Start a Business in Nepal Legally: Process, Costs & Documents

If you are planning to start a business in Nepal, you are entering one of South Asia’s most strategically placed and reform-driven markets. Nepal offers access to India and China, a young English-speaking workforce, competitive operating costs, and a steadily improving foreign investment regime.

This guide is written specifically for foreign companies. It explains the legal process, costs, documents, and compliance required to start a business in Nepal in 2026. You will also learn which entry model fits your goals, common mistakes to avoid, and how long everything takes.

Why Start a Business in Nepal as a Foreign Company?

Nepal is no longer just a tourism-led economy. It is actively positioning itself as a destination for foreign capital, outsourced operations, and regional service hubs.

Key advantages for foreign investors

• Competitive labor costs with strong technical talent

• English widely used in business and law

• Full foreign ownership allowed in most sectors

• Legal profit repatriation in foreign currency

• Growing demand for IT, consulting, outsourcing, energy, and manufacturing

Nepal’s legal framework for foreign investment is anchored by the Foreign Investment and Technology Transfer Act, which guarantees investor rights, protection, and repatriation.

Legal Framework for Starting a Business in Nepal

Before choosing a structure, foreign companies must understand the governing laws.

Core laws you must comply with

• Companies Act

• Foreign Investment and Technology Transfer Act

• Income Tax Act 2002

• Labour Act 2017

• Social Security Act 2018

• NRB Foreign Exchange Directives

These laws define company formation, ownership, employment, taxation, and capital repatriation.

Business Structures Available to Foreign Companies in Nepal

Foreign investors cannot operate as sole proprietors. You must choose one of the legally recognized entities.

1. Private Limited Company (FDI Company)

This is the most common option for foreign companies.

Best for:
Long-term operations, hiring staff, invoicing locally, scaling revenue.

Key features:

• Up to 100% foreign ownership

• Minimum FDI: NPR 20 million

• Separate legal entity

• Eligible for profit repatriation

2. Branch Office

A branch is an extension of a foreign parent company.

Best for:
Project-based work, donor-funded contracts, or fixed-scope engagements.

Limitations:

• Cannot undertake unrelated commercial activities

• Heavily regulated

• Parent company bears liability

3. Liaison (Representative) Office

This is not a revenue-generating entity.

Best for:
Market research, relationship building, feasibility studies.

Restrictions:

• No income

• No commercial contracts

• Limited staffing

Comparison: Which Business Model Is Right for You?

Step-by-Step Process to Start a Business in Nepal (FDI Company)

Step 1: Foreign Investment Approval

You must first apply for foreign investment approval through the Department of Industry or Investment Board Nepal, depending on project size.

Documents include:

• Parent company registration certificate

• Board resolution approving Nepal investment

• Project profile and financial forecast

• Shareholder passport copies

Step 2: Company Registration

Once FDI approval is issued, the company is registered with the Office of Company Registrar.

You will reserve the company name, submit constitutional documents, and receive the company registration certificate.

Step 3: Tax and PAN Registration

Every business must register with the Inland Revenue Department to obtain a PAN (Permanent Account Number).

This enables:

• Corporate tax filings

• VAT registration (if applicable)

• Legal invoicing

Step 4: Capital Injection via NRB Channel

Foreign capital must enter Nepal through a designated bank under approval of Nepal Rastra Bank.

This step is critical for:

• Legal repatriation later

• Dividend and royalty payments

• Compliance audits

Step 5: Employment and Labour Compliance

If you plan to hire:

• Employment contracts must follow Nepal Labour Act

• Mandatory Social Security Fund (SSF) registration

• Work visas for foreign nationals

Documents Required to Start a Business in Nepal

Below is a consolidated checklist foreign companies typically need.

Corporate documents

• Certificate of Incorporation (parent company)

• Memorandum & Articles of Association

• Board Resolution for Nepal investment

• Shareholder structure

Individual documents

• Passport copies of shareholders and directors

• Recent photographs

• Power of Attorney (if applicable)

Nepal-specific documents

• FDI approval letter

• Company registration certificate

• PAN certificate

• Bank account confirmation

How Much Does It Cost to Start a Business in Nepal?

Costs vary based on structure, sector, and advisory support.

Typical cost components

• Government registration fees

• Legal drafting and filings

• Bank compliance and approvals

• Professional advisory fees

Indicative range:
USD 2,000 to USD 6,000 (excluding minimum capital)

Timeline: How Long Does It Take?

For a properly prepared FDI company:

1. FDI approval: 2–4 weeks

2. Company registration: 3–5 working days

3. PAN and bank setup: 1 week

Total timeline: 4–6 weeks on average

Common Mistakes Foreign Companies Make

Avoid these errors when you start a business in Nepal:

• Injecting capital before approval

• Choosing a liaison office for revenue activities

• Ignoring labour and SSF compliance

• Poor shareholder documentation

• Not planning repatriation structure early

Taxation Overview for Foreign-Owned Companies

• Corporate income tax: generally 25%

• VAT: 13% (sector-specific)

• Withholding taxes on dividends, royalties, and services

• Transfer pricing rules apply for related parties

Nepal allows legal repatriation of profits, dividends, and capital, provided compliance is maintained.

When Employer of Record (EOR) Is a Better First Step

Some foreign companies delay incorporation and start with an Employer of Record (EOR).

EOR is ideal if you:

• Want to hire quickly

• Are testing the Nepal market

• Do not need local invoicing yet

Many companies later transition from EOR to a full FDI entity.

Conclusion: Start a Business in Nepal with Confidence

To start a business in Nepal successfully, foreign companies must balance opportunity with compliance. The country offers genuine advantages, but only when the legal process is followed correctly.

With the right structure, clear documentation, and compliant capital flow, Nepal can become a cost-effective and scalable base for South Asia operations.

Call to Action

If you are planning to start a business in Nepal, speak with specialists who handle FDI, company registration, compliance, and payroll under one roof.

👉 Book a confidential consultation to assess the right entry model for your business.

Frequently Asked Questions (People Also Ask)

Is Nepal open to 100% foreign ownership?

Yes. Most sectors allow 100% foreign ownership under FITTA 2019, except restricted industries.

What is the minimum investment to start a business in Nepal?

The current minimum foreign investment threshold is NPR 20 million.

Can foreign companies repatriate profits from Nepal?

Yes. Profits, dividends, and capital can be repatriated through NRB-approved banking channels.

How long does company registration take in Nepal?

With proper documents, the process usually takes 4–6 weeks.

Can a foreigner be a director of a Nepali company?

Yes. Foreign nationals can be directors, subject to visa and work permit rules.