Why Register a Company in Nepal?

Nepal sits between two of the world’s largest consumer markets, India and China, and the Foreign Investment and Technology Transfer Act, 2075 (FITTA), gives foreign investors national treatment alongside guarantees on profit repatriation and protection against arbitrary nationalisation. The Companies Act, 2063 (2006) governs incorporation itself, administered by the Office of the Company Registrar (OCR), which has moved its registration process onto CAMIS, the Company Administration and Management Information System, an online portal that handles name reservation, form submission and certificate issuance without requiring a physical office visit for most straightforward filings.

The single most important structural fact for a foreign investor is that Nepal splits company registration into two separate government processes rather than one. Before a foreign-invested company can register with the OCR, the investment itself needs approval under FITTA, either from the Department of Industry for projects up to NPR 6 billion or from Investment Board Nepal for larger, nationally significant projects. Only once that investment approval is granted can the company proceed to standard OCR incorporation, so the FITTA stage isn’t a formality layered on top of registration. It’s a genuine precondition that determines whether registration can happen at all.

Nepal has also been actively adjusting this framework in recent years, in both directions. The general FDI minimum threshold was reduced from NPR 50 million to NPR 20 million, and in 2023 the Ministry of Industry, Commerce and Supplies removed the minimum threshold entirely for the information technology sector, a genuinely significant carve-out for a country trying to build out IT and business process outsourcing as an export industry. At the same time, a March 2025 amendment introduced a new approval requirement before foreign investors can sell or transfer equity to a domestic party, tightening what used to be a simpler post-transaction notification process. Both changes are covered in more detail below.

Choosing the Right Business Structure

The right structure in Nepal depends mainly on whether you’re bringing in equity to build a genuine local business, or you need a presence to research the market, coordinate with local partners, or run a specific project before committing capital.

Private Limited Company

The Private Limited Company is the standard vehicle for the large majority of foreign investors, allowing between 1 and 101 shareholders, foreign or Nepali, with full liability protection separate from the shareholders’ personal assets. For a foreign-invested private limited company, FITTA requires a minimum equity investment of NPR 20 million per foreign investor in most sectors, though this minimum doesn’t apply to Nepali shareholders in the same company and, as covered below, doesn’t apply at all to companies in the IT sector. Shares can be transferred between shareholders, though a foreign shareholder transferring equity to a Nepali party now needs prior Department of Industry approval under the March 2025 amendment.

Public Limited Company

A Public Limited Company suits larger operations, particularly banks, insurers and businesses that plan to raise capital from the public or list on the Nepal Stock Exchange. It requires a minimum of 7 shareholders and carries meaningfully heavier governance and disclosure obligations than a private limited company, including stricter board composition rules and more extensive reporting to the OCR. Most foreign investors entering Nepal for the first time don’t need this structure unless their sector specifically requires it, banking and insurance being common examples.

Branch Office

A branch office lets a foreign company carry out income-generating business activity in Nepal directly under its own name, without incorporating a separate Nepali legal entity. Section 154 of the Companies Act requires branch office applicants to submit approval from the relevant sector regulator alongside the OCR application, and unlike a liaison office, a branch can invoice clients, sign contracts and generate revenue. The trade-off is that a branch has no separate legal personality. It remains part of the foreign parent company, which bears full liability for whatever the branch does in Nepal, and it must appoint a local representative to manage day-to-day activities and comply with Nepali tax, labour and company law.

Liaison Office

A liaison office is the lightest-touch option, intended for market research, coordinating with local agents, and building relationships ahead of a genuine investment decision, rather than trading. The Companies Act specifically prohibits a liaison office from earning income, entering contracts, or conducting marketing and advertising, so it functions purely as a communication channel. Because it doesn’t generate income, it doesn’t fall under FITTA’s equity thresholds, and government approval usually isn’t required for straightforward liaison office registration, though the OCR can require sector regulator sign-off depending on the parent company’s line of business.

