Nepal offers unique strategic advantages for international investors. Nestled between two economic giants, India and China, Nepal provides access to a growing market of over 29 million people with untapped potential. The country has seen increasing interest from foreign investors in sectors like hydropower, tourism, manufacturing, and IT. The government is actively encouraging foreign investment through policy reforms – for example, simplifying regulations and improving infrastructure. Recent reforms have made foreign company registration in Nepal easier than ever, including lowering minimum capital requirements and introducing fast-track approval routes for certain industries. In short, Nepal’s developing economy and pro-investment stance make it an attractive frontier market for entrepreneurs looking to expand internationally.
Foreign companies have several avenues to establish a presence in Nepal, each with its own implications. The main entry structures available are:
Private Limited Company (Local Company) – A new Nepalese company incorporated locally, which can be wholly or partially owned by foreign investors. This is the most common route, essentially creating a subsidiary in Nepal.
Branch Office – An extension of a foreign company that carries out business in Nepal. A branch is not a separate legal entity; it remains part of the parent company abroad.
Liaison Office (Representative Office) – A non-commercial office established only for limited activities like market research, networking, or coordination. A liaison office cannot engage in any income-generating business in Nepal.
Joint Venture – In some cases, foreign investors partner with Nepali companies or individuals to form a jointly owned company. However, except in restricted sectors, joint ventures are not mandatory – 100% foreign ownership is generally allowed in permitted industries.
Each structure has its pros and cons. For example, a private limited company (subsidiary) gives you a fully local entity with limited liability protection, whereas a branch office keeps things simpler legally but the foreign parent bears full liability. Liaison offices are useful for establishing an initial footprint without heavy investment, but they cannot conduct revenue-earning operations. The choice depends on your business goals, investment size, and the level of operational freedom you need in Nepal.
A Private Limited Company in Nepal is a locally incorporated company that is a separate legal entity from its owners. It is the most common business structure for foreign investors entering Nepal. As a private limited company, your business enjoys limited liability – meaning the foreign shareholders’ liability is limited to the capital they invest.
Key characteristics of a Nepali private limited company include:
Ownership: Foreigners can own up to 100% of a private limited company in most sectors (no local partner is required unless mandated by industry-specific law). This local company can function as a subsidiary of a foreign parent company if the parent holds the shares.
Shareholders and Directors: At least two shareholders and two directors are required to form a private company. These can be foreign individuals or entities. Directors must be individuals (not corporate bodies), but they don’t need to be Nepali citizens.
Capital Requirement: Nepal’s company law does not impose a specific minimum capital for local companies. In practice, you could register with a small authorized capital (e.g. NPR 100,000). However, foreign investors are subject to a minimum investment threshold under FDI rules (discussed in a later question).
Compliance: Private companies must register with the Office of the Company Registrar (OCR) and abide by Nepali company regulations. They are required to maintain proper accounts, undergo annual audits, and file annual returns. The company must also register for taxes (e.g. obtain a Permanent Account Number, PAN) and comply with tax laws.
For most foreign entrepreneurs, setting up a private limited company is the preferred route because it creates a Nepal-based entity that can engage in all normal business activities. The subsidiary can enter contracts, trade, and repatriate profits under its own name, and it signals a long-term commitment to operating in Nepal.
A Branch Office is an extension of a foreign company operating in Nepal. Unlike a subsidiary, a branch is not a separate legal entity – it is considered the same legal entity as the parent company overseas. The branch can carry out business activities in Nepal (such as selling products or services, executing projects, etc.) but those activities must be similar to the scope of business of the parent company.
Important points about branch offices:
Approval and Registration: To open a branch in Nepal, the foreign company must obtain permission from the relevant government ministry or authority associated with its industry. For example, a tech company might need approval from the Ministry of Communications and Information Technology before the Office of Company Registrar can register the branch. If the branch is being opened to fulfill a specific contract with the Nepal government, that contract or agreement can serve as the required approval.
No Separate Capital Requirement: There is no fixed minimum capital that must be brought in for a branch office – the law is silent on a set amount. In practice, the parent company will remit funds as needed to cover the branch’s operating costs. (Registration fees for a branch are based on the amount of investment the company declares it will use in Nepal, but this can be adjusted to the scale of your project.)
Liabilities: Because the branch is legally part of the foreign company, the parent company bears unlimited liability for any debts or obligations incurred by the branch in Nepal. This means higher risk exposure – any legal or financial issue in Nepal can directly affect the parent.
Activities: A branch can engage in commercial activities, earn revenue, and repatriate profits (after taxes). However, it is generally limited to the business scope of its parent. Branch offices are often used by foreign companies that have a specific project or contract in Nepal, such as construction projects, or for sectors like banking where operating as a branch might be allowed.
Compliance: Branches must be registered with the OCR and tax authorities. They also typically need to submit copies of the parent company’s documents (charter, incorporation certificate) and appoint a local representative in Nepal to liaise with regulators. Ongoing compliance includes filing audited financial statements of the branch and any required reports to Nepali authorities. The branch’s earnings in Nepal are taxed at the normal corporate rate.
A branch office can be a good option if you want to maintain tighter control from the headquarters and if your Nepal operations are an extension of your existing business. However, due to liability and regulatory approvals involved, many investors prefer setting up a local company unless a branch structure offers a specific advantage for their case.
