Registration of Non-Profit Institution in Nepal

Introduction

Non-profit institutions in Nepal operate under a structured legal framework designed to serve public interest while maintaining organizational accountability. These entities can be registered either as Profit Not Distributing Companies under the Companies Act, 2063, or through the District Administration Office under the Social Welfare Act, 2049. Both pathways provide distinct advantages depending on organizational objectives, governance structure, and operational scope. Understanding the registration process, tax implications, compliance requirements, and available incentives enables organizations to select the most suitable registration method and establish sustainable operations.

Registration Process for Non-Profit Institutions

Registration as Profit Not Distributing Company

Non-profit institutions can register as Profit Not Distributing Companies under the Companies Act, 2063. This registration method provides legal recognition and corporate status while restricting profit distribution to members. The process involves several sequential steps that must be completed with the Office of the Company Registrar.

Steps for Registration:

Obtain a Memorandum of Association (MOA) and Articles of Association (AOA) drafted in compliance with the Companies Act, 2063.
Conduct a name availability search with the Office of the Company Registrar to ensure the proposed name is unique and not already registered.
Prepare and submit the application form along with supporting documents including MOA, AOA, and list of founding members.
Pay the prescribed registration fee as determined by the Company Registrar’s office.
Receive the Certificate of Incorporation from the Company Registrar upon approval.
Obtain a Permanent Account Number (PAN) from the Inland Revenue Department.
Register with the Social Security Fund if the organization employs staff members.

Registration Through District Administration Office

Non-profit institutions can alternatively register through the District Administration Office under the Social Welfare Act, 2049. This method suits organizations focused on social welfare, community development, and charitable activities. The process is less formal than company registration but requires compliance with specific statutory requirements.

Steps for Registration:

Prepare the organization’s constitution or bylaws in accordance with the Social Welfare Act, 2049.
Compile required documents including proof of office location, list of office bearers, and organizational objectives.
Submit the application to the District Administration Office with all supporting documentation.
Pay the prescribed registration fee as determined by the District Administration Office.
Obtain the registration certificate upon approval from the District Administration Office.
Register with the Inland Revenue Department for tax purposes.
Comply with annual reporting requirements as mandated by the District Administration Office.

Tax Implications and Exemptions

Income Tax Exemptions

Non-profit institutions registered under either method may qualify for income tax exemptions under the Income Tax Act, 2058. Organizations engaged in education, health, social welfare, and charitable activities can apply for tax exemption status. The Inland Revenue Department evaluates applications based on organizational objectives and fund utilization patterns.

Eligible Activities for Tax Exemption:

Educational institutions providing primary, secondary, or higher education services.
Health organizations delivering medical services and public health programs.
Social welfare organizations serving vulnerable populations and communities.
Religious institutions conducting charitable and community welfare activities.
Environmental organizations engaged in conservation and sustainability initiatives.

Value Added Tax (VAT) Considerations

Non-profit institutions must register for VAT if their annual turnover exceeds the prescribed threshold. However, certain services provided by non-profit organizations may qualify for VAT exemption under the VAT Act, 2052. Educational services, health services, and charitable activities often receive preferential VAT treatment.

Property Tax and Local Tax Obligations

Non-profit institutions remain subject to property tax on owned or leased premises unless specifically exempted by local authorities. Organizations should verify local tax regulations with the respective municipality or rural municipality. Some local bodies provide property tax exemptions for organizations serving public interest.

Compliance Requirements

Annual Reporting Obligations

Non-profit institutions must submit annual reports to relevant authorities as mandated by their registration method. Profit Not Distributing Companies file annual reports with the Company Registrar, while institutions registered through District Administration Offices report to the respective district office.

Annual Compliance Checklist:

Submit audited financial statements prepared by a qualified chartered accountant.
File annual reports detailing organizational activities, achievements, and financial performance.
Maintain updated records of office bearers, members, and organizational changes.
Comply with statutory filing deadlines to avoid penalties and legal complications.
Ensure financial transparency and accountability in fund management and utilization.

Financial Management and Auditing

Non-profit institutions must maintain transparent financial records and undergo annual audits. The Auditor General’s Office or private chartered accountants conduct audits depending on organizational size and funding sources. Audited financial statements must be submitted to relevant authorities within prescribed timeframes.

Governance and Organizational Structure

Non-profit institutions must establish clear governance structures with defined roles and responsibilities. Organizations require a Board of Directors or Management Committee responsible for strategic decisions and organizational oversight. Regular meetings and documented decisions ensure accountability and compliance with statutory requirements.

Labor Laws and Employment Regulations

Employee Registration and Social Security

Non-profit institutions employing staff members must register with the Social Security Fund under the Social Security Act, 2074. Employers contribute to employee social security benefits including health insurance, provident fund, and employment injury benefits.

Social Security Obligations:

Register the organization with the Social Security Fund within thirty days of employment commencement.
Contribute prescribed percentages of employee salaries to social security schemes.
Maintain employee records including contracts, attendance, and salary documentation.
Provide employees with social security cards and benefit information.
Comply with contribution payment deadlines to avoid penalties.

