Starting a Small Business in Nepal: What You Need to Know

If you’re planning to start a business in Nepal, you’re entering one of South Asia’s most under-explored but high-potential markets. Nepal offers competitive labour costs, improving digital infrastructure, and preferential access to India and China. Yet, for foreign companies, the process is highly regulated and often misunderstood.

This guide explains how foreign companies can start a business in Nepal legally, covering approved structures, costs, timelines, compliance, and common pitfalls. It’s written for founders, CFOs, and expansion leaders who want clarity, not guesswork.

Why Foreign Companies Are Choosing Nepal

Nepal is no longer just a tourism or aid-driven economy. It is emerging as a services, outsourcing, and tech-enabled destination.

Key reasons foreign companies start a business in Nepal include:

• Access to skilled, English-speaking professionals

• Labour costs 50–70 percent lower than developed markets

• Strategic proximity to India and China

• Government-backed Foreign Direct Investment incentives

• Growing IT, BPO, accounting, engineering, and fintech ecosystems

From Australian mortgage firms to European SaaS startups, Nepal is becoming a cost-efficient regional base.

Can Foreigners Start a Business in Nepal?

Yes. Foreign nationals and companies can legally start a business in Nepal, but only through approved investment routes.

Foreigners cannot register a local sole proprietorship or partnership. Every foreign-owned venture must comply with Nepal’s FDI framework.

The governing laws include:

• Foreign Investment and Technology Transfer Act (FITTA 2019)

• Company Act Nepal

• Industrial Enterprises Act

• Nepal Rastra Bank (foreign exchange approvals)

Approved Ways to Start a Business in Nepal as a Foreigner

Foreign companies can enter Nepal through four legal pathways.

1. Foreign Direct Investment (FDI) Company

This is the most common route.

A foreign investor incorporates a Private Limited Company in Nepal with foreign shareholding.

Best for:

• Long-term market entry

• Hiring local staff

• Revenue generation inside Nepal

Minimum investment threshold:

• NPR 20 million (approx. USD 150,000)

2. Branch Office

A Branch Office is an extension of the foreign parent company.

Key features:

• No separate legal personality

• Allowed to earn revenue

• Parent company bears liability

Often used by:

• Engineering firms

• Infrastructure contractors

• Consulting companies

3. Liaison (Representative) Office

A Liaison Office is non-revenue-generating.

Permitted activities:

• Market research

• Relationship building

• Coordination with headquarters

Not allowed:

• Sales

• Invoicing

• Commercial contracts

4. Employer of Record (EOR)

An EOR allows you to hire staff in Nepal without setting up a legal entity.

Ideal for:

• Testing the market

• Small teams

• Remote operations

This is often the fastest way to start operating in Nepal.

Step-by-Step Process to Start a Business in Nepal

Below is a simplified, realistic roadmap for foreign companies.

Step 1: Decide Your Entry Structure

Choose between:

• FDI company

• Branch office

• Liaison office

• Employer of Record

This decision affects cost, compliance, and timelines.

Step 2: Obtain FDI Approval

Applications are submitted to the Department of Industry or Investment Board Nepal.

Required documents include:

• Parent company incorporation documents

• Board resolution

• Business plan

• Shareholder details

Approval timeline:

• 15–30 working days

Step 3: Company Registration

Once FDI approval is granted:

• Company is incorporated at the Office of Company Registrar

• PAN and VAT registration follows

Step 4: Capital Injection

Foreign capital must be:

• Remitted through a Nepalese bank

• Approved by Nepal Rastra Bank

• Properly documented for repatriation later

Step 5: Post-Incorporation Compliance

This includes:

• Labour registration

• Social Security Fund enrollment

• Tax registration

• Sector-specific licenses

How Long Does It Take to Start a Business in Nepal?

Insight: Many foreign companies start with EOR and later convert to FDI once scale is proven.

Costs to Start a Business in Nepal

Typical cost components include:

• Government fees

• Legal and compliance advisory

• Capital requirements

• Ongoing accounting and tax compliance

Estimated ranges:

• EOR setup: Low initial cost

• Liaison office: USD 5,000–8,000

• Branch office: USD 8,000–12,000

• FDI company: USD 10,000–20,000 (excluding capital)

Key Compliance Obligations After You Start

Foreign companies must comply with:

• Monthly payroll tax filings

• Social Security Fund contributions

• Annual audit by a licensed Nepali auditor

• Annual returns with regulators

Non-compliance can lead to:

• Penalties

• Visa issues

• Capital repatriation delays

Common Mistakes Foreign Companies Make

Avoid these costly errors:

• Choosing the wrong entry structure

• Underestimating compliance complexity

• Using nominee shareholders illegally

• Injecting capital without NRB approval

• Ignoring exit and repatriation planning

Taxation Overview for Foreign-Owned Businesses

Key tax points:

• Corporate tax: Typically 25 percent

• Withholding taxes apply to salaries and services

• Dividends are repatriable after tax clearance

Nepal has Double Tax Avoidance Agreements with several countries.

Hiring Employees in Nepal

Foreign-owned businesses can hire:

• Nepali nationals freely

• Foreign nationals with work visas

Mandatory contributions include:

• Social Security Fund

• Leave and labour compliance under Nepal’s Labour Act

Is Nepal a Good Place for Small Foreign Businesses?

Yes, if you:

• Choose the right structure

• Have local compliance support

• Take a long-term view

Nepal rewards patient, compliant investors.

Final Thoughts on How to Start a Business in Nepal

To successfully start a business in Nepal, foreign companies must balance opportunity with compliance. The market is welcoming, but the rules matter. With the right structure and guidance, Nepal can become a profitable and strategic base for your regional operations.

Call to Action

If you’re planning to start a business in Nepal, book a free market-entry consultation with our Nepal FDI and expansion specialists. We’ll help you choose the right structure and avoid costly mistakes.

Frequently Asked Questions

Can foreigners fully own a business in Nepal?

Yes. Foreigners can own up to 100 percent equity in approved sectors through FDI under FITTA 2019.

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

The standard minimum FDI threshold is NPR 20 million, though EOR models require no capital injection.

Can I hire staff in Nepal without registering a company?

Yes. An Employer of Record allows legal hiring without entity setup.

How do I repatriate profits from Nepal?

Profits can be repatriated after tax clearance and approval from Nepal Rastra Bank.

Is Nepal suitable for startups?

Yes. Nepal is ideal for service-based startups, outsourcing, and back-office operations.