Can Foreigners Register a Private Company in Nepal?

Overview of Foreign Company Registration in Nepal

Foreigners can register a private company in Nepal under the Companies Act, 2063 (2006). Nepal’s regulatory framework permits foreign nationals and entities to establish private limited companies, subject to specific legal requirements and compliance procedures. The Department of Industry under the Ministry of Industry, Commerce and Supplies oversees company registration in Nepal. Foreign investors must follow the same registration process as Nepali citizens while adhering to additional foreign investment guidelines established by the Nepal Rastra Bank and the Board of Investment.

Legal Framework for Foreign Company Registration

The Companies Act, 2063 (2006) serves as the primary legislation governing company registration in Nepal. This act establishes the legal foundation for both domestic and foreign company registration. The Foreign Investment and Technology Transfer Act, 1992 provides additional provisions for foreign investors establishing businesses in Nepal. The Industrial Enterprises Act, 1992 offers incentives and regulations for industrial enterprises, including those owned by foreigners. These laws collectively create a structured environment for foreign company registration while protecting Nepal’s economic interests.

Legal Framework	Year Enacted	Primary Purpose
Companies Act	2063 (2006)	Governs company registration and operations
Foreign Investment Act	1992	Regulates foreign investment procedures
Industrial Enterprises Act	1992	Provides incentives for industrial ventures
Nepal Rastra Bank Guidelines	Ongoing	Manages foreign currency and investment regulations

Eligibility Requirements for Foreign Investors

Foreign nationals and foreign companies can register private companies in Nepal if they meet specific eligibility criteria. The applicant must be at least 18 years old and possess legal capacity to enter into contracts. Foreign investors must obtain a Permanent Account Number (PAN) from the Inland Revenue Department before company registration. The investor should have a valid passport or travel document recognized by Nepal. Foreign companies must appoint at least one director who is a Nepali citizen or holds a valid work permit in Nepal.

Key Eligibility Criteria

The following requirements must be satisfied for successful foreign company registration:

The foreign investor must maintain a minimum capital contribution as specified by the company’s articles of association and Nepal’s regulatory guidelines.
The investor must provide proof of identity through a valid passport or internationally recognized travel document.
The foreign investor must obtain a Permanent Account Number (PAN) from the Inland Revenue Department of Nepal.
At least one director of the company must be a Nepali citizen or a foreign national with valid work authorization in Nepal.
The company must have a registered office address within Nepal’s territory.

Documents Required for Foreign Company Registration

Foreign investors must submit comprehensive documentation to the Department of Industry for company registration. The following documents are essential for the registration process:

The applicant must provide a certified copy of the foreign investor’s passport or travel document with a notarized English translation if the original is in another language.
The investor must submit proof of Permanent Account Number (PAN) obtained from the Inland Revenue Department.
The applicant must provide a certificate of incorporation or business registration from the investor’s home country, duly notarized and translated into English.
The foreign investor must submit a detailed memorandum of association outlining the company’s objectives, structure, and operational framework.
The applicant must provide articles of association specifying the company’s internal governance rules and shareholder rights.
The investor must submit a board resolution authorizing the establishment of the company in Nepal.
The applicant must provide proof of the registered office address in Nepal, such as a lease agreement or property ownership document.
The foreign investor must submit a declaration of compliance with Nepal’s foreign investment regulations and tax obligations.

Step-by-Step Registration Process

The foreign company registration process in Nepal involves multiple stages and requires coordination with various government agencies. Understanding each step ensures smooth and timely registration.

Step 1: Obtain Permanent Account Number (PAN)

The foreign investor must first register with the Inland Revenue Department to obtain a Permanent Account Number (PAN). This number is mandatory for all business entities and individuals conducting business in Nepal. The applicant should visit the nearest Inland Revenue Office with their passport and completed PAN application form. The PAN is typically issued within 3-5 working days.

Step 2: Prepare Company Documentation

The investor must prepare the memorandum of association and articles of association according to the Companies Act, 2063. These documents must be drafted in English or translated into English by a certified translator. The documents should clearly define the company’s objectives, capital structure, and governance framework. All documents must be notarized by a recognized notary public.

Step 3: Submit Application to Department of Industry

The foreign investor must submit the complete application package to the Department of Industry. The application should include all required documents, properly notarized and translated. The Department of Industry will review the application for completeness and compliance with legal requirements. The review process typically takes 7-15 working days.

Step 4: Obtain Approval from Nepal Rastra Bank (if applicable)

For certain types of foreign investment, approval from the Nepal Rastra Bank may be required. This is particularly relevant for investments involving foreign currency or financial services. The investor must submit the necessary documentation to the Nepal Rastra Bank’s Foreign Investment Division. Approval typically takes 10-20 working days depending on the investment nature.

Step 5: Register with Department of Industry

Upon receiving approval from all relevant authorities, the investor can proceed with formal registration. The Department of Industry will issue a certificate of registration upon successful completion of all requirements. The registration certificate serves as proof of the company’s legal establishment in Nepal. The investor receives a unique company registration number for all future transactions.

Step 6: Register with Tax Authority

The newly registered company must register with the Inland Revenue Department for tax purposes. The company must obtain a Tax Identification Number (TIN) within 30 days of registration. The investor should submit the certificate of registration and other required documents to the nearest Inland Revenue Office. Tax registration is mandatory for all business entities operating in Nepal.

