For international companies exploring market entry strategies, understanding the available business registration options is critical. In the context of company incorporation in Nepal, foreign businesses typically choose between three paths: incorporating a private limited company, setting up a branch office, or establishing a representative office.
Each model comes with distinct legal, operational, and tax implications. This article will focus on comparing representative offices and branch offices—two popular alternatives for companies that are not yet ready for full incorporation but still want a presence in Nepal.
Nepal offers multiple entry points for foreign entities under the Foreign Investment and Technology Transfer Act (FITTA) and the Companies Act. While company incorporation in Nepal refers to establishing a full legal entity such as a private limited company, both branch offices and representative offices provide a lighter-touch method of entering the market—each suited to different business goals.
A branch office is an extension of a foreign parent company. It is allowed to:
Conduct commercial activities in Nepal
Earn revenue and sign contracts
Employ local and foreign staff
Import goods or provide services under the parent company’s banner
However, it is not a separate legal entity—it remains legally tied to the parent company, which is liable for its operations.
Requires approval from the Department of Industry (DOI) under FITTA
Must register with the Office of the Company Registrar (OCR)
Needs a PAN and VAT registration
Subject to Nepalese taxation (corporate income tax, VAT, etc.)
Must maintain audited financial statements locally
A representative office (also called a liaison office) is non-commercial. It serves only to promote the parent company, conduct market research, or facilitate communication between the head office and local clients or stakeholders.
This structure is best suited for companies not intending to earn income from operations in Nepal.
Cannot sign contracts, generate revenue, or conduct business transactions
Must register with the Department of Industry (DOI) under special terms
Generally not subject to taxation unless violating the non-commercial mandate
Allowed to employ limited staff for administrative or research purposes
Must report activities and expenditures to authorities
| Criteria | Branch Office | Representative Office |
|---|---|---|
| Legal Status | Extension of foreign company | Extension of foreign company |
| Commercial Activities | Allowed | Not allowed |
| Revenue Generation | Yes | No |
| Taxation | Yes (corporate tax, VAT, etc.) | Generally exempt |
| Approval Required | FITTA + OCR | FITTA |
| Employment | Can hire full team | Limited staffing allowed |
| Permitted Activities | Business operations, sales, contracts | Research, marketing, coordination |
| Reporting Obligations | Full financial and tax reporting | Annual activity reports |
Obtain foreign investment approval from the Department of Industry
Register the entity with the Office of the Company Registrar
Register for PAN and VAT with Inland Revenue Office
Open a local bank account and deposit required capital
Set up an office and begin operations
Submit a formal application to the Department of Industry with a business intent letter
Provide documentation on the parent company and office plan
Comply with FITTA reporting, but no need for OCR registration
No tax filings unless activities exceed scope
Advantages:
Full operational presence
Ability to earn and remit profits
Suitable for project-based work or contracts
Limitations:
Taxable on Nepal-sourced income
Parent company is fully liable
Regulatory compliance is more stringent
Advantages:
Easier to set up
No corporate tax or VAT obligations
Ideal for market research or relationship building
Limitations:
Cannot operate commercially
Limited staffing
May be restricted to 2–3 years before needing conversion to a branch or subsidiary
Choosing between a branch office and a representative office depends on your business goals:
If your aim is to sign contracts, provide services, or conduct trade, a branch office is essential.
If your goal is to study the market, build local relationships, or coordinate with partners, a representative office is the better fit.
For both structures, understanding the nuances of FITTA, Nepalese taxation, labor laws, and repatriation rules is vital.
For foreign companies considering company incorporation in Nepal, both branch and representative offices offer valuable ways to establish presence without forming a full-fledged company. However, they differ significantly in their legal, operational, and tax implications. Making the right choice depends on your long-term plans, resource commitment, and compliance readiness.
Consulting with experienced local advisors in accounting, legal compliance, and cross-border regulations can ensure a smooth and compliant market entry.