A Liaison Office, also known as a representative or contact office, is a setup for foreign companies who wish to have a minimal presence in Nepal without engaging in full business operations. The liaison office serves as a communication and networking channel for the parent company but cannot conduct any income-earning activities in Nepal.
Key features of a liaison office:
Non-Commercial Activities: Liaison offices are strictly barred from carrying out trading, services, or any revenue-generating work. They typically can undertake market research, promote the parent company’s business, coordinate with local contacts, or provide after-sales support in a limited capacity. Activities like advertising the parent company’s products or negotiating contracts are often restricted for liaison offices.
Establishment Approval: Setting up a liaison office still requires registration with the Office of the Company Registrar, but the process is generally simpler than for a branch. In practice, a liaison office may not require special ministry approvals since it will not engage in business transactions. The parent company must still submit necessary documents (certificate of incorporation, etc., with Nepali translations) and appoint a representative in Nepal.
Limitations: A liaison office cannot sign contracts or directly represent the parent company in legal matters beyond its liaison role. It also cannot import or export goods, invoice for services, or open letters of credit. All expenses of the liaison office (rent, salaries, office costs) must be covered by remittances from the parent company abroad.
Conversion to Full Office: If you initially set up a liaison office and later decide to start commercial operations in Nepal, you would need to upgrade or convert the liaison office into a branch or a subsidiary (which involves going through the standard approval and registration process for those structures).
Liaison offices are ideal for foreign companies in an exploratory phase – for instance, assessing the Nepal market, establishing partnerships, or overseeing quality and procurement – before committing to a full-fledged business entity. They provide a low-risk way to “get a foot in the door,” but they are inherently temporary and limited in scope.
Yes. In most business sectors of Nepal, foreign investors are allowed to own up to 100% equity in a company. Nepal’s laws do not require having a local Nepali partner or shareholder just for the sake of ownership. This means a foreign entrepreneur or a foreign corporation can establish a wholly foreign-owned subsidiary (private limited company) in Nepal and retain complete control.
However, there are important exceptions due to Nepal’s “Negative List” of industries. Certain sectors are either partially or fully off-limits to foreign investment. If a sector is restricted, it might either:
Prohibit any foreign ownership (100% foreign ownership is not allowed, or foreigners are barred entirely), or
Allow foreign investment only up to a certain percentage or under specific conditions (often requiring a joint venture with a Nepali partner or other terms).
For the vast majority of industries open to FDI, you can own 100% of the company. There is no general legal requirement to have Nepali citizens as shareholders or directors. Many foreign companies operate in Nepal with full foreign ownership, especially in sectors like IT, manufacturing, export-oriented services, and large-scale projects.
Always ensure that your business activity is in a permitted sector. If it’s in a restricted category, you may need to restructure your plan – sometimes a joint venture with a Nepali entity or an alternative approach might be necessary if 100% ownership is not allowed in that specific business.
Yes, Nepal maintains a Negative List of industries where foreign direct investment is either prohibited or restricted. This list is defined by the Foreign Investment and Technology Transfer Act (FITTA) and related regulations. If your proposed business falls under these categories, you either cannot invest at all or will face special conditions.
Examples of restricted or banned sectors for foreign investors include:
Small Retail and Personal Services: Foreigners cannot invest in small-scale retail trading businesses (like running a local retail shop) or personal service businesses such as barber shops, beauty salons, local catering, and domestic courier services aimed at the local market.
Real Estate Trading: Foreign investment in real estate trading (buying and selling land for profit) is prohibited, although foreign investment in large-scale construction or integrated housing development may be allowed with approval.
Agriculture and Animal Husbandry: Traditional farming, livestock rearing, fisheries and similar small-scale agriculture intended for local consumption are off-limits to foreign investors. (Commercial large-scale farming or agro-processing for export might be permitted case-by-case, but basic agriculture for the local market is protected for Nepali citizens.)
Travel and Tourism Services for Local Market: Certain services like travel agencies, trekking agencies, or tour guides that cater primarily to local tourists are restricted for foreign investment. (Investing in tourism projects targeting international tourists – such as hotels or adventure tourism – is generally allowed, however).
Weapons and Defense Industry: Manufacturing of arms, ammunition, or explosives is completely closed to foreign investment.
Professional Services: Professions such as legal services, accounting, and engineering consulting are generally not open to foreign firms unless specific conditions are met (often these fields have licensing requirements that only Nepali nationals can fulfill).
These examples are not exhaustive, but they illustrate the types of activities on the Negative List. The Nepali government updates the list from time to time. It’s crucial to verify the current regulations or consult with local authorities/consultants before planning an investment. If your business is in a gray area, professional guidance can help determine if there's a legal way to structure your investment.
Registering a foreign-owned company in Nepal involves multiple steps and government bodies. Here is a step-by-step overview of the market entry process for a foreign company:
1. Initial Planning and Sector Check: Before anything else, confirm that your intended business is permissible for foreign investment in Nepal. As mentioned, ensure it’s not in the Negative List. It’s also wise to conduct preliminary market research or seek local advice to understand regulatory nuances for your industry.
2. Foreign Investment Approval (FDI Approval): Nepal requires foreign investors to obtain approval under the Foreign Investment and Technology Transfer Act (FITTA) before setting up a company. You will need to submit an application to the appropriate authority:
For investments up to NPR 6 billion (approximately USD 50 million), the Department of Industry (DoI) is the approving body.
