Registering a BPO/Outsourcing Company in Nepal for Foreigners

Legal Framework for Foreign Investment in BPO Companies

Foreign investors can establish Business Process Outsourcing (BPO) and outsourcing companies in Nepal under the Foreign Investment and Technology Transfer Act, 2019 (FITTA 2019). The Act permits 100% foreign ownership in service sector industries, including information technology and business process outsourcing services. The Department of Industry (DOI) serves as the primary regulatory authority for foreign investment registration and approval. Foreign investors must comply with the Industrial Enterprises Act, 2020, which governs the establishment and operation of industrial enterprises in Nepal.

Types of Business Structures Available for Foreign Investors

Foreign investors can register BPO companies in Nepal through several legal structures recognized under the Companies Act, 2063 (2006):

Business Structure	Minimum Capital	Foreign Ownership	Liability
Private Limited Company	NPR 100,000	Up to 100%	Limited to share capital
Public Limited Company	NPR 10,000,000	Up to 100%	Limited to share capital
Branch Office	As per parent company	100%	Unlimited (parent liable)
Liaison Office	No commercial activity	100%	Not applicable

Private Limited Companies represent the most common structure for foreign-owned BPO operations due to lower capital requirements and operational flexibility.

Minimum Capital Requirements for BPO Companies

The Foreign Investment and Technology Transfer Act, 2019 mandates minimum foreign investment thresholds based on the business sector. For service sector enterprises including BPO companies, foreign investors must invest a minimum of NPR 50 million (approximately USD 375,000) as equity capital. This requirement applies to wholly foreign-owned companies. Joint ventures with Nepali partners may have different capital requirements based on the foreign ownership percentage. The capital must be brought into Nepal through banking channels and converted to Nepali Rupees through authorized financial institutions.

Step-by-Step Registration Process

Step 1: Obtain Foreign Investment Approval

Foreign investors must first register with the Department of Industry to obtain foreign investment approval. The application requires submission of a detailed project proposal, feasibility study, and source of funds documentation. The Department reviews applications within 7 working days for service sector projects under the Industrial Enterprises Act, 2020.

Step 2: Reserve Company Name

The applicant must reserve a unique company name through the Office of Company Registrar (OCR). The name reservation application can be submitted online through the OCR portal. The reserved name remains valid for 35 days from the date of approval. The company name must not duplicate existing registered entities and must comply with naming conventions under the Companies Act, 2063.

Step 3: Prepare Constitutional Documents

The company must prepare its Memorandum of Association and Articles of Association in accordance with the Companies Act, 2063. These documents must specify the company’s objectives, authorized capital, share structure, and governance provisions. For BPO companies, the objectives should clearly mention business process outsourcing, information technology services, and related activities.

Step 4: Register with Office of Company Registrar

Submit the company registration application to the Office of Company Registrar along with all required documents and prescribed fees. The OCR processes complete applications within 1-3 working days. Upon approval, the company receives a Certificate of Incorporation and Company Registration Number.

Step 5: Obtain Tax Registration

Register with the Inland Revenue Department for Permanent Account Number (PAN) within 7 days of company registration. The PAN serves as the primary tax identification number for all tax-related transactions. The application requires submission of the company registration certificate and constitutional documents.

Step 6: Register with Local Authorities

Register the company with the respective municipal office where the business will operate. This registration is mandatory under the Local Government Operation Act, 2074 (2017). The municipality issues a business operation recommendation letter required for other registrations.

Required Documents for Company Registration

Documents from Foreign Investors

Valid passport copies of all foreign shareholders and directors with notarization and authentication from the Nepali Embassy or Apostille certification.
Board resolution from the parent company (if applicable) authorizing investment in Nepal with proper authentication.
Bank solvency certificate or financial statements demonstrating the investor’s financial capacity to make the proposed investment.
Police clearance certificate from the home country for all foreign directors and shareholders.
Curriculum vitae of foreign directors detailing their professional experience and qualifications.

Company Formation Documents

Memorandum of Association stating the company’s objectives, authorized capital, and initial shareholding structure.
Articles of Association outlining the internal governance rules, director powers, and shareholder rights.
Feasibility study report for the BPO project including market analysis, operational plan, and financial projections.
Office lease agreement or property ownership documents for the registered office address.
Consent letters from all proposed directors agreeing to serve on the company board.

Financial Documents

Bank statement showing the source of investment funds with certification from the issuing bank.
Foreign investment approval certificate issued by the Department of Industry.
Capital commitment letter from foreign investors specifying the investment amount and timeline.

Sector-Specific Licenses and Permits

BPO companies in Nepal must obtain several sector-specific approvals beyond basic company registration:

Telecommunications License

Companies providing voice-based BPO services must obtain a telecommunications service license from the Nepal Telecommunications Authority under the Telecommunications Act, 2053 (1997). The license application requires technical specifications, network diagrams, and service delivery plans.