Comparison of Common Business Structures in Nepal

Structure Common purpose Pros Cons
Private Limited Company Foreign-owned subsidiaries, SMEs and standard commercial trading Full liability protection; 100% foreign ownership allowed in most sectors; 1 to 101 shareholders Foreign-invested companies need NPR 20 million in equity per investor (waived for IT); FITTA approval required first
Public Limited Company Larger operations, banks, insurers and businesses planning to list or raise public capital Can raise capital from the public; suited to large-scale or regulated operations Minimum of 7 shareholders; heavier governance, disclosure and reporting obligations
Branch office A foreign company carrying out income-generating business directly under its own name No new Nepali legal entity to incorporate; keeps the parent company’s identity and contracts No separate legal personality; parent company bears full liability; sector regulator approval required
Liaison office Market research, coordination with agents, and relationship-building ahead of a real investment Simple to set up; no FITTA equity requirement since it doesn’t generate income Cannot invoice, contract, sell or earn income in Nepal under any circumstances

For most foreign companies planning genuine operations in Nepal, a Private Limited Company is the practical choice. It creates a separate legal entity that limits liability to the business itself, while a branch office keeps the parent fully exposed and a liaison office can’t generate revenue at all, making both better suited to a narrower, specific purpose than to a company planning to trade, hire and grow in the Nepali market.

Nepal's Legal and Regulatory Requirements for Companies

Company formation runs through the OCR, but a foreign-invested company also has separate, ongoing obligations to the Department of Industry under FITTA, to Nepal Rastra Bank for foreign exchange compliance, and to the Inland Revenue Department for tax registration and filing.

Key Business Regulations in Nepal

  • Standard corporate income tax is 25% on net profit, rising to 30% for banks, financial institutions, insurance companies and telecom operators, while IT and agro-processing industries are taxed at 20%, and export-oriented IT firms can reduce their effective rate to roughly 5% by claiming the 75% export income rebate
  • Value Added Tax is a flat 13% on most goods and services under the VAT Act, 2052, with mandatory registration once annual turnover exceeds NPR 50 lakh (5 million) for goods businesses or NPR 30 lakh (3 million) for services, and registration is required within 30 days of crossing the threshold
  • FITTA’s negative list restricts foreign investment in specific sectors entirely, including primary agriculture such as fish farming and dairy, small and cottage industries, personal service businesses like salons and tailoring, and arms, ammunition and atomic energy related industries, while other sectors permit foreign investment only up to a specified equity cap
  • Foreign-invested companies employing staff must comply with the Contribution Based Social Security Act, 2074, which is mandatory for employers with 10 or more employees and voluntary below that threshold
  • Since the March 2025 amendment under the Act Relating to Improving Economic and Business Environment and Enhancing Investment, 2081, a foreign investor selling or transferring equity to a domestic party needs prior Department of Industry approval, replacing the previous rule that only required notification and registration within 30 days after the transaction

Tips for Staying Compliant with Nepali Laws

  • Confirm your sector’s status on the current FITTA negative list before committing to a structure or budget, since the list is updated periodically and a sector open to FDI today may carry a different equity cap than older guides describe
  • If you’re in the IT sector, get written confirmation of your exemption from the NPR 20 million threshold from the Department of Industry as part of your application file, since this exemption is a specific ministerial notice rather than a blanket statutory rule for the whole industry
  • Route all foreign capital through Nepal Rastra Bank’s prescribed banking channels and keep the paperwork, since NRB approval and documentation are what make future profit repatriation and equity transfers straightforward later
  • If your business plan includes a future sale or exit, plan for the Department of Industry approval the March 2025 amendment now requires before transferring equity to a Nepali party, since this adds a genuine approval step that wasn’t there before
  • Register for Social Security Fund contributions as soon as you cross 10 employees rather than waiting, since enrolment, monthly filing and the transition away from older provident fund arrangements all take real administrative lead time

Step-by-Step Process to Set Up a Company in Nepal

Setting up a foreign-invested Private Limited Company in Nepal runs through two sequential government processes. Investment approval has to be secured before incorporation can proceed, which makes the sequencing genuinely important to plan around rather than something to figure out along the way.