For larger investments above NPR 6 billion, or for certain large-scale projects (e.g. large hydropower projects over 200 MW), approval is handled by the Investment Board of Nepal (IBN).
The approval application typically includes your project proposal or business plan, details of investors, projected financials, and supporting documents. Upon approval, you will receive an FDI Approval Letter or certificate. (Some sectors now have an Automatic Approval Route for FDI – notably certain IT and tech sectors – where approvals are fast-tracked online as long as the criteria are met.)
3. Company Name Reservation: In parallel with or after FDI approval, you must reserve a unique company name with the Office of the Company Registrar (OCR). This is done through the OCR’s online system. The name should not duplicate or closely resemble existing company names in Nepal.
4. Company Incorporation with OCR: Once you have the FDI approval (if required) and name reservation, you can proceed to register the company with the OCR. The incorporation application will include:
Drafts of your Memorandum of Association (MoA) and Articles of Association (AoA) for the new company.
Details of shareholders, directors, and the intended registered office address in Nepal.
Copies of identification documents (passports for individual foreign investors; incorporation certificates and board resolutions for any corporate investor).
The FDI approval letter from DoI or IBN.
Proof of name reservation.
Power of Attorney if you are using a local representative or lawyer to file on your behalf.
Payment of the registration fee (which varies based on your company’s authorized capital – see the FAQ on costs).
The OCR will review the documents and, if all is in order, issue a Certificate of Incorporation for your company. This certificate legally establishes your company as a Nepali entity.
5. Post-Incorporation Registrations: After the company is incorporated, there are a few additional registrations and compliance steps:
Tax Registration: Register with the Inland Revenue Department (IRD) to obtain a Permanent Account Number (PAN) for your company, which is mandatory for tax purposes. If your company will be engaging in VAT-applicable transactions (common for most businesses above a low turnover threshold), you should register for VAT as well.
Industry Registration: In some cases (especially if your FDI approval was through the DoI), you may need to obtain an Industry Registration Certificate or Business Operation License from the DoI or local authorities. This is often referred to as a Business Registration Certificate (BRC) and is essentially the government’s acknowledgement to commence operations.
Local Government Registration: Companies in Nepal are typically required to register at the local ward office (municipal level) where the business is located. This is usually a simple notification/registration for local records and to obtain any municipal trade license if needed for certain trades.
Social Security Fund Registration: If you will be hiring employees in Nepal, you will have to register your company with the Social Security Fund (a government-run fund for employee benefits) and comply with labor laws.
6. Bringing in Investment Capital: With the company formed, foreign shareholders can remit the investment capital into Nepal. You’ll open a business bank account in Nepal (usually this can be done in foreign currency and NPR). The process is:
Obtain a Nepal Rastra Bank (NRB) approval/record for the inward remittance. The central bank regulates foreign currency inflows and outflows. Your bank will coordinate with NRB to ensure the incoming funds are recorded as foreign investment.
The funds (equity capital) must be brought in through formal banking channels. Once the money is received, you’ll get a bank confirmation, and NRB will issue a letter (or endorse the amount) noting that the capital is duly received as FDI. This documentation is crucial for future profit repatriation.
Nepal’s current policy requires a minimum foreign investment of NPR 20 million for each investor, which means you should remit at least that amount as capital (unless your project falls under an exception). Note that you don’t necessarily need to bring the entire amount at once; there are timelines for phased injection of capital (e.g. a portion within the first year, and the rest as you scale up), but the commitment must meet the minimum threshold.
7. Start Operations and Ongoing Compliance: With the above steps completed, your company is legally ready to operate in Nepal. You can lease premises, hire staff, begin sales or production, etc. Ensure that you maintain compliance:
Install proper accounting systems to track income and expenses in Nepal (financial statements must be prepared yearly).
Adhere to any sector-specific regulations or permits (for example, if you are in a regulated industry like banking, telecom, or hydro, additional licenses will apply).
Overall, the market entry and company incorporation process in Nepal involves dealing with multiple authorities – the DoI/IBN for investment approval, the Company Registrar for incorporation, NRB for capital inflow, and the tax office for PAN/VAT. While the process can be complex, Nepal has made strides in recent years to streamline procedures and even offer online application portals for some steps. Many foreign investors engage local consulting firms or legal advisors to handle the paperwork and follow-ups, which can significantly smooth out the process.
The documentation for company incorporation and foreign investment in Nepal can be quite extensive. You should be prepared with the following key documents and information:
Foreign Investor Documents: If you are investing as an individual, a copy of your passport (notarized) is required. If the investor is a foreign company, you will need that company’s Certificate of Incorporation, Memorandum and Articles of Association, and a Board Resolution authorizing the Nepal investment. These corporate documents should be notarized and, if not in English, accompanied by an English (and often Nepali) translation.
Project Proposal/Business Plan: As part of the FDI approval process, a detailed business plan or project proposal is usually needed. This outlines the nature of the business, capital structure, projected financials, and benefits to Nepal (like employment, technology transfer, or export earnings).
Memorandum and Articles of Association of New Company: You must draft the Memorandum of Association (MOA) and Articles of Association (AOA) for the new Nepali company. The MOA states the company’s name, registered office, objectives, and capital structure, while the AOA outlines the internal governance and rules. These must comply with the Companies Act 2006 requirements.
