal is obtaining approval from the government to invest. This is mandated by FITTA 2019. For IT and software companies, the approving authority is typically the Department of Industry (DOI) under the Ministry of Industry, Commerce, and Supplies. (Large investments above a certain high threshold might go to the Investment Board Nepal, but most IT startups fall under DOI’s jurisdiction).

Apply for Investment Approval: You will submit an application for foreign investment approval to the DOI. This application includes details of the foreign investor(s), the proposed company, and the investment plan. Key documents and requirements at this stage include:

• Application Form: A prescribed form available from DOI (often can be downloaded or filed online) where you fill in investor names, intended business activities, proposed capital investment, etc.

• Name Reservation Certificate: Attach the proof of name reservation from OCR for the proposed company name.

• Project Report/Business Plan: A brief description of the software/IT services you will provide, target markets (since you intend to export services), projected employment, and financial projections. Highlight how this investment benefits Nepal (e.g., creating IT jobs, bringing in foreign revenue).

• Investor Documents: If the investor is an individual, include a copy of the passport. If a company, include incorporation certificate, memorandum/articles, and a Board Resolution from that company authorizing the Nepal investment. The Board Resolution should state that the company intends to establish a subsidiary in Nepal, and designate a person to act on its behalf for the process.

• Financial Credibility Certificate: A letter from a bank or financial institution confirming that the investor has at least the amount of capital they intend to invest, available in their account or as credit. For example, if you plan to invest USD 50,000, your bank letter should confirm you have that capability. Since Nepal no longer imposes a minimum investment requirement for IT sector projects, you could even invest less than the old thresholds. Nonetheless, having a credible amount in the FCC (commensurate with your project needs) helps the approval.

• Power of Attorney: If you have a local consultant or a representative (like DCV or a lawyer) handling the application, include a signed power of attorney authorizing them to liaise with DOI on your behalf.

• Identification of Authorized Representative: DOI may require you to name a local contact person or representative for correspondence. This could be a hired consultant or a future director of the company who is on the ground in Nepal.

Once your application is submitted, DOI will review it. IT and software investments are generally looked upon favorably, as Nepal is trying to boost its IT sector. The good news under the Automatic Route is that standard cases are processed quickly – often within 7 to 10 days for approval Under this route (available for investments up to NPR 500 million), much of the bureaucracy is bypassed if all documents are in order. You might even be able to apply through an online system and receive an electronic approval letter.

Approval and Investment License: If everything is in order, the Department of Industry will issue you a Foreign Investment Approval Letter (sometimes called an Industry Registration Certificate or an Investment License). This official letter consents to your proposed investment and usually specifies conditions like the industry code, the approved capital (in NPR and equivalent foreign currency), and a timeframe within which you should bring the investment. For example, it might say you’re approved to invest NPR 10 million in an IT service company. Keep this document safe – it will be needed for company registration and later when you bring in funds.

Practical Tip: In this stage, any missing or incorrectly prepared document can cause delays. Common mistakes to avoid are incomplete documentation or inconsistencies (e.g., your name spelled differently in different papers) which can lead to queries and lost time. Having a local expert double-check everything is wise. DCV routinely helps clients prepare a flawless application packet, ensuring that all translations (if any documents are not in English/Nepali) and notarizations are done as required. This can save significant time and hassle in obtaining approval.

Step 3: Company Incorporation at the Office of the Company Registrar (OCR)

With the foreign investment approval in hand, you can proceed to formally incorporate the company under the Companies Act 2063. This takes place at the Office of the Company Registrar in Kathmandu (which handles nationwide company registration). Essentially, this step turns your approved project into a legal Nepali company.

Key steps and requirements for OCR registration include:

• Drafting Constitutive Documents: Prepare the Memorandum of Association (MOA) and Articles of Association (AOA) for your new company. These are the charter documents that outline the company's name, registered office, objectives, share capital, shareholders, and rules of governance. For an IT company, the objectives clause in the MOA should clearly state the scope of IT/software activities. Often general wording like “to carry out software development, IT consulting, export of software services, and related IT enabled services” is used to keep it broad. The MOA will also list the initial subscribed capital and shareholders. For example, MOA may state the company has authorized capital of NPR X (say NPR 10 million) and is starting with issued capital of NPR Y (e.g., NPR 5 million) divided into shares, and that Investor A (foreign person or company) will hold 100% of those shares. The AOA outlines how the company will be governed – e.g., how directors are appointed, meetings conducted, etc. Standard templates exist, and lawyers or consultants can help tailor them to your needs while ensuring compliance with Nepali law.

• Filling Out Forms: OCR provides forms for registration (such as Form A for company registration application). You'll fill in details like the company name, address, directors’ names, shareholders’ details, and the company’s authorized and paid-up capital. List the directors (at least one; can be foreigners) and the intended signatory who will handle documents. You will also declare the registered office address (which you arranged in Step 1).

• Submit Required Documents: Along with the application form and MOA/AOA, you'll need to submit:

  • Foreign Investment Approval Letter (obtained in Step 2) – this proves you have government consent to register the company.

  • Notarized Passport Copies of foreign shareholders and directors. These should be attested by a notary or Nepali embassy if required. If any shareholder is a foreign company, include that company's registration certificate and board resolution (notarized) as provided earlier.

  • Photographs: passport-size photos of the directors/shareholders may be required for the file (check current OCR requirements).

  • Signature Specimen of Authorized Person: Usually the person filing (could be you or a representative) will give a specimen signature.

