Registration of Large Industry in Nepal

In Nepal, the industrial sector is governed by the Industrial Enterprises Act, 2076 (2020), which categorizes industries based on their fixed capital investment. Large industries play a significant role in Nepal’s economic development, creating employment opportunities and contributing to the national GDP. This article provides comprehensive information about the registration process, requirements, and compliance aspects for large industries in Nepal.

Definition and Classification of Large Industries

According to Section 17(1)(d) of the Industrial Enterprises Act, 2076 (2020), large industries are defined as enterprises with fixed capital exceeding NPR 250 million (25 crore). However, industries with investment above NPR 150 million (15 crore) must register with the Department of Industry (DOI) regardless of their classification. The Act categorizes industries based on their nature and investment size to streamline regulatory processes and provide appropriate incentives.

Types of Large Industries

Large industries in Nepal can be broadly categorized into:

1. Manufacturing industries
2. Energy-based industries
3. Agro and forest-based industries
4. Mineral industries
5. Tourism industries
6. Information technology industries
7. Service-based industries

Investment Threshold for Large Industries

The investment threshold for large industries has evolved over time through various industrial policies. Currently, as per the Industrial Enterprises Act, 2076 (2020):

• Medium industries: Fixed capital between NPR 100 million to 250 million
• Large industries: Fixed capital exceeding NPR 250 million
• Industries with fixed capital above NPR 150 million must register with the Department of Industry

Legal Framework Governing Large Industries

The registration and operation of large industries in Nepal are governed by multiple laws and regulations that ensure proper compliance and facilitate business operations.

Industrial Enterprises Act, 2076 (2020)

This is the primary legislation governing industrial enterprises in Nepal. It provides the legal framework for industry classification, registration procedures, incentives, and concessions. Section 3 of the Act mandates that all industries must be registered before commencing operations.

Company Act, 2063 (2006)

Before industry registration, entrepreneurs must register their business entity under the Company Act, 2063 (2006). Section 5 of this Act outlines the procedures for company registration, which is a prerequisite for industry registration.

Environmental Protection Act, 2076 (2019)

Large industries must comply with environmental regulations. Section 3 of this Act requires industries to conduct either an Initial Environmental Examination (IEE) or Environmental Impact Assessment (EIA) depending on their potential environmental impact.

Foreign Investment and Technology Transfer Act, 2075 (2019)

For industries with foreign investment, this Act provides the regulatory framework. Section 4 outlines the approval process for foreign investment in Nepalese industries.

Step-by-Step Registration Process for Large Industries

The registration process for large industries in Nepal involves multiple steps and interactions with various government agencies. Following these steps systematically ensures compliance with all legal requirements.

Step 1: Company Registration

The first step is to register your company with the Office of the Company Registrar (OCR).

• Required documents:
  • Memorandum of Association
  • Articles of Association
  • Copy of citizenship certificates of promoters
  • Passport-sized photographs of promoters
  • No Objection Letter from relevant authorities (if applicable)
  • Proof of office address

The company registration process typically takes 3-7 working days and costs between NPR 9,500 to NPR 16,500 depending on the authorized capital.

Step 2: Tax Registration (PAN and VAT)

After company registration, obtain Permanent Account Number (PAN) and Value Added Tax (VAT) registration from the Inland Revenue Department.

• Required documents:
  • Company registration certificate
  • Memorandum and Articles of Association
  • Board resolution for tax registration
  • Citizenship certificates of directors
  • Rental agreement for office space
  • Recent passport-sized photographs of directors

This process typically takes 1-2 working days and is free of charge.

Step 3: Bank Account Opening

Open a corporate bank account in a commercial bank in Nepal.

• Required documents:
  • Company registration certificate
  • PAN/VAT registration certificate
  • Board resolution for bank account opening
  • KYC forms of directors
  • Specimen signatures of authorized signatories
  • Citizenship certificates of directors

This process typically takes 2-3 working days and may require a minimum deposit as per bank policy.

Step 4: Letter of Intent (LOI) from Department of Industry

Submit a Letter of Intent (LOI) to the Department of Industry (DOI) outlining your proposed industrial project.

• Required documents:
  • Application in prescribed format
  • Project proposal/feasibility study
  • Company registration certificate
  • PAN/VAT registration certificate
  • Environmental clearance (preliminary assessment)
  • Land ownership or lease documents
  • Board resolution for industry establishment

The LOI approval process typically takes 15-30 days and requires a fee based on the investment size.

Step 5: Environmental Clearance (IEE/EIA) and Final Registration

Conduct either an Initial Environmental Examination (IEE) or Environmental Impact Assessment (EIA) as required by law, then complete the final registration with the DOI.