Details of Shareholders and Directors: A list of all proposed shareholders (with their nationality, address, and shareholding percentage) and directors (with personal details and address) has to be provided. For each foreign individual shareholder or director, a notarized passport copy is required; for Nepali nationals, a citizenship certificate copy. If a shareholder is a company, the documents mentioned above for that company are needed along with a board resolution naming an authorized representative.
Power of Attorney: If you are not physically present in Nepal to handle the procedures, you will appoint a local representative (often a lawyer or consultant) through a Power of Attorney (POA). The POA should explicitly empower them to act on your behalf for company incorporation and legal formalities. This document must be notarized (and attested by the Nepali Embassy or Consulate if made abroad).
FDI Approval Letter: Once you obtain the foreign investment approval, include the approval letter/certificate from the Department of Industry or IBN in your registration packet as evidence that the government has permitted your investment.
Bank Reference/Financial Commitment: Sometimes authorities request a reference letter from your bank or evidence of your financial capacity to make the investment (especially for large projects). It’s essentially to show that the funds for the proposed capital injection are available.
Registered Office Address Proof: You’ll need to declare a registered office for the company in Nepal. Typically, a simple rent agreement or letter of intent for an office space suffices for the registration stage. Some investors use their lawyer’s or consultant’s address temporarily, but eventually you’ll update this when you have your own office.
Application Forms: There are standard application forms for company registration (as provided by the OCR) and for FDI approval (for the DoI/IBN). These forms must be filled out (information about the company’s name, objectives, capital, promoters, etc.) and signed by the promoters or their authorized representative.
Photographs: Passport-sized photographs of the promoters/directors may be required for various forms and records (e.g., work permit or visa processes later on, and sometimes for bank account opening or industry registrations).
All documents that originate from outside Nepal should be notarized and, where necessary, officially translated. It’s advisable to have multiple sets of copies ready, as different government offices may ask for their own file. Having a local legal consultant prepare and vet your document set is highly recommended to avoid any omission that could delay the process.
The timeline can vary widely depending on the nature of the business and how prepared you are with documentation. On average, foreign company incorporation in Nepal takes a few weeks to a few months. Breaking it down:
Foreign Investment Approval: Getting the FDI approval is often the longest step. In a straightforward case (e.g., a services company in a permitted sector with all documents in order), approval might come through in as little as 2–4 weeks. However, more complex proposals or high-value investments can take longer – sometimes 2–3 months if there are queries or government back-and-forth. Bureaucratic delays can also add unpredictability.
Company Registration (OCR): Once you have the FDI approval, the actual company registration with the Office of the Company Registrar is relatively quick. Name reservation is instant or takes a couple of days via the online system. After submitting all incorporation documents, the OCR might take about 5–10 working days to review and issue the Certificate of Incorporation (provided everything is in order). In many cases, this is done within a week.
Post-Incorporation Tasks: Obtaining the PAN from the tax office can usually be done within a few days to a week. VAT registration, if needed, might take a few more days. Industry-specific licenses or local registrations (if applicable) vary – for example, getting a tourism license might add a couple of weeks; registering with local ward could be done in a day.
Overall Expected Duration: In the best-case scenario, some foreign businesses have completed the entire process (from initial application to final registration) in roughly 4 to 8 weeks. This assumes efficient handling and no major hitches. To be safe, many investors plan for about 2 to 3 months total to cover any unforeseen delays. In worst cases, if there are regulatory complexities or delays (or during times of government transitions), it could stretch to 5–6 months, but that is not typical for standard investments.
Remember that holidays and festival seasons in Nepal (such as Dashain and Tihar in the autumn) can slow down government work. Also, any need to resubmit or clarify information will extend the timeline. Engaging experienced professionals can help keep things on track, as they will frequently follow up with officials and pre-emptively address common issues.
The costs associated with company incorporation in Nepal include several components:
Government Registration Fees: The Office of the Company Registrar charges a fee based on the company’s authorized capital. This fee ranges from a minimum of NPR 5,000 for small capital companies up to NPR 200,000 for very large capital companies. For example, if you register a company with an authorized capital of, say, NPR 20 million (approximately USD 150,000, which is the minimum for foreign investment), the registration fee might be in the range of a few tens of thousands of Nepali rupees. A sliding scale is applied; the exact fee can be confirmed on the OCR fee schedule. (By comparison, a branch office pays a similar graduated fee based on the amount of money the branch will bring in – e.g. NPR 15,000 for up to NPR 10 million investment, NPR 40,000 for up to 100 million, and so forth.)
Professional Service Fees: If you use lawyers or incorporation services (like Digital Consulting Ventures or law firms) to handle the setup, they will charge service fees. These can vary depending on the scope – whether it’s just paperwork filing or a turnkey solution including everything from FDI approval to office setup. It’s common to engage such services given language and bureaucracy barriers, and costs might be a few thousand dollars for comprehensive support (just as a rough estimate).
Notary and Translation Charges: You’ll incur costs to notarize documents and translate them into Nepali (for any official documents not originally in Nepali or English). Each document translation and notarization might cost anywhere from a few dollars to $20-$50 depending on the length and the provider. If many documents are involved (like a thick shareholders’ agreement or detailed articles of association from the parent company), translation costs can add up.
Miscellaneous and Administrative Costs: There will be small costs for things like printing, photocopying, government application forms (usually nominal), and perhaps travel expenses if you need to visit government offices. If you are sending documents internationally (couriers) or wiring capital to Nepal, consider bank transfer fees and currency exchange spreads too.