  • Payment of Registration Fees: Pay the applicable registration fee to OCR. The fee in Nepal is scaled based on authorized capital – but note that recently the government removed company registration fees for FDI-based companies as an incentive. This waiver, if applicable, means you might not have to pay the standard fee (which otherwise could be a few hundred dollars for a multi-million rupee capital). Check the current policy; as of 2024, upfront fees have been reduced or waived to encourage foreign investors.

• Company Registration Certificate: Once the OCR is satisfied with your documents, they will issue a Certificate of Incorporation for your company, along with a unique company registration number. The turnaround time for this is typically about 7 to 10 days after submission, assuming no queries. The certificate is a critical document – it formally marks the birth of “YourCompany Nepal Pvt. Ltd.” in the legal sense. Additionally, OCR will provide a copy of the MOA/AOA stamped as registered, and you will have the company’s Permanent Account Number (PAN) assigned (in some cases you apply for PAN separately, but often the process is linked). The PAN is essentially the tax ID for the company.

At this stage, you have a registered Nepali company. However, you cannot start business operations fully yet – there are post-incorporation steps to make the company "business-ready", especially since this is an exporting company.

Note: If you were establishing a branch office instead of a subsidiary, the procedure differs here. After FITTA approval (which for a branch would come from the line ministry, e.g., Ministry of Communication & IT), the branch must be registered with OCR by filing the parent company’s documents (Charter, resolution to open branch, etc.) and the approval letter. OCR will then register the foreign company’s branch and issue a registration certificate for the branch. No MOA/AOA is needed because the branch isn’t a separate company; instead, you file the Memorandum of Undertaking from the parent company. Branch registration also typically requires naming a local representative who is authorized to act on behalf of the branch. The timeline is similar (a week or two). For the purposes of this guide, we will proceed with the steps assuming the subsidiary route, as it’s more common for IT ventures.

Step 4: Post-Incorporation Tasks – Tax Registration, Capital Injection, and Bank Accounts

With your company now legally registered, there are several crucial tasks to operationalize it, especially geared towards being an export-oriented IT business:

• PAN Registration with Inland Revenue Department (IRD): If not already obtained at incorporation, immediately register your company with the Tax Authority to get a Permanent Account Number (PAN). This is done at the Inland Revenue Office for your company’s location. PAN registration is mandatory for all companies to conduct financial transactions, issue invoices, or hire employees. The process is quick (a few days) and requires your OCR incorporation certificate, copies of MOA/AOA, your company stamp, and an application form. Once you have a PAN, your company is on record with the tax system.

• VAT Registration: Value Added Tax (VAT) is applicable in Nepal at a flat 13% rate on goods and services sold domestically. However, services exported out of Nepal (i.e., services provided to foreign clients where payment is received in foreign currency) are generally zero-rated or exempt. This means your software development or IT support services for overseas clients wouldn’t incur VAT on the sales. You may still want to register for VAT if you will also have local sales or just to be able to claim input VAT refunds (for any local purchases). VAT registration is compulsory if your annual turnover exceeds a threshold (currently NPR 5 million for services) or if you plan to claim any VAT back. The process can be done together with PAN at the tax office by filling a VAT form and might require a simple VAT orientation briefing. Once registered, you’ll get a VAT certificate and need to file VAT returns (either monthly or quarterly depending on volume, even if just to report zero sales for exports).

• Open a Corporate Bank Account: Choose a reputable commercial bank in Nepal and open a company bank account in the company’s name. Many banks in Kathmandu are experienced with handling foreign company accounts and FDI transactions (for instance, Nabil Bank, Standard Chartered Nepal, Himalayan Bank, etc.). You will need your company incorporation certificate, PAN, copy of MOA/AOA, board resolution (if required) authorizing opening of the account, and KYC documents for the account signatories (passports, photos, etc.). Banks may also ask for the DOI approval letter to understand that foreign investment is involved. Opening the account typically takes a few days.

• Inject the Foreign Capital: With the bank account ready, the foreign shareholder should remit the investment funds from abroad into this account. Nepal Rastra Bank (the central bank) monitors foreign currency inflows, so it's important the purpose is clear – usually the remittance is tagged as share capital investment for the new company, referencing the DOI approval. The funds must come in via bank transfer in foreign currency (common currencies like USD, EUR are fine). Once the money arrives, the bank will provide a Foreign Inward Remittance Certificate. You should inform the Department of Industry (and/or the central bank) about the capital receipt to officially record that you have brought in the approved investment. According to FITTA regulations, a portion of the pledged capital should be brought in within the first year (e.g., 70% before starting operations as per rule), but since IT companies now have flexibility on the amount, ensure you bring in what you realistically need for the initial operations. If you had pledged a large amount but plan to bring it in stages, Nepal’s rules allow phased injection – for instance, 25% of a smaller project’s capital within a year.

• Share Allotment and Company Update: Once the capital is in the bank, you can formally issue shares to the foreign investor equivalent to the money. This will be reflected in your company’s share register. You may need to file a return at OCR indicating that the shares have been allotted and paid for (this is part of post-incorporation compliance). Engage an accountant or service provider to update the share certificates and accounting books to show the paid-up capital in the company.

• Industry Specific Licenses or Registration: In general, a software or IT services company does not require any special industry license to operate in Nepal. The DOI approval and company registration suffice as permission. However, if your business has specific components – e.g., running an IT training institute or an ISP (Internet Service Provider) – then you might need additional licenses (like an ISP license from the Nepal Telecommunications Authority). For pure software development, IT consultancy, outsourcing, etc., no extra operating license is needed, which simplifies things. One thing to consider is registering your business with the relevant industry association for networking – for instance, the Nepalese Association of Software and IT Services Companies (NASIT) or similar bodies, although this is optional.