1

Apply for Foreign Investment Approval Under FITTA

Submit an application to the Department of Industry, or to Investment Board Nepal for investments above NPR 6 billion, including a business plan, proposed shareholding structure, and evidence of the source of funds. The statutory timeline for a decision is 7 days, though in practice this routinely takes longer, commonly cited as anywhere from a few weeks up to several months depending on the sector and how complete the initial filing is. This is the stage where your sector’s status under the FITTA negative list and any applicable equity minimum, including the IT exemption if relevant, actually gets confirmed.

2

Reserve Your company Name and Prepare Incorporation Documents

Once investment approval is granted, reserve your proposed company name through the OCR’s CAMIS portal, checking it doesn’t conflict with an existing registered entity. Prepare the Memorandum of Association and Articles of Association setting out the company’s objectives, share structure and governance, along with identification documents for all directors and shareholders. Documents originating outside Nepal generally need to be translated into Nepali and, for foreign corporate shareholders, properly authenticated before submission.

3

Submit the Incorporation Application Through CAMIS

File the complete application through the OCR’s online CAMIS portal, referencing your FITTA approval as part of the submission. The OCR reviews the documents for completeness and consistency, a common cause of rejection being names that don’t match exactly between the Memorandum of Association and the application form, or missing identification details for directors or shareholders. Where documentation is clean and consistent, incorporation can move relatively quickly, though the OCR has indicated a physical office visit may still be needed for verification in some cases even with the online system in place.

4

Bring in Capital Through Nepal Rastra Bank’s Banking Channel

Foreign equity must be remitted into Nepal through the banking channel prescribed by Nepal Rastra Bank, which issues the documentation confirming the capital has been properly brought in as foreign investment rather than as an ordinary commercial remittance. This step matters well beyond initial registration, since NRB’s own records of how capital entered the country are what support profit repatriation and any future equity transfer or divestment.

5

Register for Tax and complete Post-Incorporation Filings

Register with the Inland Revenue Department for a Permanent Account Number (PAN), and for VAT registration if your turnover is expected to cross the applicable threshold. Complete registration at the local ward office where required, and, once you plan to hire, register as an employer with the Social Security Fund. Foreign-invested companies also typically need to register separately with the Department of Industry as an operating industry under the Industrial Enterprises Act, a step distinct from the initial FITTA investment approval.

Hiring and Managing Employees

Nepal’s Labour Act, 2074 (2017) and the Contribution Based Social Security Act, 2074 govern employment. Employers with 10 or more employees must enrol staff in the Social Security Fund (SSF), contributing a combined 31% of each employee’s basic salary, 20% from the employer and 11% from the employee, covering medical treatment, health and maternity protection, accident and disability protection, dependent family protection, and old-age pension benefits. SSF contributions are deposited monthly by the 15th of the Nepali month and, for enrolled employers, replace the older separate provident fund and gratuity arrangements. Employees who contribute to the SSF are also exempt from the 1% Social Security Tax that otherwise applies to the first band of individual income tax.

Foreign nationals cannot work in Nepal on a business or tourist visa. Employing a foreign national requires two separate approvals: a work permit (labour permit) from the Department of Labour and Occupational Safety, and, once that’s granted, a non-tourist working visa from the Department of Immigration. The employer must generally demonstrate that no qualified Nepali candidate is available for the role, commonly through advertising the vacancy locally before applying, and companies with foreign investment are typically limited to filling roughly 5% of their total workforce with foreign nationals, a cap that makes workforce planning genuinely important from the outset rather than an afterthought. A small number of categories, including diplomats, individuals covered by specific international treaties, and technicians engaged for short-term tasks under three months, are exempt from the work permit requirement under Section 23(2) of the Labour Act.

