Step-by-Step Guide to Company Incorporation in Nepal

Nepal’s expanding economy, strategic geographical position, and growing consumer market make it an increasingly attractive destination for foreign investors. From small-scale ventures to large corporate projects, establishing a company in Nepal offers a foothold into South Asia’s emerging markets. However, navigating the incorporation process requires a solid understanding of local regulations, tax obligations, and administrative steps.

As a senior accountant with extensive experience in Nepali corporate law and foreign investment regulations, I have prepared this detailed, step-by-step guide to help you incorporate a company in Nepal with confidence. From choosing the right entity type to obtaining required approvals and ensuring ongoing compliance, this guide streamlines the entire journey—ultimately setting you up for success in Nepal’s dynamic business landscape.

1. Understand the Legal Framework for Foreign Investment

Before initiating any formal process, it is critical to understand the legal environment governing foreign investments in Nepal. The key laws that define the landscape for company incorporation and foreign investment include:

• Companies Act, 2006: This act outlines the procedures for incorporating a company, defining shareholders’ rights and responsibilities, company governance standards, and operational guidelines.
• Foreign Investment and Technology Transfer Act (FITTA), 2019: FITTA details the sectors open to foreign investment, minimum investment thresholds, repatriation protocols, and the technology transfer process.
• Industrial Enterprises Act, 2020: This law provides incentives, concessions, and streamlined processes for certain industries, encouraging foreign investment in Nepal’s industrial sector.

Tip: Consulting with a qualified accountant or legal expert familiar with these laws can save time, minimise errors, and ensure compliance from the outset.

2. Determine the Right Business Structure

Selecting the most appropriate entity type for your venture in Nepal is a crucial first step. Each entity type offers different advantages, responsibilities, and compliance obligations:

1. Private Limited Company:

   • Ideal For: Small to medium-sized enterprises (SMEs) and foreign investors looking for limited liability protection.
   • Key Features: 1-101 shareholders, no public share issuance, and simpler administrative processes.

2. Public Limited Company:

   • Ideal For: Larger businesses aiming to raise capital from the public and eventually list on the stock exchange.
   • Key Features: Unlimited shareholders, ability to offer shares publicly, and higher regulatory scrutiny.

3. Branch Office of a Foreign Company:

   • Ideal For: Foreign firms seeking a direct market presence without establishing a separate Nepali legal entity.
   • Key Features: Operates as an extension of the parent company, subject to Department of Industry approval.

4. Liaison Office:

   • Ideal For: Market research, promotional activities, and representing a foreign company in Nepal without engaging in direct commercial operations.
   • Key Features: Cannot generate revenue or engage in trade; used primarily for brand presence.

Tip: Assess your long-term growth strategy, industry requirements, and investment scale before deciding on the entity type.

3. Check Minimum Capital Requirements

Under FITTA, foreign investors must meet a minimum investment threshold of NPR 20 million (approx. USD 153,000). However, sector-specific regulations may impose higher thresholds, especially in regulated industries like banking, aviation, or telecommunications.

Action Step: Confirm the exact capital requirements for your chosen sector. A specialised accountant or consulting firm can provide clarity and help you structure your initial capital infusion accordingly.

4. Reserve a Unique Company Name

Your company name is your brand’s first impression and must comply with Nepal’s naming conventions. The Office of the Company Registrar (OCR) maintains a database of registered entities to prevent duplications and trademarks conflicts.

How to Proceed:

• Submit a name reservation application to the OCR.
• Provide several name options to increase the likelihood of approval.
• Once approved, your chosen name is reserved for a specific period, usually around 30 days.

SEO Note: Choosing a relevant and memorable company name can help with digital branding and online discoverability down the line, though the OCR’s naming rules may limit keyword inclusion.

5. Prepare the Necessary Documentation

Accurate and well-prepared documentation is the backbone of a successful incorporation process. Typical requirements for foreign investors include:

• Memorandum of Association (MOA) and Articles of Association (AOA): These foundational documents define your company’s objectives, shareholding structure, operational guidelines, and governance.
• Board Resolution from Parent Company: Authorises the establishment of the Nepali entity on behalf of foreign shareholders.
• Notarised Passports of Shareholders and Directors: Ensures proper identification and compliance with Nepal’s Know-Your-Customer (KYC) norms.
• Bank Certificate of Share Capital Deposit: Verifies that you have deposited the required investment capital into a Nepali bank account.
• Power of Attorney (POA): Appoints a local representative to act on your behalf in Nepal.
• Parent Company’s Incorporation and Constitutional Documents: Certified and notarised copies of the parent entity’s registration documents.