• Municipal Registration: Some local municipalities in Nepal require businesses operating in their area to register and/or obtain a local trade license (also called an “operating license” or signboard tax). In Kathmandu, for example, after setting up an office, companies often register with the city ward office and pay a nominal fee for a certificate that allows them to place their office signboard. This is usually done after you have a physical office space and is part of local compliance.

By the end of Step 4, your company is capitalized, recognized by tax authorities, and banked – essentially ready to transact. You can now legally invoice clients (your invoices will carry your PAN/VAT), receive payments in Nepal, pay local employees, and so on. The foundations are set.

Step 5: Setting Up Operations – Office, Staffing, and Infrastructure

With all legalities sorted, the focus shifts to operational readiness. As a foreign IT or software business aiming to export services, you’ll need to establish a working base in Nepal that meets both business needs and compliance standards.

• Physical or Virtual Office: Decide on your office setup in Nepal. Many new IT companies start with a modest space – for example, renting a coworking desk or a small office in Kathmandu, Lalitpur, or a city like Pokhara. These cities have good internet connectivity and a pool of IT professionals. You might also consider leveraging a virtual office for mail handling and a physical address while your team works remotely or from home initially. Virtual offices can provide services like reception, mail forwarding, and meeting room access. Just ensure your registered address (from Step 1) is updated if you change it later. Nepal’s regulations allow companies to have their registered office at a different location than their main operations, as long as you update the Company Registrar about any changes. Setting up a basic office with internet, power backup (important in Nepal due to occasional power cuts), and necessary furniture is usually straightforward and cost-effective. Many offices come furnished in business centers if you choose that route.

• Hiring Employees: Nepal offers a skilled, English-speaking workforce of IT graduates and professionals at very competitive salary levels. Begin recruiting the talent you need – software developers, designers, support engineers, etc. You can advertise on local job portals or work with recruitment agencies. Note that under Nepali law, you should provide employees with a written employment contract, setting out terms of employment, salary, benefits, and notice period. Labor Law Compliance: Nepal’s Labor Act, 2017 applies to your company once you hire staff. Key points include a standard workweek (48 hours), overtime pay requirements, minimum wage (which is periodically revised, ensure you pay at least the minimum – IT workers typically earn well above this), and provisions for leave (annual leave, sick leave, etc.). You will also need to contribute to the Social Security Fund (SSF) on behalf of each employee. The SSF is a government-managed fund where employers and employees contribute a portion of salary (currently total around 31% of basic salary, split between employer and employee) to cover benefits like pensions, medical insurance, and unemployment. Register your company with the Social Security Fund and enroll all local staff. This registration is now mandatory and typically should be done within a few months of hiring your first employee (it takes 2-5 days to complete).

• Foreign Employees: If you plan to bring in any expat staff (for example, a technical lead or a manager from your home country), they will need work authorization. Nepal requires that you demonstrate no local could fill that role or that the foreign employee brings special skills. Practically, IT companies do hire foreign experts occasionally, but the bulk of staff will likely be Nepali. For any foreigner, you’d apply for a work permit from the Department of Labor and a non-tourist visa or business visa through the Department of Immigration. One advantage of being an investor is that foreign investors (shareholders/directors) in a company can get a Business Visa extended for up to a year at a time, which is convenient for company owners to stay in Nepal and oversee operations. DCV can assist in navigating the visa process, ensuring all paperwork (police reports, medical, etc.) is handled.

• Technology Infrastructure: Set up reliable high-speed internet connections (Nepal has multiple ISP options and improving infrastructure, but having a backup ISP link is advisable for an IT company). Ensure you have necessary hardware – servers (if on-premise) or use cloud services (AWS, Azure have presence in nearby regions, and some local data centers exist if needed). If you deal with international clients, invest in good video conferencing setups, and power backup (UPS or generator) to ensure 24/7 uptime for critical operations. Nepal’s time zone (GMT+5:45) conveniently overlaps with many regions, which can be a selling point for outsourcing work.

• Banking and Financial Setup: Now that your bank account is open and capital is injected, you can also set up online banking to manage transactions. If you will be paying overseas expenses or receiving numerous overseas payments, talk to your bank about foreign currency account options or the process for outward remittances. Keep in mind that for each repatriation of profit or dividend, you will need to show tax clearance and perhaps a board resolution for the dividend. But paying for regular expenses (software licenses abroad, import of equipment, etc.) is allowed from your account with proper invoices – Nepal Rastra Bank has guidelines that your bank will have you follow.

• Accounting and Record-Keeping: Implement an accounting system to track your finances in Nepal. You can hire a local accountant or use accounting software (tailored for Nepal’s accounting standards and Nepali fiscal year). Ensure to maintain records of all expenses, revenues, and bank transactions. This will be vital for annual audits and tax filings. By law, companies in Nepal must get their financial statements audited by a Nepali-certified auditor annually. Engaging an audit firm early to consult on best practices can help you stay compliant from the start. DCV and similar consulting firms often provide bookkeeping and payroll services or can recommend trusted accountants, so you don’t have to hire a full-time finance team immediately.

At this point, your foreign-owned IT company in Nepal is not just on paper – it’s a functioning entity. You have an office (even if a small one), the necessary registrations, a bank account with funds, and perhaps your first few employees or contractors writing code or handling support. Now let's look at the environment you’ll operate in – the taxes you’ll encounter and incentives you can enjoy – as well as ongoing compliance matters.