For a company that wants to hire in Nepal without first securing FITTA approval and incorporating a local entity, an Employer of Record in Nepal can take on the legal employer role directly, managing SSF enrolment, payroll withholding and Labour Act compliance without requiring an investment approval or company registration to be completed first.

Tips for Recruiting and Retaining Local Talent

  • Consider a recruitment agency for IT and BPO roles concentrated in Kathmandu, where demand from export-oriented employers has grown quickly since the sector’s FDI threshold was removed in 2023
  • Budget the full 20% employer SSF contribution into hiring costs from the outset, since it applies on top of gross salary rather than being funded from within it
  • If your workforce plan depends on foreign specialists, map out the 5% foreign-employee cap early, since it constrains how many non-Nepali staff a foreign-invested company can realistically bring in as headcount grows
  • Start the local vacancy advertisement and justification process for any foreign hire well ahead of when you need them in role, since the work permit and visa sequence both depend on that labour market test being completed first

Financial Management and Reporting

Companies file annual tax returns with the Inland Revenue Department, and the fiscal year in Nepal runs from mid-July to mid-July rather than the calendar year, which is a genuine planning point for a foreign parent company used to reporting on a different cycle. VAT-registered businesses file monthly returns by the 25th of the following Nepali month. Branch offices carry an additional reporting layer: they must appoint an auditor and submit an annual financial statement, balance sheet and profit and loss account to the OCR within 6 months of the fiscal year’s completion, and must also submit the parent company’s own balance sheet alongside the branch’s Nepal-specific accounts.

Nepal doesn’t offer a fully instantaneous registration experience even with CAMIS now handling most of the OCR process online, since document consistency requirements are strictly enforced and the FITTA approval stage that precedes incorporation still runs on its own, less predictable timeline. Budgeting real time, not just the statutory 7-day figure often quoted, for the investment approval stage specifically avoids the most common source of delay in the whole process.

Common Pitfalls to Avoid

  • Starting business activity, signing contracts, or opening operations before FITTA approval is actually granted, rather than while it’s still pending
  • Assuming the NPR 20 million minimum applies uniformly, when it’s specifically waived for the IT sector and Nepali co-shareholders in a mixed structure aren’t subject to it at all
  • Treating the March 2025 equity transfer approval requirement as the same lighter-touch notification process that applied before, when it’s now a genuine prior-approval step through the Department of Industry
  • Overlooking the branch office’s dual reporting obligation, since both the branch’s own accounts and the parent company’s balance sheet need to be filed with the OCR
  • Missing the 5% cap on foreign employees as a foreign-invested company scales its Nepal headcount, which can constrain hiring plans that weren’t built around it from the start

Tips for Operating Successfully in Nepal

Matching your structure to your actual purpose in Nepal matters more here than in many jurisdictions, given how differently a liaison office, branch office and Private Limited Company are treated. A liaison office is genuinely useful for testing the market and building relationships before committing capital, but trying to stretch it into anything resembling revenue-generating activity risks the registration itself, since the restriction on income-generating activity is a hard legal line rather than a grey area.

Treat the FITTA approval stage and OCR incorporation as sequential, not parallel, processes, and build your market-entry timeline around the FITTA stage’s real-world processing time rather than the statutory 7-day figure many sources quote. Companies that plan for a several-week to multi-month approval window tend to have a smoother experience than those that expect immediate turnaround.

Finally, if your sector qualifies for the IT exemption or another current incentive, get the specific ministerial notice or circular that confirms it in writing as part of your application file, rather than relying on general industry knowledge that a sector is exempt, since Nepal’s investment framework has changed several times in the past few years and what applied even a year or two ago isn’t always still current.