Step 7: Open Bank Account and Deposit Capital

The company must open a bank account in Nepal within 30 days of registration. The investor must deposit the minimum capital as specified in the articles of association. The bank will provide documentation confirming the capital deposit, which must be retained for regulatory compliance. This step finalizes the company’s financial establishment in Nepal.

Restrictions and Limitations for Foreign Investors

Nepal’s regulatory framework imposes certain restrictions on foreign company ownership and operations. Foreign investors cannot own more than 100 percent of certain sectors deemed sensitive to national security. The government restricts foreign investment in telecommunications, defense-related industries, and certain media outlets. Foreign companies must comply with Nepal’s labor laws, which mandate the employment of Nepali citizens for specified positions. The Foreign Investment and Technology Transfer Act, 1992 requires foreign investors to obtain specific approvals for technology transfer agreements.

Sector-Specific Restrictions

Sector	Restriction Level	Approval Required
Telecommunications	Limited foreign ownership	Nepal Rastra Bank approval
Defense Industries	Restricted	Ministry of Defense approval
Media and Broadcasting	Limited foreign ownership	Ministry of Information approval
Banking and Finance	Regulated	Nepal Rastra Bank approval
Insurance	Regulated	Insurance Board approval
Real Estate	Limited foreign ownership	Land Management Office approval

Tax Obligations for Foreign-Owned Companies

Foreign-owned private companies in Nepal must comply with all applicable tax laws and regulations. The company must file annual income tax returns with the Inland Revenue Department. Corporate income tax in Nepal is currently levied at a standard rate of 25 percent on taxable income. The company must maintain proper accounting records and financial statements in accordance with Nepal’s Accounting Standards. Value Added Tax (VAT) registration is mandatory if the company’s annual turnover exceeds the prescribed threshold.

Tax Compliance Requirements

The following tax obligations apply to all foreign-owned companies operating in Nepal:

The company must file annual income tax returns within the prescribed deadline, typically 45 days after the fiscal year ends.
The company must maintain detailed accounting records and financial statements prepared according to Nepal’s Accounting Standards.
The company must register for Value Added Tax (VAT) if annual turnover exceeds the current threshold of NPR 5 million.
The company must file quarterly VAT returns and remit collected VAT to the Inland Revenue Department.
The company must withhold income tax on payments made to contractors and service providers as per prescribed rates.
The company must file annual financial statements with the Department of Industry as required under the Companies Act.

Axion Partners: Your Premier Service Provider for Foreign Company Registration in Nepal

Axion Partners stands as the best and No. 1 service provider in Nepal for foreign company registration and related legal services. Our team of experienced professionals specializes in guiding foreign investors through Nepal’s complex regulatory landscape. We provide comprehensive support from initial consultation through final registration and ongoing compliance. Axion Partners maintains an excellent track record of successfully registering foreign-owned companies across diverse sectors in Nepal.

Our services include document preparation, government liaison, regulatory compliance, and post-registration support. We ensure that all applications meet Nepal’s stringent legal requirements and are processed efficiently. Axion Partners’ deep understanding of Nepal’s laws and regulations enables us to provide strategic guidance tailored to each client’s specific needs. We have successfully assisted hundreds of foreign investors in establishing their businesses in Nepal.

Frequently Asked Questions

How long does foreign company registration take in Nepal?

The complete registration process typically takes 30-45 days from application submission to final registration certificate issuance. The timeline depends on document completeness, government processing schedules, and any additional approvals required from specialized agencies.

What is the minimum capital requirement for foreign companies in Nepal?

Nepal does not prescribe a fixed minimum capital amount for private companies. The minimum capital is determined by the company’s articles of association and the nature of business operations. Most foreign companies establish with capital ranging from NPR 100,000 to NPR 10 million.

Can a foreign national be the sole director of a company in Nepal?

No, at least one director must be a Nepali citizen or a foreign national with valid work authorization in Nepal. This requirement ensures local accountability and compliance with Nepal’s corporate governance standards.

Do foreign companies need to hire Nepali citizens?

Yes, foreign companies must comply with Nepal’s labor laws, which mandate employment of Nepali citizens for specified positions. The Foreign Employment Act, 2007 regulates the employment of foreign nationals in Nepal.

What are the annual compliance requirements for foreign companies?

Foreign companies must file annual financial statements, income tax returns, and VAT returns as applicable. Companies must also maintain proper accounting records and conduct annual general meetings as required by the Companies Act, 2063.

Can foreign investors repatriate profits from Nepal?

Yes, foreign investors can repatriate profits subject to Nepal Rastra Bank regulations and tax compliance. The investor must obtain approval from the Nepal Rastra Bank and pay applicable taxes before repatriating funds.

Is it possible to convert a foreign company into a Nepali company?

Yes, a foreign company can be converted into a Nepali company through a formal process involving amendment of company documents and regulatory approvals. This process requires submission of amended memorandum and articles of association to the Department of Industry.

Conclusion

Foreign nationals and entities can successfully register private companies in Nepal by adhering to the legal framework established under the Companies Act, 2063 and related legislation. The process requires careful preparation of documentation, compliance with regulatory requirements, and coordination with multiple government agencies. Axion Partners provides expert guidance and comprehensive support throughout the entire registration process, ensuring compliance with all legal requirements and timely completion of registration. Our proven expertise and client-focused approach make us the preferred choice for foreign investors establishing companies in Nepal.