Taxation and Incentives for IT/Software Businesses in Nepal

Understanding the tax obligations and benefits is critical for planning a successful operation. Nepal’s tax regime for companies is relatively straightforward, and the government has introduced specific incentives to promote IT and export-oriented businesses.

Corporate Income Tax: The standard corporate tax rate in Nepal is 25% of net profits for most industries, including IT. This rate is competitive in the region and means that after deducting all your business expenses (staff salaries, rent, utilities, etc.), your company will pay 25% of the remaining profit in taxes annually. Tax returns are filed at the end of the Nepali fiscal year (mid-July). An advance tax system requires paying estimated tax in installments during the year (usually three installments). But new IT companies often have minimal profits in initial years, so tax burden is low at start.

Dividend Distribution Tax: When you as a shareholder take profits out of the company (declaring dividends), there’s a 5% tax on dividends. However, to encourage reinvestment in the tech sector, the government has offered a rebate on the 5% dividend tax if tech companies reinvest their profits into expansion. In other words, if you choose to plow back your profit into growing the Nepal operations (hiring more people, buying equipment), you could avoid the dividend tax. This incentivizes growth over profit taking, aligning with the startup culture of scaling up.

Value Added Tax (VAT): VAT is levied at 13% on goods and services sold in Nepal. However, exported services (services provided to clients outside Nepal for payment in convertible foreign currency) are generally zero-rated for VAT. Practically, this means if your software company is delivering a project for a client in the US and they pay in USD, you would not charge Nepali VAT on that invoice – and it isn’t counted as VATable revenue. You might still register for VAT to claim any VAT you paid on local purchases (like computers, office supplies) as a refund. Many IT companies register voluntarily because if you do have any local clients or local revenue streams, you want to be prepared. Additionally, being VAT-registered adds credibility when dealing with larger enterprises and can simplify certain import procedures if you ever import equipment. Remember to file periodic VAT returns; even if you have no local sales, a nil return may be required.

Tax Incentives for IT Exporters: The Nepali government has recognized IT and software export as a high-potential sector and has rolled out tax incentives. One major incentive is a 50% income tax exemption on export income from IT services. As per recent fiscal policies, export income earned in foreign currency from services like software development, cloud services, or BPO is eligible for a 50% reduction in the applicable income tax rate until at least FY 2084/85 (2027/28 AD). This effectively means if your company’s profits are, say, entirely from export of services, your effective corporate tax rate could be halved (so around 12.5% instead of 25%) on those profits, under the incentive scheme. This is a significant saving and is aimed to boost Nepal as an IT outsourcing hub. Keep an eye on annual budget announcements as such incentives sometimes get extended or modified.

Another incentive relates to employment generation. The Income Tax Act provides that IT companies employing above certain thresholds of Nepali staff get progressive tax rate reductions. For example, if you directly employ 100 or more Nepali citizens, your corporate tax can be reduced to 22.5%, and it goes down further if you employ 300+, 500+, or 1000+ Nepali staff (with rates dropping to 20%, 18.75%, and as low as ~17% in those cases). Moreover, if at least one-third of those employees are from disadvantaged groups (women, Dalits, or persons with disabilities), the rates reduce slightly more. While a small startup might not immediately reach 100 employees, these policies signal that as you scale, Nepal rewards job creation in the tech sector. It also indicates the government’s emphasis on inclusive growth.

Startup-Friendly Policies: Beyond tax numbers, Nepal has rolled out other startup-friendly measures:

• No Minimum Capital for IT FDI: As discussed, dropping the minimum investment requirement was a game-changer, allowing even lean startups to set up in Nepal without onerous capital lock-in.

• Automatic Route & Fast-track Approvals: The introduction of an automatic route for FDI up to NPR 500 million means less red tape and quick approvals for most IT investments.. Many steps are moving online, reducing the need for physical paperwork and visits.

• Fee Waivers: Recent government policies waived certain fees to reduce the cost of starting a business. Company registration fees and fees for increasing authorized capital have been waived for new foreign investments in the tech sector. This could save companies a few hundred to a couple of thousand dollars, depending on their capital size, making the entry cost negligible.

• Industrial Enterprise Act Benefits: The Industrial Enterprise Act 2020 classifies IT and tech companies as priority industries. This can make them eligible for other benefits like simpler environmental clearances (IT companies typically are non-polluting so they have minimal hurdles there) and sometimes tax holidays for certain categories. For instance, manufacturing industries in Nepal often get a 5-year tax holiday if established in less developed areas; while IT is not manufacturing, if you were to set up outside Kathmandu Valley, you might negotiate local tax relief or subsidies. It’s worth checking if any provincial government incentives or IT park facilities are available. Nepal has an IT Park in Banepa (near Kathmandu) intended to host software companies with facilities – renting space in such a zone could potentially bring benefits like ready infrastructure or concessions on utilities.

• Repatriation and Forex Facilities: The central bank (Nepal Rastra Bank) has streamlined processes for IT companies to receive export earnings. Since software exports bring in foreign currency, the government welcomes it – you can maintain USD balance in your account or easily convert to NPR. When repatriating profits, after an audit and tax clearance, the process is straightforward and legally protected by FITTA (no unpredictable capital controls).