Capital Requirement (Deposit): While not a fee, it’s worth noting you’ll need to actually bring in the minimum capital (NPR 20 million for foreign investors, unless exempted). This money will typically be deposited in the company’s bank account in Nepal. It remains your business’s capital to be used for operations, so it’s not a fee, but it is a financial commitment.
In summary, aside from the investment capital itself, the out-of-pocket costs to get set up (government + professional + ancillary costs) are relatively modest compared to many countries. Many foreign entrepreneurs budget a few thousand dollars total for the entire incorporation process (excluding the capital injection). Always ask for a clear breakdown of expected costs from any consultant you engage, and note that official fees can change if regulations update.
Nepal imposes a minimum investment amount for foreign investors under its FDI policy. Currently, the general minimum capital requirement is NPR 20 million (approximately USD 150,000) per foreign investor. This means that if you are establishing a new wholly foreign-owned company, or if you as a foreign individual are investing in a Nepali company, you must bring in at least NPR 20 million as equity capital.
This threshold was revised in recent years. A 2019 policy change had raised the minimum to NPR 50 million (around USD 400,000), but that proved to be too high for many investors. In 2022, the government announced a reduction of the minimum investment to NPR 20 million to attract more small and medium-sized foreign enterprises. Now, NPR 20 million is the baseline for most sectors.
Key points regarding this requirement:
The rule applies “per investor”. So if two foreign partners are setting up a joint venture, together they should bring NPR 40 million (each contributing at least 20 million, unless one is putting more and the other less – practically, it’s interpreted as each foreign shareholder should meet the 20 million minimum in their share of equity).
You do not necessarily need to invest all of that at once. Typically, when your investment is approved, you might be allowed to bring a portion initially and the rest over a period as needed. For instance, you might bring 25% in the first year and the rest as you scale up (as long as the full amount comes in within a certain timeframe). The approval letter will usually specify the plan for capital injection.
Certain sectors are exempt or have flexibility. Notably, information technology startups and some knowledge-based industries have been given leeway with a lower threshold if they use the automatic route. The government realized that forcing a software startup to bring $150k upfront can be counterproductive, so they have carved out exceptions for such cases. Always check if your business falls under any category where the minimum might not apply or is reduced.
If you plan to reinvest earnings or bring in additional capital later, those are separate from the initial minimum. But repatriation (taking money back out) will only be allowed up to the amount you brought in and profits earned – which is why meeting and documenting the minimum investment is crucial from the start.
In summary, most foreign entrepreneurs should be prepared to invest at least $150,000 in their Nepali venture. This ensures that the project is taken seriously and has sufficient capital. If your business model truly cannot justify that amount, you may need to consult with authorities or advisors to see if an exception or different structuring is possible.
After your company is established in Nepal, maintaining it requires fulfilling various compliance obligations. Here are the major ongoing requirements:
Annual Financial Statements and Audit: Every company in Nepal must prepare annual financial statements. These accounts must be audited by a certified auditor (Chartered Accountant) each fiscal year, as mandated by law. The Nepali fiscal year runs from mid-July to mid-July. You’ll submit the audited financials to the Office of the Company Registrar and tax office annually. Failing to file accounts or get an audit can result in penalties.
Annual General Meeting (AGM): The Companies Act requires that shareholders meet at least once a year in an AGM, within six months of the fiscal year end. During the AGM, the shareholders approve the audited accounts, possibly declare dividends, and address any changes like electing directors. After the AGM, you need to file annual returns with the Company Registrar (which include details of the meeting, financial summary, and any changes in the board or capital).
Tax Filings: Companies must file an annual income tax return with the Inland Revenue Department. Corporate income tax is generally 25% of net profit (with higher or lower rates for specific industries as discussed in the tax question). The annual tax return is due within 3 months of the fiscal year end (with a possibility to extend). If your company is VAT-registered, you must file VAT returns on a monthly or quarterly basis, and pay any VAT due. Additionally, you’ll handle routine tax withholdings: for example, payroll taxes (withheld from employee salaries each month), and withholding on payments to vendors as applicable (known as Tax Deducted at Source or TDS).
Labor Compliance: If you have employees, you’ll need to comply with labor laws. This includes contributing to the Social Security Fund (SSF) on behalf of employees (the SSF covers provident fund, pension, medical, accident, and maternity benefits under one scheme). You also need to provide minimum benefits like paid leave, bonuses (Nepali law requires an annual festival bonus roughly equal to a month’s salary), and gratuity for long-term employees. If you hire expats, their work permits need annual renewal and you should maintain the ratio/conditions under which the permit was granted.
Foreign Investment Compliance: The Nepal Rastra Bank requires that any changes in your foreign investment be reported. For instance, if you reinvest profits to increase capital, or if you take loans from abroad, there are reporting requirements. Also, when you repatriate dividends, you must ensure you follow the central bank procedures each time (as covered in the repatriation question). Usually, companies submit a yearly update on foreign investment status to NRB.
Renewals and Licenses: Certain industries or activities require periodic license renewals or additional compliance. For example, an industry registration certificate from the Department of Industry might need renewal every five years. Businesses like hotels, pharmacies, banks, etc., have their sector regulators with their own compliance calendars. Be aware of any such obligations specific to your line of business.
Statutory Changes: If the company undergoes changes – say you change your registered office, or appoint a new director, or transfer shares – those changes need to be officially recorded. You’d file the appropriate notice or application with the Company Registrar and sometimes get approval from the DOI (if it changes the shareholding structure of foreign vs local or amounts of foreign investment).