Tip: Ensure all foreign documents are notarised, translated (if necessary), and legalised as required. Engaging a local professional can prevent documentation-related delays.

6. Register Your Company with the Office of the Company Registrar (OCR)

Once your documents are ready, submit them to the OCR for formal registration. The OCR will review your application, verify compliance, and, if everything is in order, issue a Certificate of Incorporation.

Expected Timeline:

• Application review: 1-2 weeks (subject to OCR’s workload and documentation quality)
• Receipt of Certificate of Incorporation: Upon approval

Pro Tip: Prompt and accurate submissions minimise back-and-forth interactions, reducing the overall timeline.

7. Obtain a Permanent Account Number (PAN) and Tax Registration

After incorporation, you must register with the Inland Revenue Department (IRD) to obtain a Permanent Account Number (PAN). The PAN ensures proper tax compliance, including regular filing of corporate taxes, VAT (if applicable), and withholding taxes on dividends.

How to Get Your PAN:

• Submit the PAN application form, along with a copy of the Certificate of Incorporation, MOA, AOA, and shareholders’ details, to the IRD.
• Once processed, you’ll receive a PAN that you must quote on all financial and tax-related documents.

Importance of PAN:

• Enables you to file income tax returns and claim tax credits.
• Establishes a transparent tax history, easing future financial operations.

8. Apply for Industry-Specific Licenses and Approvals

Depending on your sector, you may need additional licenses or permits. For instance:

• Manufacturing Licenses: Required if you plan to set up a production facility.
• Tourism Permits: For hotels, travel agencies, and trekking companies.
• Financial Services Licenses: For banks, finance companies, or insurance providers.

Tip: Identify these sector-specific requirements early. Delays in obtaining necessary licenses can stall operations and revenue generation.

9. Comply with FITTA and Nepal Rastra Bank (NRB) Regulations

Foreign investments often require approval from the Department of Industry (DOI) and Nepal Rastra Bank (NRB). The NRB governs foreign currency inflows, capital repatriation, and maintains oversight of foreign exchange regulations.

What to Expect:

• DOI Approval: Grants foreign investment approval certificates.
• NRB Approval: Reviews your investment proposal to ensure compliance with forex regulations and approves future profit repatriation requests.

Timeline:

• DOI/NRB approval process generally takes 2-3 months. Projects requiring Investment Board Nepal (IBN) clearance may take up to 6 months.

10. Post-Incorporation Compliance and Annual Filings

After successfully incorporating your company, staying compliant is key to long-term success. Important post-incorporation tasks include:

• Maintaining Statutory Registers: Keep updated records of shareholders, directors, and board meetings.
• Annual Returns and Financial Statements: File audited annual financial statements and returns with the OCR and IRD.
• Tax Compliance: Ensure timely filing of corporate taxes, VAT returns, and withholding taxes.
• Labor Laws & Social Security: Comply with employment regulations, register employees with social security funds, and adhere to minimum wage and benefit requirements.
• Repatriation Procedures: Follow NRB guidelines for sending dividends, interest, and capital gains back to your home country.

Staying Organised:
Engage with a local accountant or auditing firm to manage these responsibilities seamlessly, allowing you to focus on strategic growth and market expansion.

FAQs About Company Incorporation in Nepal

Q1: How long does it take to incorporate a company in Nepal?
Typically, it takes 4-8 weeks for the basic incorporation process. However, obtaining foreign investment approvals and sector-specific licenses can extend the timeline to several months.

Q2: Can foreign investors fully own a company in Nepal?
Yes. Most sectors allow 100% foreign ownership. However, certain industries may have foreign ownership caps or require joint ventures.

Q3: Are there any sectoral restrictions for foreign investments in Nepal?
Yes. Some sensitive sectors—like defense, media, or real estate—may have additional limitations or specific regulatory requirements.

Conclusion

Incorporating a company in Nepal as a foreign investor involves multiple steps—from understanding the legal framework and selecting the right entity type to preparing documentation, obtaining licenses, and ensuring ongoing compliance. Though the process may appear complex, the right guidance can streamline your journey and help you capitalise on Nepal’s promising investment environment.

By following this step-by-step guide and seeking professional advice from local accountants and legal experts, you can minimise delays, reduce costs, and build a solid foundation for growth. Whether you’re entering Nepal’s market as a first-time entrepreneur or a seasoned global investor, meticulous planning and compliance are the cornerstones of long-term success.