• Required documents for final registration:
  • Approved LOI
  • Completed IEE/EIA report approved by relevant ministry
  • Detailed project report
  • Land ownership documents
  • Technical specifications of machinery
  • Proof of capital investment
  • Foreign investment approval (if applicable)

The final registration process typically takes 30-45 days after environmental clearance and requires a registration fee based on the investment size.

Benefits and Incentives for Large Industries

The Nepalese government offers various incentives to encourage the establishment and growth of large industries in the country.

Tax Incentives

According to Section 21 of the Industrial Enterprises Act, 2076 (2020), large industries enjoy several tax benefits:

• 25% income tax exemption for industries employing more than 100 Nepalese citizens
• Additional 15% income tax exemption for industries employing more than 500 Nepalese citizens
• 15% income tax exemption for industries established in underdeveloped areas

Customs Duty Exemptions

Large industries can benefit from customs duty exemptions on the import of machinery, equipment, and raw materials as per Section 22 of the Industrial Enterprises Act:

• Up to 50% reduction in customs duty for machinery and equipment
• Exemption from export duty for manufactured goods
• Bonded warehouse facilities for export-oriented industries

Land Acquisition Facilitation

The government facilitates land acquisition for large industrial projects:

• Assistance in acquiring government or public land
• Permission to purchase land beyond ceiling limits
• Simplified procedures for land use change

One-Window Service

Section 37 of the Industrial Enterprises Act provides for a one-window committee to facilitate services for large industries, including:

• Coordinated approvals from multiple government agencies
• Expedited processing of permits and licenses
• Assistance with infrastructure requirements like electricity, water, and roads

Compliance Requirements for Large Industries

Large industries must adhere to various compliance requirements to maintain their legal status and operational legitimacy.

Annual Reporting

As per Section 8 of the Industrial Enterprises Act, all registered industries must submit annual reports to the DOI containing:

• Production and sales data
• Employment statistics
• Environmental compliance information
• Financial statements
• Tax compliance details

Labor Compliance

Large industries must comply with the Labor Act, 2074 (2017), which includes:

• Proper employment contracts
• Minimum wage compliance
• Workplace safety measures
• Social security contributions
• Provident fund and gratuity provisions

Environmental Compliance

Ongoing environmental compliance is mandatory as per the Environmental Protection Act, 2076 (2019):

• Regular environmental audits
• Pollution control measures
• Waste management systems
• Compliance with prescribed standards

Foreign Exchange Regulations

Industries with foreign investment must comply with Nepal Rastra Bank regulations regarding:

• Repatriation of profits
• Foreign currency transactions
• Reporting of foreign exchange movements
• Dividend payments to foreign investors

FAQs about Large Industry Registration in Nepal

What is the minimum investment required for a large industry in Nepal?

According to the Industrial Enterprises Act, 2076 (2020), a large industry requires a fixed capital investment exceeding NPR 250 million (25 crore). However, industries with investment above NPR 150 million must register with the Department of Industry regardless of their classification.

How long does the entire registration process for a large industry take?

The complete registration process for a large industry typically takes 3-4 months from company registration to final industry registration. This timeline can vary based on the complexity of the project, environmental clearance requirements, and the efficiency of document preparation.

What are the costs involved in registering a large industry?

The costs include company registration fees (NPR 9,500-16,500), industry registration fees (0.5% of project cost for investments up to NPR 500 million and 0.25% for investments exceeding NPR 500 million), environmental assessment costs (NPR 200,000-1,000,000 depending on project size), and professional service fees.

Is foreign investment allowed in large industries in Nepal?

Yes, foreign investment is allowed in most large industries in Nepal as per the Foreign Investment and Technology Transfer Act, 2075 (2019). However, certain sectors have restrictions or are prohibited for foreign investment as specified in the negative list published by the government.

What environmental clearances are required for large industries?

Large industries typically require an Environmental Impact Assessment (EIA) as mandated by the Environmental Protection Act, 2076 (2019). Industries with smaller environmental footprints may qualify for an Initial Environmental Examination (IEE). The specific requirement depends on the nature, size, and location of the industry.

Can large industries obtain land beyond the land ceiling limits?

Yes, Section 25 of the Industrial Enterprises Act, 2076 (2020) allows large industries to acquire land beyond the ceiling limits prescribed in the Land Act. This provision facilitates the establishment of large-scale industrial projects requiring substantial land area.

What are the ongoing compliance requirements after registration?

After registration, large industries must submit annual reports to the DOI, maintain environmental compliance, adhere to labor laws, fulfill tax obligations, and comply with industry-specific regulations. Failure to meet these requirements can result in penalties or revocation of registration.