Nepal is undergoing a transformative phase in its corporate legal landscape. The year 2025 brings forth a series of amendments aimed at enhancing the business environment, attracting foreign investment, and aligning with global standards. For foreign companies eyeing Nepal as a potential investment destination, understanding these legal shifts is crucial. This guide delves into the key changes in Nepalese company laws and their implications for foreign investors.
One of the significant changes introduced in 2025 is the simplification of the repatriation process for foreign investors. Previously, the approval process for fund repatriation could take up to 15 days, with appeals extending to 30 days. The new ordinance has streamlined this process, reducing the approval timeline to 7 days and appeal resolutions to 15 days. This change aims to enhance the ease of doing business and boost investor confidence.
The scope of technology transfer has been broadened to include fields such as information technology, marketing, financial services, accounting, engineering, outsourcing, digital data processing, and design services. This expansion facilitates greater collaboration between Nepalese companies and foreign entities, promoting innovation and technical advancement.
Foreign investors are now permitted to invest in units of specialized investment funds, including venture capital funds registered with the Securities Board of Nepal. This provision opens new avenues for foreign capital inflow and supports the growth of startups and innovative enterprises in Nepal.
In a groundbreaking move, Nepalese IT companies are now allowed to establish branches or liaison offices in foreign countries. This change enables local IT firms to expand their global footprint, engage in international collaborations, and access new markets.
The amended laws have introduced provisions for Employee Stock Ownership Plans (ESOPs), allowing employees to acquire shares in the company. This initiative aims to enhance employee engagement, retention, and align employee interests with company performance.
Non-Resident Nepali citizens are now recognized as eligible promoters of companies in Nepal. By submitting a certified copy of their NRN Citizenship Certificate, NRNs can actively participate in establishing and promoting businesses in Nepal, fostering stronger ties with the diaspora community.
The updated laws allow startups to issue shares for non-cash contributions such as intellectual property, goodwill, or technical know-how. Startups can allocate up to 40% of their paid-up capital for non-cash shares, encouraging innovation and recognizing the value of intangible assets.
Significant liberalization measures have been introduced in Nepal's FDI framework. New sectors have been opened for foreign investment, ownership limits have been increased, and procedures have been simplified. The integration of digital platforms for application and approval processes further enhances transparency and efficiency.
Nepal offers attractive tax incentives to foreign investors, including corporate tax holidays, customs duty exemptions on machinery and raw materials, VAT exemptions for exports, and additional benefits for investments in Special Economic Zones and least developed areas.
Special Economic Zones have been established in various regions, offering enhanced infrastructure and incentives to businesses. Benefits include corporate tax exemptions, import duty exemptions, one-stop services, and streamlined procedures, making them attractive destinations for foreign investment.
Q1: Can a foreigner own 100% of a company in Nepal?
Yes, foreign investors can own 100% of a company in most sectors, subject to sector-specific restrictions and compliance with the Foreign Investment and Technology Transfer Act (FITTA).
Q2: What is the minimum investment required for foreign investors?
As of 2025, the minimum foreign direct investment (FDI) required is NPR 20 million (approx. USD 150,000) per foreign investor for most sectors. However, IT-based companies using the automatic FDI approval route are exempt from this minimum capital threshold.
Q3: Are there any sectors restricted for foreign investment?
Yes, certain sectors like retail trading (excluding international franchises), personal services, and small-scale agriculture are restricted.
Q4: How long does the company registration process take?
Typically, it takes 4 to 8 weeks, depending on documentation and regulatory approvals. The process includes FDI approval, name reservation, company registration, tax registration, and capital injection setup.
Q5: Can profits be repatriated?
Yes, after fulfilling tax obligations and obtaining necessary approvals from Nepal Rastra Bank. The recent amendments have simplified the repatriation process, reducing approval timelines.