Data Protection Compliance

BPO companies handling personal data must comply with the Electronic Transactions Act, 2063 (2008) regarding data privacy and security. Companies must implement appropriate technical and organizational measures to protect client data.

Export Registration

BPO companies exporting services must register with the Department of Customs and obtain an exporter code. This registration enables the company to claim export incentives and tax benefits under the Income Tax Act, 2058 (2002).

Foreign Employment and Work Permits

Work Visa Requirements

Foreign nationals working in Nepal must obtain work visas through the Department of Immigration. The employer must first obtain work permit approval from the Department of Labor and Employment. The Foreign Employment Act, 2064 (2007) regulates foreign worker employment in Nepal.

Work Permit Application Process

Step 1: The company submits a work permit application to the Department of Labor specifying the position, qualifications required, and justification for hiring foreign employees.

Step 2: The Department reviews the application and may require proof that qualified Nepali workers are unavailable for the position.

Step 3: Upon approval, the foreign employee applies for a work visa at the Nepali Embassy or upon arrival at Tribhuvan International Airport.

Step 4: The work visa is typically issued for one year and can be renewed annually based on continued employment.

Limitations on Foreign Employment

The Labor Act, 2074 (2017) requires that at least 75% of employees in private companies must be Nepali citizens. Foreign employees can only fill positions requiring specialized skills not available in the local labor market. Companies must provide training to Nepali employees to eventually replace foreign workers in technical positions.

Tax Obligations and Incentives

Corporate Income Tax

BPO companies in Nepal are subject to corporate income tax at the rate of 25% on taxable income under the Income Tax Act, 2058 (2002). Companies must file annual tax returns within 3 months of the fiscal year end (mid-July). Quarterly advance tax payments are mandatory for companies with annual turnover exceeding NPR 10 million.

Value Added Tax (VAT)

BPO companies providing services to foreign clients can claim VAT exemption on export services under the Value Added Tax Act, 2052 (1996). Services provided to domestic clients are subject to 13% VAT. Companies with annual turnover exceeding NPR 5 million must register for VAT.

Tax Incentives for IT and BPO Sector

Incentive Type	Benefit	Legal Basis
Income Tax Exemption	5 years for IT companies in specified areas	Income Tax Act, 2058 Section 11
Export Income Deduction	50% deduction on export income	Income Tax Act, 2058 Section 12
Accelerated Depreciation	Higher depreciation rates on IT equipment	Income Tax Rules, 2059
Dividend Tax Exemption	No withholding tax on reinvested dividends	Income Tax Act, 2058 Section 54

Repatriation of Profits and Capital

The Foreign Exchange (Regulation) Act, 2019 governs foreign exchange transactions and profit repatriation. Foreign investors can repatriate the following amounts after paying applicable taxes:

Net profit earned from the investment after deducting all taxes and liabilities.
Principal amount invested in the company upon liquidation or sale of shares.
Proceeds from the sale of shares to other investors.
Amounts received as dividends from the company’s distributable profits.

All repatriation transactions must be conducted through authorized banking channels with proper documentation. The Nepal Rastra Bank (Central Bank) monitors foreign exchange transactions to ensure compliance with foreign exchange regulations.

Compliance Requirements for Operating BPO Companies

Annual Compliance Obligations

File annual returns with the Office of Company Registrar within 6 months of fiscal year end including audited financial statements.
Submit annual tax returns to the Inland Revenue Department within 3 months of fiscal year end.
Conduct annual general meetings within 6 months of fiscal year end as required by the Companies Act, 2063.
Renew business operation licenses with municipal authorities annually.
File social security contributions for employees with the Social Security Fund under the Contribution Based Social Security Act, 2074.

Periodic Reporting to Department of Industry

Foreign-invested companies must submit progress reports to the Department of Industry every 6 months. The reports must include information on capital investment, employment generation, production/service delivery, and compliance with investment commitments. Failure to submit reports may result in penalties or cancellation of foreign investment approval.

Labor Law Compliance

BPO companies must comply with the Labor Act, 2074 (2017) regarding employee rights, working conditions, and benefits. Key requirements include:

Maximum 8 hours daily and 48 hours weekly working time with provisions for overtime compensation.
Minimum wage payment as prescribed by the government (currently NPR 15,000 per month for unskilled workers).
Mandatory social security enrollment for all employees under the Contribution Based Social Security Act, 2074.
Annual leave, sick leave, and maternity leave as specified in the Labor Act.
Workplace safety measures and accident compensation provisions.

Intellectual Property Protection

BPO companies handling client data and proprietary information must implement intellectual property protection measures. The Copyright Act, 2059 (2002) and Patent, Design and Trademark Act, 2022 (1965) provide legal protection for intellectual property rights in Nepal.

