Start an Online Business in Nepal: Legal & Technical Guide

If you are planning to start a business in Nepal, the online route is the fastest, most scalable, and most cost-efficient option for foreign companies. Nepal offers low operating costs, an English-speaking workforce, improving digital infrastructure, and strong government support for foreign direct investment.

This guide explains how to start an online business in Nepal from a legal, regulatory, and technical standpoint. It is written specifically for foreign founders, overseas directors, and international companies looking for compliant market entry.

By the end, you will understand the correct business structure, registration process, licensing, tax obligations, and digital setup required to operate legally and scale confidently.

Why Foreign Companies Are Choosing Nepal for Online Businesses

Nepal has quietly become a strategic offshore and nearshore destination for digital businesses.

Key drivers include competitive labor costs, improving broadband penetration, and a favorable time zone for global operations.

Strategic advantages for foreign companies

• Skilled talent in IT, finance, marketing, and operations

• Monthly operating costs 60–70 percent lower than developed markets

• English widely used in business and professional services

• Growing startup ecosystem in Kathmandu and Lalitpur

• Full profit repatriation allowed under foreign investment laws

According to the Government of Nepal, the ICT and services sector is among the fastest-growing segments for foreign investment.

Legal Ways to Start a Business in Nepal as a Foreigner

Foreigners cannot operate informally in Nepal. A legal presence is mandatory.

When you start a business in Nepal, you must choose the correct entry model.

Main entry options for foreign companies

1. Foreign Direct Investment private limited company

2. Branch office of a foreign company

3. Liaison office for non-commercial activities

4. Employer of Record for hiring without entity setup

Each option suits a different stage of market entry.

Starting an Online Business Through Foreign Direct Investment

Private limited company with FDI

This is the most common structure for long-term operations.

Under Nepal’s foreign investment regime, overseas shareholders can own up to 100 percent equity in most online service sectors.

FDI registration is governed by the Foreign Investment and Technology Transfer Act and related regulations.

Minimum investment threshold

• USD 50,000 minimum foreign investment

• Can be injected as equity or shareholder loan

• Funds must enter Nepal through a licensed bank

Typical online businesses approved under FDI

• SaaS and software development

• Digital marketing agencies

• IT outsourcing and BPO services

• E-commerce platforms

• Fintech and data services (sector approvals required)

Step-by-Step Process to Start an Online Business in Nepal

1. Investment approval

Foreign investors apply through the Department of Industry or Investment Board Nepal, depending on project size.

2. Company registration

The company is incorporated with the Office of the Company Registrar under the Companies Act.

3. Tax and statutory registrations

• Permanent Account Number

• VAT registration if applicable

• Social Security Fund enrollment

4. Capital injection and bank compliance

Funds are remitted through an approved Nepali bank with FDI reporting.

5. Operational licensing

Sector-specific approvals may be required for fintech, payments, or regulated services.

Technical Setup for Online Businesses in Nepal

Starting a business in Nepal is not only legal. It is also technical.

Core technical requirements

• Business website with local compliance disclosures

• Secure hosting with data protection safeguards

• Accounting and payroll systems compliant with Nepali tax law

• Payment gateway integration for domestic and international clients

Common payment options

• International gateways via foreign parent entities

• Local gateways for domestic transactions

• Cross-border invoicing under NRB guidelines

Taxation for Online Businesses in Nepal

Understanding taxes is essential when you start a business in Nepal.

Corporate taxes

• Standard corporate income tax is 25 percent

• Certain IT exports may qualify for concessions

• Withholding tax applies on service payments

Value Added Tax

• 13 percent VAT on taxable digital services

• Export services are generally zero-rated

Payroll and employment costs

• Employer Social Security contribution is mandatory

• Income tax withheld at source for employees

All taxation is governed by the Income Tax Act.

Employer of Record vs FDI Company for Online Businesses

Many foreign founders want speed.

An Employer of Record allows immediate hiring without entity registration.

Comparison table

This hybrid approach is common for pilot operations.

Compliance Obligations You Must Not Ignore

Foreign-owned online businesses must maintain strict compliance.

Ongoing requirements

• Monthly payroll and tax filings

• Annual financial statements

• Audit and tax returns

• FDI reporting to central bank

• Renewal of sector licenses

Non-compliance can lead to fines, blocked repatriation, or business suspension.

Repatriation of Profits and Capital

One major advantage when you start a business in Nepal is full repatriation rights.

Foreign investors may repatriate:

• Dividends

• Profits

• Loan repayments

• Capital on exit

This is guaranteed under Nepal’s foreign investment framework, subject to tax clearance.

Common Mistakes Foreign Companies Make

Avoid these early-stage errors.

• Choosing a liaison office for commercial activity

• Underestimating tax and payroll compliance

• Improper capital injection documentation

• Using personal accounts for business payments

• Ignoring local labor laws

Professional structuring from day one saves cost and risk.

When Nepal Is the Right Market for You

Nepal is ideal if you want to:

• Build a remote or hybrid global team

• Reduce operating and talent costs

• Serve overseas clients from Nepal

• Establish a South Asia delivery hub

For heavily regulated fintech or payment businesses, additional planning is required.

How Digital Consulting Ventures Helps Foreign Companies

Digital Consulting Ventures supports international founders across the full lifecycle.

Our support includes

• FDI structuring and approvals

• Company registration and licensing

• Virtual office and local directors

• Accounting, payroll, and tax compliance

• Employer of Record services

• Ongoing legal and compliance advisory

We act as your long-term Nepal market partner.

Conclusion

To start a business in Nepal, foreign companies must combine correct legal structuring with reliable technical execution. Online businesses benefit the most from Nepal’s cost efficiency, talent pool, and foreign investment protections.

With the right setup, Nepal becomes a scalable, compliant base for global operations. Strategic planning at entry ensures faster growth, easier repatriation, and lower long-term risk.

Call to Action

Planning to start a business in Nepal or launch an online operation?
Book a free consultation with Digital Consulting Ventures to assess the best entry model for your company.

Frequently Asked Questions

Can foreigners fully own an online business in Nepal?

Yes. Foreign investors can own 100 percent equity in most online and IT-enabled service businesses under Nepal’s FDI laws.

How long does it take to start a business in Nepal?

FDI company setup usually takes 8 to 12 weeks. Employer of Record hiring can begin within 1 to 2 weeks.

Is USD 50,000 mandatory for all businesses?

The minimum foreign investment threshold is USD 50,000 for FDI companies. It does not apply to Employer of Record models.

Can profits be sent back to my home country?

Yes. Nepal allows full repatriation of profits and capital after tax clearance and regulatory reporting.

Do online businesses need VAT registration?

If you provide taxable digital services in Nepal, VAT registration is required. Export services are usually zero-rated.