Double Taxation Avoidance: Nepal has Double Taxation Avoidance Agreements (DTAAs) with several countries. If your home country has a DTAA with Nepal (for example, India has one, and a number of others), this can provide relief from being taxed twice on the same income. For instance, if you pay taxes in Nepal on the company’s profit and then want to take dividends home, the DTAA might allow credit for Nepal taxes in your home country tax filing. It’s a technical area, but worth consulting a tax advisor on cross-border tax efficiency once you’re profitable.

In essence, Nepal’s tax system is not only straightforward but also increasingly geared to favor IT exporters and startups. By taking advantage of the 50% tax break on exports and other rebates, a foreign IT company can significantly lower its effective tax rate – making Nepal not just a low-cost talent location but also a financially smart choice. Always stay updated on yearly finance acts/budgets as they may introduce new incentives (or update existing ones) for the IT industry.

Compliance and Local Regulations: Ensuring Ongoing Adherence

After successful registration and setup, running your IT business in Nepal will require ongoing compliance with various local regulations. Being proactive about these obligations will keep your company in good legal standing and avoid penalties or disruptions. Below are key areas of compliance and regulatory considerations:

1. Annual Company Compliance (Company Registrar): Every registered company in Nepal must fulfill annual requirements with the Office of the Company Registrar. This includes holding an Annual General Meeting (AGM) of shareholders within six months from the end of the fiscal year (Nepal’s fiscal year ends mid-July, so AGMs are typically by mid-January). At the AGM, you will approve financial statements and any dividends, among other things. Within a few months of the AGM, you must file an Annual Return at OCR – this is basically an update of the company’s details (shareholders, directors, etc.) and submission of the audited financial statements. If there are changes in the company (like a change in directors, change of registered address, or increase in capital), those too must be filed with OCR within a specified time (usually 30 days of the change). These filings are usually straightforward but easy to overlook if you’re new to Nepal’s system. Missing filing deadlines can result in fines, so it’s wise to mark your calendar or have a company secretary or service provider handle it.

2. Accounting and Audit: Nepali law requires that companies maintain proper books of account and get an audit done annually by a certified auditor. The audit report must be submitted with your annual return. Choose a reputable audit firm or a chartered accountant early on. They will also help in preparing financial statements according to Nepali accounting standards (NAS, which are gradually converging with IFRS in some areas). Since you’re an IT exporter, your accounts will involve foreign currency transactions – ensure you record exchange rates properly and follow central bank guidelines on declaring forex earnings. An auditor will ensure your tax calculations (with those export incentives) are correctly applied and that you provision for any taxes.

3. Tax Compliance (IRD): With your PAN and possibly VAT registration, you need to comply with tax filing schedules:

• VAT: If registered, file VAT returns regularly (monthly if sales are high, otherwise quarterly). Even if you have no VAT to pay (e.g., only export sales), you file a return showing zero or claiming refund on input taxes if any. Keep purchase records and sales invoices well-organized for any audit.

• Income Tax: Pay advance taxes by the end of Poush (mid-Jan, 40% of expected tax) and Chaitra (mid-April, another 30%) and Ashad (mid-July, remaining 30%). These are based on estimates; if you’re in loss, you pay minimal or file for extension. The annual income tax return is filed within 3 months of fiscal year end (by mid-October). Hiring a local tax practitioner or using DCV’s accounting services can ensure all filings are done correctly. Tax clearance certificate: To repatriate profits or close the company, you will need a tax clearance from the IRD, so always pay any due taxes on time.

• Withholding Taxes: Be aware of Nepal’s withholding tax requirements. If your company makes certain payments – e.g., rent to a landlord, or service payments to local vendors – you may need to deduct a small percentage (1% or 15% depending on the nature) and deposit it to the government as Tax Deducted at Source (TDS). Similarly, if you pay any technical or management fees abroad to your parent company or others, consult tax advisors on whether you need to withhold tax according to Nepali law (and DTAA provisions).

4. Labor Law and Employment Compliance: Once you have employees, compliance with labor regulations is crucial:

• Maintain a personal file for each employee with their contract, copy of citizenship certificate (for Nepalis) or passport (for foreigners), tax/PAN registration (employees in Nepal should have a personal PAN for income tax on salary), and records of their leave.

• Pay salaries on time, and deposit the due amounts to the Social Security Fund each month (this covers provident fund, gratuity, etc., replacing older systems). Also ensure you’re contributing to employee’s CIT (Citizen Investment Trust) or provident fund if applicable, but since SSF rollout, it consolidates these.

• Adhere to working hours and overtime rules: if employees work beyond 8 hours a day or 48 a week, overtime pay at 1.5x rate is mandated. Night work and females working at night have special provisions (like providing transport).

• Provide a healthy and safe work environment – for IT offices, this mostly means ergonomic setups and fire safety. Not onerous, but still a responsibility.

• If ever needing to downsize or terminate staff, follow due process as per Labor Act – usually providing notice or pay in lieu, and valid reasons.

• Work Permits for Foreign Staff: As mentioned, any foreign national drawing a salary in Nepal must have a work permit. After hiring, apply at Department of Labor for each such employee. They will need to present credentials proving expertise, and the company shows justification. Upon approval, the person will get a work permit card. Also renew their visas timely (business visa for investors, non-tourist for employees, typically yearly renewal).

5. Local Representation and Communication: Although not legally mandatory to have a local director, it’s wise to have someone in Nepal who can represent the company in routine matters. This could be a senior hire or an external consultant. They can attend any sudden inquiries from a government office, sign routine paperwork, or accept official letters. If all directors are foreign and often abroad, consider appointing a “Compliance Officer” or using a service provider to handle day-to-day compliance tasks and be a point of contact. DCV often fills this role for clients by providing local liaison services – they’ll ensure your mail from regulators is responded to, remind you of filings, and even represent you in meetings if needed.