Labor Standards and Working Conditions

Non-profit institutions must comply with the Labor Act, 2074, which establishes minimum standards for working conditions, wages, and employee rights. Organizations must provide safe working environments, fair compensation, and protection against discrimination.

Labor Law Compliance Requirements:

Establish written employment contracts specifying terms, conditions, and compensation.
Ensure compliance with minimum wage requirements as prescribed by the government.
Provide mandatory leave entitlements including annual leave, sick leave, and public holidays.
Maintain safe and healthy working conditions in accordance with occupational safety standards.
Establish grievance redressal mechanisms for employee complaints and disputes.

Incentives and Benefits for Non-Profit Institutions

Tax Incentives

Non-profit institutions registered under the Companies Act, 2063, or Social Welfare Act, 2049, may access various tax incentives. Income tax exemptions apply to organizations meeting specified criteria regarding charitable activities and public benefit. Organizations can claim deductions for donations received from individuals and corporate entities.

Grants and Funding Opportunities

Government agencies and international organizations provide grants and funding to non-profit institutions engaged in development activities. The Ministry of Federal Affairs and General Administration, Ministry of Education, and Ministry of Health allocate funds for organizations working in their respective sectors.

Regulatory Exemptions

Non-profit institutions may receive exemptions from certain regulatory requirements applicable to commercial entities. Simplified compliance procedures apply to smaller organizations with limited financial turnover. Some regulatory fees and charges are waived for organizations serving public interest.

Cost Analysis for Registration

Registration Fees

Registration Method	Initial Registration Fee (NPR)	PAN Registration (NPR)	Total Initial Cost (NPR)
Profit Not Distributing Company	5,000 – 15,000	500	5,500 – 15,500
District Administration Office	1,000 – 5,000	500	1,500 – 5,500

Ongoing Operational Costs

Cost Category	Estimated Annual Amount
Annual Report Filing	NPR 2,000 – 5,000
Audit Fees	NPR 10,000 – 50,000
Office Rent and Utilities	Variable
Staff Salaries	Variable
Social Security Contributions	11% of total payroll

Timeline for Registration

Profit Not Distributing Company Registration Timeline

The registration process for Profit Not Distributing Companies typically requires 15–30 days from application submission to Certificate of Incorporation issuance. Document preparation and name availability search require 3–5 days. The Company Registrar’s office processes applications within 10–20 days upon receipt of complete documentation.

District Administration Office Registration Timeline

Registration through the District Administration Office generally requires 7–15 days from application submission to certificate issuance. Document verification and approval processes are typically faster than company registration. Timeline may vary depending on district office workload and document completeness.

Why Choose Axion Partners

Axion Partners stands as the No. 1 service provider for non-profit institution registration in Nepal. The firm provides comprehensive legal guidance covering registration process selection, documentation preparation, and compliance management. Axion Partners’ experienced team ensures organizations navigate complex regulatory requirements efficiently while minimizing costs and timeline delays.

Axion Partners’ Service Advantages:

Expert consultation on optimal registration method selection based on organizational objectives.
Complete documentation preparation and submission to relevant authorities.
Compliance management and annual reporting assistance.
Tax planning and exemption application support.
Ongoing legal advisory services for organizational governance and regulatory compliance.
Established relationships with government agencies enabling expedited processing.

Frequently Asked Questions

What is the difference between Profit Not Distributing Company and District Administration Office registration?

Profit Not Distributing Company registration provides corporate status and formal governance structure under the Companies Act, 2063. District Administration Office registration is simpler and suits smaller organizations focused on social welfare activities under the Social Welfare Act, 2049.

Can non-profit institutions claim income tax exemption?

Yes, non-profit institutions engaged in education, health, social welfare, and charitable activities can apply for income tax exemption from the Inland Revenue Department upon meeting specified criteria.

What are the annual compliance requirements for non-profit institutions?

Non-profit institutions must submit audited financial statements, annual reports, and maintain updated organizational records with relevant authorities within prescribed deadlines.

How much does non-profit institution registration cost?

Registration costs range from NPR 1,500–15,500 depending on the registration method selected and applicable government fees.

What is the typical registration timeline?

Registration typically requires 7–30 days depending on the method chosen and document completeness.

Are non-profit institutions required to register with the Social Security Fund?

Yes, organizations employing staff members must register with the Social Security Fund and contribute prescribed percentages of employee salaries.

Can non-profit institutions receive government grants?

Yes, government agencies provide grants and funding to non-profit institutions engaged in development activities aligned with government priorities.

Conclusion

Non-profit institution registration in Nepal provides organizations with legal recognition and access to tax incentives while establishing accountability frameworks. Selecting between Profit Not Distributing Company and District Administration Office registration depends on organizational size, objectives, and governance preferences. Compliance with financial reporting, labor laws, and regulatory requirements ensures sustainable operations and public trust. Axion Partners delivers expert guidance throughout the registration process and ongoing compliance management, enabling organizations to focus on their social mission while maintaining legal and regulatory compliance.