Maintaining good standing in Nepal is manageable, but it requires attention to deadlines and proper record-keeping. Many companies hire local accountants or retain consulting firms to handle monthly filings and annual returns. The penalties for non-compliance can include fines or even suspension of your business, so it’s essential to keep track of these duties. With a proper compliance calendar and local support, you can ensure your Nepal entity remains in good standing and avoid last-minute scrambles.
Foreign companies in Nepal are subject to the same tax regime as Nepali companies. Key tax considerations include:
Corporate Income Tax: The standard corporate tax rate is 25% of taxable profit for most industries. Some sectors have different rates: for example, banks, financial institutions, insurance companies, and petroleum companies are taxed at 30% of profit. Certain special industries (like export-oriented industries or infrastructure projects under public-private partnership models) might enjoy a reduced rate, sometimes around 20%. These rates are defined by the Income Tax Act and annual Finance Acts.
Dividend Tax: When a Nepali company distributes dividends to shareholders, a dividend tax (withholding tax) is levied on the gross dividend. The rate is currently 5%. This tax is usually final – meaning the shareholder doesn’t have to pay additional tax on that dividend in Nepal beyond the 5% withheld. So if your company (after paying corporate income tax on profits) decides to distribute dividends, it will withhold 5% and the remaining 95% can be repatriated to you (assuming other repatriation procedures are followed).
VAT (Value Added Tax): The VAT rate in Nepal is 13%. Companies dealing in goods or services (except exempt items) with an annual turnover above ~NPR 5 million must register for VAT. You’ll charge 13% on your sales invoices and can claim credit for VAT paid on your business purchases. Net VAT is paid to the government monthly or quarterly. Note that some services (like export services, certain IT services) can be zero-rated, meaning no VAT is charged but you can still claim input credits.
Withholding Taxes: Nepal requires withholding on various payments. For instance, on salaries paid to employees (graduated rates depending on salary amount), on rent paid to landlords (typically 10%), on payments to consultants or service providers (15% if to foreign entities, a lower fixed rate for local consultants), and on interest payments (15%). As a company, you’ll be responsible for deducting these at source and depositing to the tax office. For foreign companies, the 15% withholding on certain payments (like technical service fees or royalties) is important to note if your Nepali entity will pay your foreign entity for any services or IP usage.
Customs and Import Duties: If your business involves importing equipment, raw materials, or finished goods, be aware of import duties. Nepal’s tariff rates vary by product; capital machinery often has concessions or lower rates, while luxury items have high duties. There’s also an import VAT (13%) but any VAT you pay on imports can be claimed back as input credit if you are VAT-registered and using those items in your business.
Tax Incentives: The government sometimes provides tax holidays or rebates for certain sectors or geographic areas (for example, income from exports might get a 25% rebate on income tax; businesses in Special Economic Zones get tax holidays for some years, etc.). If your venture qualifies, it’s worth exploring these incentives for potential tax savings.
Importantly, Nepal has signed Double Taxation Avoidance Agreements (DTAs) with several countries (including India, China, Mauritius, and others). If your home country has a DTA with Nepal, it could reduce the withholding tax rates on dividends, interest, or royalties and determine which country gets taxing rights on certain income. Consulting a tax expert on treaty benefits can ensure you’re not overpaying tax and can legally minimize withholding where applicable.
Overall, the corporate tax environment in Nepal is straightforward with a flat corporate rate. Compliance (filing returns and paying installments of advance tax) is something your accounting team will handle as part of yearly routine.
Yes, foreign investors are allowed to repatriate profits, dividends, and even the proceeds from the sale or liquidation of the business, but this must be done in accordance with the procedures set by the Nepal Rastra Bank (NRB) and other regulators. Here’s what you need to know about taking money out of Nepal:
Repatriation of Dividends: After your company earns profits and pays the applicable taxes, you can declare dividends to foreign shareholders. To repatriate those dividends out of Nepal, your company will apply to NRB through its commercial bank. You will typically need to provide the bank and NRB with:
Audited financial statements of the company showing the profit.
A board resolution declaring the dividend and the amount per share.
Tax clearance certificate to prove that all taxes (including the 25% corporate tax and 5% dividend tax) have been paid.
FDI approval reference and evidence of the initial investment having been brought in and recorded.
Once NRB is satisfied, they authorize the conversion of the dividend amount into foreign currency and the remittance to the shareholder’s overseas bank account. This process ensures that only legitimate, tax-paid profits leave the country.
Repatriation of Capital: If you sell your equity in the company (full or partial exit) or liquidate the company entirely, you can repatriate the proceeds of your investment. For this, you must again show that:
The shares were sold at a fair valuation (often needs a valuation report for unlisted shares).
All due taxes on any capital gains are paid. Nepal imposes a tax on capital gains (for foreign investors, typically a 5% on gains from sale of shares, though this can vary if treaty provisions apply).
The original investment came in through proper channels. NRB will cross-verify that the amount you are taking out does not exceed what you brought in plus legitimate gains.
Royalty or Technical Service Fee Repatriation: If your Nepali entity is paying royalties, management fees, or technical service fees to a foreign entity (like a parent company), those can be remitted too. They require approval, and you must show the agreement underlying those payments was reported during FDI approval or is permissible. Taxes (usually 15% withholding) must be deducted before remittance.