6. Intellectual Property (IP) and Data Protection: While not a registration compliance per se, IT businesses should consider protecting their IP in Nepal. If you have a brand name or logo, you may file a trademark registration with the Department of Industry’s IP office. Nepal is a member of WIPO and respects IP rights, but registration gives you local legal protection. Similarly, if you develop software, though Nepal doesn’t have a separate patent for software, you might rely on copyright (automatic, but you can also register copyrights).
Data protection laws in Nepal are still nascent (there is an IT law and some privacy provisions), but if you handle user data, follow global best practices because it’s good business hygiene and gives confidence to clients and regulators alike.

7. Renewal and Other Sectoral Compliance: Some licenses, if you obtained (like an ISP license or any special registration), may require annual renewal or fees. Ensure those are tracked.

By staying on top of these compliance areas, your Nepali entity will operate smoothly year after year. Non-compliance, on the other hand, could result in fines or even suspension of your business license, so it’s not worth the risk. The good news is that compliance in Nepal, especially for a straightforward software export company, is manageable with a bit of organization or the help of local experts. Many foreign entrepreneurs find that after the first year of operation, these compliance routines become second nature.

How Digital Consulting Ventures (DCV) Supports Foreign Tech Companies

Navigating a new country's bureaucracy and business environment can be challenging. This is where Digital Consulting Ventures (DCV) becomes an invaluable partner for foreign IT and software companies entering Nepal. DCV specializes in bridging global businesses with Nepal’s ecosystem, and their support spans the entire lifecycle of company setup and growth. Here’s how DCV can help ensure your Nepal venture is a success:

• Pre-Investment Advisory: DCV provides upfront consultation on the optimal entry strategy. This includes clarifying any doubts about the legal process, recommending whether to set up a subsidiary or branch, and helping you understand local nuances. For example, DCV can perform a quick feasibility check for your specific business model under Nepali laws, confirm that your planned activities are permitted, and outline the expected timeline and costs. This level of preparation can save foreign founders from unpleasant surprises and ensure they meet all requirements from the start.

• Foreign Investment Approval and Incorporation Services: Dealing with government paperwork from abroad is daunting. DCV acts as your local agent to handle submissions to the Department of Industry and the Company Registrar. They will prepare and file the FITTA approval application on your behalf, making sure every required document (from the project report to the financial certificates) is correctly prepared and attested. Because they have experience, they know the common pitfalls – e.g., they ensure translations if a document is not in English/Nepali, verify that names and addresses match exactly across forms, and so on. When it comes to incorporation, DCV helps draft the MOA/AOA aligning with both your business needs and Nepali legal terminology (which can be tricky for foreigners). Essentially, they fast-track the bureaucratic steps by doing it right the first time and actively following up with the officials. As a result, many companies that engage DCV report getting set up in the shortest possible time – often as fast as 4-6 weeks total for the entire process, compared to much longer if navigating solo.

• Post-Incorporation Setup: Once the company is registered, DCV doesn’t step away. They assist in getting your tax registrations (PAN/VAT) promptly, helping open your corporate bank account (leveraging relationships with banks to ensure smooth FDI remittance), and even coordinating with Nepal Rastra Bank if any reporting is needed for bringing in capital. If you’re physically not in Nepal yet, having DCV handle bank liaison means your account gets opened without you having to fly in immediately – they know the compliance for authorizations and can arrange it such that you might only need to send some notarized documents or make one visit to sign at the bank when convenient.

• Infrastructure and Staffing Solutions: DCV’s mission includes helping with the practical aspects of starting operations. Need a temporary workspace or a virtual office? DCV can set that up, providing you with a local business address and meeting facilities as needed. They can also advise on reliable internet providers and IT infrastructure vendors. When it comes to hiring, DCV can function as a recruitment facilitator. They are well-connected in Nepal’s tech talent market and can help source candidates or connect you to trusted recruiting agencies. For companies that want to start quickly, DCV even offers a “plug and play” staffing solution – essentially helping you hire a team in Nepal which they can host/payroll on your behalf until your entity is fully ready (a service sometimes termed as EOR, Employer of Record, during transition).

• Compliance Management and Ongoing Support: DCV offers accounting and legal compliance services so that your company stays on track with local laws. They can handle routine bookkeeping, payroll processing (ensuring timely salary payments and Social Security Fund deposits), and tax filings so you remain in good standing with the Inland Revenue. At year-end, they assist with coordinating the audit and preparing financial statements. For things like the annual return to OCR or any change updates, DCV can prepare the documents and even represent the company at government offices. Essentially, they can act as your fractional CFO and Company Secretary, taking care of the back-office formalities while you focus on your core business.

• Local Representation and Liaison: As foreign founders might be traveling or offshore, DCV provides local representation. They can assign a dedicated account manager who will be the go-to contact for Nepali authorities. For instance, if the tax office sends an inquiry or if the Department of Industry calls for a meeting to check on project status, DCV will attend and handle it professionally. This ensures no miscommunication due to language or cultural barriers – you have someone who understands both Western business expectations and Nepali administrative norms.