Common Mistakes to Avoid

  1. Applying to the OCR for incorporation before FITTA investment approval has actually been granted
  2. Assuming the general NPR 20 million FDI threshold applies to an IT company without confirming the specific 2023 exemption in writing
  3. Underestimating the real-world FITTA approval timeline by planning around the statutory 7-day figure alone
  4. Missing the new Department of Industry approval requirement before transferring equity to a Nepali party under the March 2025 amendment
  5. Treating a liaison office as capable of light commercial activity, when Nepali law prohibits it from earning income under any circumstances
  6. Overlooking the 5% cap on foreign employees when planning a foreign-invested company’s hiring trajectory

Why Now is the Right Time to Register a Company in Nepal

Nepal’s foreign investment framework has moved in a genuinely investor-friendly direction on the fundamentals that matter most for market entry. The general FDI threshold has come down from NPR 50 million to NPR 20 million in recent years, and the complete removal of the minimum for IT companies in 2023 is a real, specific reason for a technology or BPO-focused business to look at Nepal now rather than treating it as a market still working through outdated capital barriers. Nepal registered a record number of new companies in the most recent fiscal year, which reflects a genuinely more active entrepreneurial and investment environment than the country had several years ago.

At the same time, a company entering now should register with accurate expectations about where the framework has tightened rather than only where it has loosened. The March 2025 requirement for Department of Industry approval before transferring equity to a domestic party is a real, recent change that adds a step to any future exit or restructuring, and the FITTA approval stage’s actual processing time remains longer in practice than the statutory 7 days often quoted. A company that plans its Nepal entry around both the genuine openings, particularly in IT, and the areas where compliance has gotten more demanding is better positioned than one working from an outdated or overly optimistic picture of the process.

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Frequently Asked Questions

There's no blanket statutory requirement under the Companies Act for a foreign-invested private limited company to appoint a Nepali director, and a company can be structured with entirely foreign directors and shareholders. That said, having a locally based director or authorised representative tends to make practical dealings with the OCR, Nepal Rastra Bank and other authorities considerably easier, particularly since original documents and in-person steps still come up at various points in the process even with CAMIS handling most filings online.

Yes, this is a common path for a foreign company testing the market before committing capital. A liaison office isn't a legal dead end. Once a company decides to move into revenue-generating activity, it applies separately for branch office registration or goes through the full FITTA approval and OCR incorporation process for a Private Limited Company, rather than converting the liaison office registration itself. The liaison office registration would generally need to be wound down as the company transitions to whichever structure it chooses next.

Nepal has specifically opened this channel in recent years. Institutional foreign investors can establish a venture capital fund in Nepal by incorporating under local law and obtaining approval from the Securities Board of Nepal, and a further 2025 ordinance amendment to FITTA expanded the ability of foreign investors to invest in Nepali companies through venture capital or specialised investment funds registered with Nepal's regulatory authorities. This is a distinct route from direct equity investment in an operating company and carries its own approval and reporting requirements through the Securities Board rather than only through the Department of Industry.

Not necessarily. FITTA specifically allows the minimum investment threshold for Non-Resident Nepalis to be set differently from the general foreign investor threshold under Section 3(3) of the Act. An NRN investor should confirm the applicable threshold for their specific situation with the Department of Industry rather than assuming the standard NPR 20 million figure automatically applies, since this is one of the more commonly misunderstood distinctions in Nepal's investment framework.

This changed significantly in 2025. The Improving Economic and Business Environment and Enhancing Investment Act, 2081, approved in March 2025, amended both the Foreign Exchange (Regulation) Act and FITTA to permit outbound investment for the first time in a meaningful way, including allowing Nepali IT companies to invest abroad in IT-related businesses, obtain foreign exchange facilities from Nepal Rastra Bank, and establish branch offices overseas. IT companies seeking this route need to show they've earned foreign currency through IT services exports for at least the preceding three fiscal years, so it isn't available to a newly established company without that export track record.