Data Security Requirements

Companies must establish written agreements with clients addressing data ownership, confidentiality, and security protocols. The Electronic Transactions Act, 2063 (2008) requires companies to implement reasonable security practices to protect electronic data. Non-disclosure agreements with employees are essential to prevent unauthorized disclosure of client information.

Banking and Financial Regulations

Opening Corporate Bank Accounts

BPO companies must open corporate bank accounts with licensed commercial banks in Nepal. Required documents include:

Company registration certificate from the Office of Company Registrar.
Tax registration certificate (PAN) from the Inland Revenue Department.
Board resolution authorizing account opening and designating authorized signatories.
Identification documents of authorized signatories.
Memorandum and Articles of Association.

Foreign Currency Accounts

Companies engaged in export services can open foreign currency accounts with authorized banks under the Foreign Exchange (Regulation) Act, 2019. These accounts facilitate receipt of foreign currency payments from international clients and simplify foreign exchange transactions.

Challenges and Considerations for Foreign Investors

Infrastructure Limitations

Foreign investors should assess Nepal’s infrastructure capabilities before establishing BPO operations. Power supply reliability, internet connectivity quality, and telecommunications infrastructure vary significantly across different regions. Major cities like Kathmandu, Pokhara, and Biratnagar offer better infrastructure compared to rural areas.

Regulatory Processing Times

Government approval processes in Nepal can experience delays due to bureaucratic procedures and documentation requirements. Foreign investors should allocate sufficient time for obtaining necessary approvals and licenses. Engaging local legal counsel and consultants can expedite the registration process.

Currency Exchange Considerations

The Nepali Rupee is pegged to the Indian Rupee, which affects currency exchange rates and financial planning. Foreign investors should consider exchange rate fluctuations when planning capital investments and profit repatriation. Banking channels for foreign exchange transactions may have processing times of 3-7 working days.

Can foreigners own 100% of a BPO company in Nepal?

Yes, foreign investors can own 100% of BPO companies in Nepal under the Foreign Investment and Technology Transfer Act, 2019. The minimum foreign investment requirement is NPR 50 million for service sector enterprises. Foreign investors must obtain approval from the Department of Industry before company registration.

What is the minimum capital required for foreign-owned BPO companies?

The minimum foreign investment for BPO companies is NPR 50 million (approximately USD 375,000) as mandated by the Foreign Investment and Technology Transfer Act, 2019. This amount must be brought into Nepal through banking channels and invested as equity capital in the company.

How long does the company registration process take?

The complete registration process typically takes 4-6 weeks from initial application to final registration. The Office of Company Registrar processes applications within 1-3 working days after receiving complete documentation. Additional time is required for foreign investment approval, name reservation, and obtaining sector-specific licenses.

What taxes apply to BPO companies in Nepal?

BPO companies pay 25% corporate income tax on taxable income. Export services to foreign clients are VAT-exempt, while domestic services attract 13% VAT. Companies may qualify for tax incentives including 5-year income tax exemption and 50% deduction on export income under the Income Tax Act, 2058.

Can foreign employees work in Nepal for BPO companies?

Yes, foreign employees can work in Nepal with proper work permits and visas. The company must obtain work permit approval from the Department of Labor before the employee applies for a work visa. At least 75% of employees must be Nepali citizens under the Labor Act, 2074.

How can profits be repatriated to foreign countries?

Foreign investors can repatriate net profits, dividends, and capital after paying applicable taxes through authorized banking channels. The Foreign Exchange (Regulation) Act, 2019 permits repatriation of legitimate investment returns. Banks require tax clearance certificates and proper documentation for processing repatriation requests.

What licenses are required for voice-based BPO services?

Voice-based BPO services require a telecommunications service license from the Nepal Telecommunications Authority under the Telecommunications Act, 2053. Companies must submit technical specifications and service delivery plans with the license application. The licensing process typically takes 2-3 months after submission of complete documentation.

Are there special economic zones for BPO companies?

Nepal has established Special Economic Zones under the Special Economic Zone Act, 2073 (2016) offering additional incentives for investors. However, operational SEZs with developed infrastructure are limited. The government is developing IT parks in Kathmandu and other cities to support technology and BPO sector growth.

What are the annual compliance requirements?

Annual compliance includes filing returns with the Company Registrar within 6 months of fiscal year end, submitting tax returns within 3 months, conducting annual general meetings, renewing municipal licenses, and submitting progress reports to the Department of Industry every 6 months.

Can BPO companies operate from home or require physical office space?

BPO companies must maintain a registered office address in Nepal as required by the Companies Act, 2063. The registered office must be a physical location where official communications can be received. Companies must provide office lease agreements or property ownership documents during registration. Home-based registration is generally not permitted for foreign-invested companies.