Time Frame and Process: Repatriation requests can take a few weeks to process. NRB and commercial banks in Nepal have set procedures, and if paperwork is complete, approvals are often given within a couple of weeks. Nepal has been working to make this efficient – for example, there have been directives urging that repatriation applications be decided within 15 days. The foreign investor’s bank abroad will receive the funds once NRB and the local bank complete the process.
One important thing: Ensure you keep all documentation from the very start. From the time you inject capital, maintain records like the NRB acknowledgement of investment, company registration, annual audit reports, and tax filings. When it comes time to repatriate, having a tidy file makes it far easier to get swift approval. Many hurdles to repatriation occur if records are missing or if the company didn’t follow some compliance (like not getting audits done or not renewing the industry registration) – those can delay or jeopardize your ability to remit funds.
In practice, many foreign companies in Nepal do repatriate dividends regularly and wind-up proceeds when they exit. The system works, but it is document-heavy. As long as you follow the rules, you are entitled to transfer your earnings back home.
Yes, any foreign national working or residing in Nepal for business purposes will need the appropriate visa, and in most cases a work permit. Here’s a breakdown:
Business Visa: Foreign investors and company executives can obtain a Business Visa for Nepal. After your company is registered and you have the FDI approval, you qualify to apply for a Business Visa. This visa can be issued for up to 1 year at a time (multi-entry) and is renewable annually as long as your business is operational. It allows you to stay in Nepal to manage your company, but is not a work permit per se; it is primarily a long-term stay visa linked to your investment.
Investor Visa: Nepal offers a special Investor Visa for individuals who invest a significant amount (the threshold has been around USD 100,000, but it’s subject to change as policies update). The Investor Visa is typically a longer-term visa (up to 5 years, for instance) granted to bona fide investors in Nepal. It provides residency rights and is an attractive option if you meet the criteria, as it saves the hassle of annual renewals. It’s usually available for investors in larger projects or priority sectors.
Work Permits: If you, as a foreign director, or any foreign employee in your company, will be taking up a hands-on role in Nepal (i.e., drawing a salary or actively managing day-to-day operations), a work permit is required from the Department of Labour. The company in Nepal must apply on behalf of the foreign individual. The general process involves:
Advertising the position locally (to show no qualified Nepali was available for the role) – this is sometimes expected for ordinary roles.
Submitting the work permit application with the foreigner’s credentials (CV, qualifications) and a justification of why a foreign expert is needed.
The Department of Labour, upon recommendation from the line ministry (if applicable) or just their own review, issues the work permit for a year (which can be renewed).
Even if you are a shareholder, if you actively work, you are supposed to have a work permit. Many company owners overlook this, but it’s legally required.
Limits and Local Hire Expectations: Nepal encourages the hiring of Nepali citizens. There is no fixed expat quota across all industries, but in practice work permits are only granted for positions where expertise is lacking locally or for high-level managerial positions. For example, you might get permits for a couple of foreign technical experts or a CEO, but you should plan to hire local staff for most other roles. In some sectors (like NGOs or education), there are explicit rules like at most 5% expat staff; for private companies it’s case-by-case.
Tax and Legal Implications for Expatriates: A foreigner working in Nepal will be subject to Nepali income tax on their Nepal-sourced income (usually through withholding from salary). But if they stay in Nepal for a non-resident period (short term), different tax rules might apply. It’s worth noting that staying more than 183 days in Nepal typically makes one a tax resident for that year. In any case, foreign employees pay Nepali taxes on their local salary through withholding. Also, Nepali labor law will cover any foreign employees in terms of work hours, holidays, etc., except where exemptions apply.
In summary, if you plan to relocate or spend significant time in Nepal running your business, you should secure a business/investor visa through your company and then obtain a work permit for your role. Many investors keep one director or executive on a work permit to oversee operations, while others might just visit periodically on business visas if they have local management in place. Plan this according to how hands-on you will be in Nepal.
Choosing between a branch office and a subsidiary (private limited company) is a crucial decision and depends on your circumstances. Here are some considerations to help you decide:
Liability: A subsidiary is a separate legal entity; the foreign parent’s liability is limited to the shares it holds. A branch, on the other hand, is the same entity as the foreign company – meaning the parent company is fully liable for all obligations of the branch. If liability and risk containment are concerns, a subsidiary offers more protection.
Business Scope: A subsidiary can carry out any business activities allowed by its charter and Nepali law, regardless of what the parent does. It offers flexibility to diversify or localize offerings. A branch is restricted to only the business activities of the parent – it cannot undertake new or unrelated lines of business apart from the parent company’s scope.
Capital and Funding: Establishing a subsidiary requires meeting the minimum foreign capital requirement (NPR 20 million). A branch has no prescribed minimum investment; you fund it as needed. If your intended operations are very small, a branch could theoretically be started with lower initial funds. But remember, even a branch setup involves some fixed costs and you’ll likely inject capital for its expenses.
Profit Repatriation: Both branch and subsidiary can repatriate profits. A subsidiary repatriates through dividends (after paying corporate tax and dividend tax). A branch repatriates its profits directly to the head office (after paying corporate tax, which often is considered as branch profit tax). Tax-wise, the burden is similar since Nepal’s dividend tax and branch repatriation tax tend to be comparable. There might be slight differences in tax treaties – some treaties treat branch profits differently – so if your home country has a treaty, check that angle.