• Scaling and Expansion Support: As your Nepal operations grow, DCV continues to add value. If you plan to increase your investment, they’ll handle the process of amending the DOI approval for more capital and updating OCR records. If you want to expand into new service lines (say, adding a training wing or a product development arm), they’ll check if any additional licenses are needed. For companies eyeing regional expansion (maybe using Nepal as a base to service clients in South Asia), DCV provides strategic advice on compliance in Nepal’s context (like transfer pricing rules if your Nepal unit will bill your HQ, etc.). They essentially become a long-term partner in your Nepal journey.

• Problem Resolution: Finally, if any issues arise – be it a compliance question or an unexpected hurdle – DCV’s experts are on call to resolve them. Their experience with government relations can be crucial if any clarification or exception needs to be sought from authorities. For example, if a foreign staff’s work permit is stuck in red tape, DCV knows the channels to expedite it. If a policy changes, DCV informs clients proactively and helps them adjust accordingly (such as new labor rules or tax rate changes).

In short, DCV acts as the one-stop solution for foreign IT companies in Nepal, offering peace of mind that professionals are handling the local complexities. This level of support allows you, as the founder or executive, to focus on building your product, managing your offshore team, and delivering to your clients – while DCV ensures the foundation (legal, financial, administrative) is solid and compliant. Many successful foreign tech companies in Nepal attribute their smooth setup and operation to having a partner like DCV by their side from day one.

Conclusion

Registering a foreign-owned IT or software company in Nepal is a multi-step process, but with the right knowledge and support, it can be navigated efficiently. Nepal has opened its doors to foreign tech investment, aligning its procedures with international best practices and introducing startup-friendly reforms. By following the Companies Act 2063 and FITTA 2019 guidelines, foreign founders can establish a legally sound company that enjoys the same freedoms as a local Nepali firm. The journey involves obtaining FDI approval, incorporating the company, setting up tax and banking infrastructure, and then diligently complying with local laws – all of which lay the groundwork for a successful operation.

The government’s focus on the IT sector is evident in the incentives and support available: from tax breaks like the 50% exemption on IT export incometo the removal of minimum investment barriers, Nepal is signaling that it is open for digital business. For an outsourcing or SaaS company, this means you can leverage Nepal’s talented workforce and cost advantages while benefiting from a favorable regulatory environment that encourages growth and innovation. Many foreign tech companies have already found Nepal to be a strategic base for extending their global teams – attracted by lower operating costs, high employee loyalty, and supportive policies.

Crucially, success in setting up abroad comes down to understanding and respecting local processes. Missteps in regulatory compliance can be costly, so it pays to be thorough or to partner with local experts. Clarity, compliance, and consistency are your best allies – from making sure your paperwork is in order to keeping up with annual filings and labor laws. By investing time in proper registration and setup, you’re building a solid platform for your venture to thrive.

Digital Consulting Ventures (DCV) and similar facilitators can shoulder much of the compliance burden and guide you through each milestone. With DCV’s help, foreign entrepreneurs have transformed what could be a daunting bureaucratic endeavor into a smooth checklist, often completing registration in a matter of weeks and moving swiftly to business operations. This kind of support lets you focus on what matters most – delivering quality IT services and scaling your team – rather than getting tangled in red tape.

Nepal presents an exciting growth opportunity for IT and software businesses. The combination of a young tech-savvy population, competitive costs, and government backing for the digital economy creates an environment ripe for foreign companies to flourish. By registering your company properly and tapping into the available resources and incentives, you set the stage for not just compliance, but also long-term success and expansion. Whether you’re a startup founder looking to extend your development team or a tech CEO aiming to set up an outsourcing hub, Nepal can be your gateway to robust growth and innovation in South Asia.

Embarking on foreign company registration in Nepal is the start of a promising journey. With this guide, you have a roadmap to make the process clear and manageable. Stay compliant, embrace the local business culture, and leverage the support systems in place. Nepal’s IT sector is growing – and your company can grow with it, enjoying both the journey and the destination of success.

FAQ: Foreign IT Company Registration in Nepal

Q1. Can a foreigner or foreign company own 100% of an IT business in Nepal?
A: Yes. Nepal permits up to 100% foreign ownership in IT and software companies. You do not need a local Nepali partner or shareholder. Your Nepal-registered Private Limited Company can be entirely held by foreign individuals or a foreign parent corporation. The law grants foreign-owned companies the same legal status as local ones, ensuring full control over your business.

Q2. What is the minimum capital required to register a foreign IT company in Nepal?
A: There is no official minimum capital requirement for IT and software companies as of the latest regulations. Previously, a threshold (like NPR 20 million) was needed, but the government removed this to encourage startups. In practice, you should invest enough to cover your initial expenses (there’s little point in setting up with too low capital to operate), but even a small tech startup with, say, a few thousand dollars can now incorporate. Just propose a reasonable capital in your application that matches your business plan.

Q3. How long does the company registration process take for a foreign company in Nepal?
A: The timeline can vary, but typically it’s about 1 to 2 months to complete all steps. Obtaining foreign investment approval (DOI) can take around 1-2 weeks, and company incorporation at OCR another 1-2 weeks. Post-incorporation tasks (PAN, bank account, etc.) might take a couple more weeks. Overall, many companies are fully set up within 4-6 weeks when efficiently managed. Engaging a local firm like DCV can help expedite the process by ensuring all paperwork is correct and moving the process along continuously.