Administrative Burden: A subsidiary requires more administrative work in terms of maintaining separate accounts, audits, and filings as a Nepali company. A branch’s accounts will be more directly tied to the parent. However, in practice a branch also has to maintain local accounts for its Nepali operations and file tax returns, etc., so the ongoing compliance effort is not significantly less. Branches do have to submit their parent company’s audited financials to Nepali authorities yearly as well.
Ease of Setup: Obtaining approval for a branch can sometimes be trickier because you need a specific ministry’s approval or a government contract. A subsidiary goes through the standard FDI approval, which is more straightforward for general business activities. Many investors find the subsidiary route simpler unless they already have a project contract in Nepal that justifies a branch.
Closure and Exit: Closing a subsidiary (liquidating a company) can be a longer legal process in Nepal. Closing a branch may be relatively simpler: you’d apply to deregister the branch after settling liabilities. If you foresee a short-term operation, branch might offer easier exit, but this depends on proper closure procedures too.
Typical Use Cases:
Choose a branch if you have a short-to-medium term project or contract in Nepal, or if you operate in a sector like banking or insurance where sometimes foreign companies prefer branch structures. Also, if you want to maintain a direct hand in the Nepali operations without creating a new corporate entity, a branch does that.
Choose a subsidiary if you plan a long-term presence, want the flexibility to grow the business in different directions, or need to shield the parent company from direct liability. Subsidiaries are also viewed as more rooted in Nepal (which can be positive for government relations, hiring employees, etc., as it shows commitment).
In many cases, foreign investors opt for the private limited company (subsidiary) as the default approach, because it’s straightforward and offers limited liability and independence. A branch tends to be a more specialized choice. It’s wise to consult with a local expert to evaluate your specific situation.
Navigating the incorporation process and subsequent business setup in a foreign country can be challenging. Digital Consulting Ventures specializes in helping foreign businesses enter and thrive in the Nepalese market. With our end-to-end services, we act as a one-stop partner so you can establish your operations smoothly and efficiently. Here’s how we support foreign entrepreneurs:
Strategic Advisory & Entity Setup: We provide guidance on the optimal entry strategy (whether to set up a private limited subsidiary, branch office, or liaison office) based on your business goals. Our legal and consulting team handles all the paperwork for company incorporation, from preparing the necessary documents to liaising with government offices for approvals. We ensure your foreign company registration process is fully compliant with local laws, obtaining all required certificates and permits on your behalf.
Regulatory Compliance Management: Digital Consulting Ventures takes care of securing all needed government approvals. This includes obtaining FDI approval under FITTA, assisting with any sector-specific licenses (for example, industry operating licenses, if needed), and registering your company with the Office of the Company Registrar. We also facilitate post-incorporation tasks like tax registration (PAN/VAT), social security setup, and any environmental or municipal registrations – making sure nothing falls through the cracks.
Accounting and Tax Compliance: Once your company is established, ongoing compliance is critical. We offer full accounting and bookkeeping services and ensure compliance with Nepali accounting standards. Our team will manage your periodic tax filings, maintain financial records, and coordinate the annual audit. Essentially, we become your outsourced finance department in Nepal, handling payroll, VAT returns, income tax compliance, and more, so that you remain in good standing with authorities.
HR and Payroll Services: Building a local team is often a necessity for foreign ventures. We assist in recruiting talent and also provide payroll management and HR advisory. From drafting local employment contracts to running monthly payroll with all required deductions (tax, social security) and benefits, we handle the HR complexities. We ensure your company follows Nepali labor law and we can even serve as an interim HR department until your operations are large enough to handle it internally.
Local Market Support: Beyond the legalities, succeeding in Nepal may require insights into local market dynamics and connections. We help with market entry strategy – whether it’s understanding customer preferences, finding local partners or distributors, or navigating cultural business practices. Our on-ground experience means we can offer practical advice and troubleshooting as you set up.
Ongoing Representation and Consulting: Think of Digital Consulting Ventures as your long-term partner. Even after the initial setup, we provide continued support – be it regulatory updates (keeping you informed of changes in law that affect your business), expansion assistance (opening new branch offices, obtaining additional licenses), or troubleshooting bureaucratic issues. If any compliance issue arises, we help resolve it swiftly. Our goal is to let you focus on your core business while we manage the administrative and regulatory burdens.
By leveraging our comprehensive suite of services, foreign entrepreneurs can save time, reduce costs, and avoid the common pitfalls of entering a new market. We’ve successfully assisted companies from around the world in establishing a presence in Nepal, and we bring that expertise to every new project. With Digital Consulting Ventures as your local partner, you gain peace of mind and a trusted advisor from day one of your Nepal journey.
https://digitalconsultingventures.com/insights/how-to-incorporate-a-company-in-nepal-as-a-foreigner-2025-edition
https://digitalconsultingventures.com/insights/minimum-capital-requirements-for-foreign-investment-in-nepal
https://mokshalegalgroup.com/foreign-direct-investment-in-nepal/
https://lawbhandari.com/publication/branch-office-registration-process-in-nepal
https://margcompusoft.com/m/company-registration-in-nepal/
https://ibn.gov.np/ibn-faq/details/what-are-the-corporate-income-tax-rates-in-nepal-8691
https://investmentpolicy.unctad.org/investment-policy-monitor/measures/3968/nepal-reduces-the-minimum-capital-requirement-by-60-