Q4. Do I need to be physically present in Nepal to register the company?
A: Not necessarily for the entire process. A lot can be done through a local proxy with a power of attorney. You will eventually need to sign certain documents (some of which can be signed abroad and couriered, or signed digitally if accepted). Many foreign owners visit Nepal at least once during the process to open the bank account or sign before the notary, but it’s possible to authorize a lawyer or consultant to handle incorporation and even bank account opening (some banks allow account opening through representatives if documentation is in order). It’s recommended to visit when possible, not only for paperwork but also to understand the environment and meet potential hires, etc.

Q5. What taxes will my IT company have to pay in Nepal?
A: The main taxes are 25% corporate income tax on profits, and 13% VAT on local sales (export services are generally zero-rated). If you distribute dividends to foreign shareholders, there’s a 5% dividend tax, although there are incentives to waive or reduce this if profits are reinvested. Additionally, you’ll contribute to social security for employees (which is a labor contribution, not a tax). There are no payroll taxes aside from withholding employees’ income tax from salaries (which is part of normal payroll). Nepal does not impose any separate export tax on software or services exported.

Q6. Can I repatriate profits and revenue out of Nepal easily?
A: Yes. Nepal’s laws (FITTA and central bank regulations) allow repatriation of profits, dividends, and even the original investment freely in foreign currency. To repatriate annual profits, your company needs to have audited financials and tax clearance for that year, then you can apply through your bank to remit dividends to your home country. The process is straightforward: you provide the bank and Nepal Rastra Bank with the audit report, board resolution for dividend, tax clearance certificate, and they approve the outward remittance. As long as you have paid all local taxes, you can legally send your money back. Many foreign IT companies routinely remit project revenues or excess funds back home without issues. Do note that paying foreign vendors for services or licenses is also allowed (just provide invoices and your bank will facilitate outward remittance for those expenses).

Q7. Are there any special incentives for IT companies or exporters in Nepal?
A: Yes, the government has introduced several incentives. Notably, 50% of the income tax is waived on export income from IT services until 2027/28l. Also, if you hire large numbers of Nepali employees (100, 300, 500+), your tax rate progressively drops below 25%. The government also removed minimum investment barriers for the IT sector and waived registration fees to encourage foreign tech startups. Additionally, tech companies reinvesting profits into growth can get a rebate on dividend taxes. Beyond fiscal incentives, you benefit from a young talent pool and low operation costs, which, while not a government “incentive,” is a natural advantage of operating in Nepal.

Q8. Do I need any special license or permission to run a software or IT services company?
A: For standard software development, IT services, or outsourcing operations, no special industry license is required beyond registering the company and getting the FDI approval. The registration itself is your permission to operate in that business category. However, if you venture into specialized areas: for instance, setting up a telecom service (like VOIP services, ISP, or any telecommunications infrastructure) you would need a license from the Nepal Telecommunications Authority. If you start offering financial tech services (fintech that handles payments), you might need Nepal Rastra Bank’s nod. But a typical IT consultancy, software development, or BPO operation doesn’t need extra permits. It is good practice to register software products or copyrights if you develop original products, but that’s a protective measure, not an operating license.

Q9. What kind of post-registration support can I expect from companies like DCV?
A: Firms like Digital Consulting Ventures (DCV) provide end-to-end support. After helping incorporate your company, they can assist with everything from accounting, tax filings, payroll management, to compliance reporting. They can act as your local representative to handle any paperwork or government communication. Essentially, you can outsource the administrative burden to them – they will remind you of due dates (tax, annual return), maintain your books, help with employee recruitment and HR policies, and ensure you leverage any available incentives. If you’re not based in Nepal full-time, their ongoing support is like having a local office manager and finance department on demand. This allows you to run the company remotely with confidence that operations are compliant and smooth on the ground.

Q10. Is Nepal a stable place to run a business, in terms of politics and infrastructure?
A: Nepal is a stable democracy nowadays and has been focusing on economic development. Political changes occur, but foreign investment, especially in the IT sector, enjoys broad support across governments. Infrastructure has been improving: internet connectivity in major cities is good and continuously upgrading, electricity supply is much more reliable than a decade ago (power cuts are now rare in Kathmandu due to increased generation and import capacity), and transportation within city areas is decent. There are challenges typical of a developing nation (bureaucracy can be slow at times, roads can be congested), but none are insurmountable, especially for an IT company that doesn’t rely on heavy logistics. The government is actively trying to improve the business climate – for instance, digitizing services at OCR and tax offices. Overall, while you may need to adapt to some local ways of doing things, many foreign companies operate successfully and even happily in Nepal. The low costs and loyal workforce often outweigh the minor hassles encountered.

Sources

• Office of the Company Registrar, Nepal – Company registration guidelines and Companies Act 2063 compliance requirements

• Department of Industry, Ministry of Industry – Foreign investment approval process under FITTA 2019 and industry-specific regulations

• Ministry of Communication and Information Technology, Nepal – Policies on IT sector business operations and branch office approvals

• Inland Revenue Department, Nepal – Tax registration (PAN/VAT) procedures and corporate tax regulations for companies

• Nepal Rastra Bank – Foreign Exchange Regulations and guidelines on FDI remittance, profit repatriation

• Companies Act, 2063 (2006) – Legal framework for company incorporation and operation in Nepal

• Foreign Investment and Technology Transfer Act, 2019 – Laws governing foreign direct investment, approval, and investor rights

• Industrial Enterprise Act, 2020 – Provisions on industry classifications, incentives (including for information technology industries)

• Labour Act, 2017 – Labor regulations, employment standards, and compliance requirements for companies in Nepal

• Income Tax Act & Annual Budget Speeches – Tax incentives, rates, and exemptions applicable to IT and export-oriented businesses