Total Cost of IT Company Registration in Nepal

Introduction to IT Company Registration in Nepal

The Information Technology sector in Nepal has experienced substantial growth over the past decade, with the government actively promoting digital entrepreneurship and technology-based businesses. Registering an IT company in Nepal requires compliance with various legal frameworks and involves multiple cost components that entrepreneurs must consider during the planning phase.

The registration process falls under the jurisdiction of the Office of Company Registrar (OCR), which operates under the Company Act, 2063 (2006). IT companies can be registered as private limited companies, public limited companies, or sole proprietorships, depending on the business structure and objectives. The total cost varies based on the company type, authorized capital, and additional services required during the registration process.

Understanding the complete cost structure helps entrepreneurs allocate resources effectively and ensures smooth business establishment. The expenses include government fees, legal documentation charges, professional service fees, and post-registration compliance costs. This article provides a detailed breakdown of all costs associated with IT company registration in Nepal.

Legal Framework for IT Company Registration

The legal foundation for company registration in Nepal is established through several legislative instruments. The Company Act, 2063 (2006) serves as the primary legislation governing company formation, operation, and dissolution. This Act replaced the previous Company Act of 2053 and introduced modern provisions aligned with international business practices.

The Company Regulations, 2064 (2007) provide detailed procedural guidelines for implementing the Company Act. These regulations specify the documentation requirements, fee structures, and administrative processes for company registration. Additionally, the Electronic Transaction Act, 2063 (2008) provides specific provisions for IT-related businesses and digital transactions.

For IT companies, compliance with the Information Technology Policy, 2067 (2010) is essential. This policy framework outlines the government’s vision for the IT sector and provides guidelines for technology businesses. The Foreign Investment and Technology Transfer Act, 2075 (2019) applies to companies with foreign investment or technology transfer agreements.

The Office of Company Registrar maintains jurisdiction over company registration matters, while the Department of Industry handles foreign investment approvals. IT companies must also register with the Inland Revenue Department for tax purposes and obtain necessary licenses from relevant authorities.

Types of IT Companies in Nepal

Private Limited Company

A private limited company represents the most common structure for IT businesses in Nepal. According to Section 3 of the Company Act, 2063, a private limited company must have a minimum of one shareholder and can have up to fifty shareholders. The minimum authorized capital requirement is NPR 100,000, though IT companies typically register with higher capital.

Private limited companies offer limited liability protection to shareholders, meaning personal assets remain separate from business liabilities. The company name must include “Private Limited” or “Pvt. Ltd.” as a suffix. This structure provides flexibility in management and ownership transfer while maintaining regulatory compliance.

Public Limited Company

Public limited companies can issue shares to the general public and list on the Nepal Stock Exchange. The minimum authorized capital requirement is NPR 10,000,000 according to the Company Act. At least seven shareholders are required for incorporation, and the company name must include “Limited” or “Ltd.”

This structure suits larger IT enterprises planning significant expansion or seeking public investment. Public companies face stricter regulatory requirements, including mandatory audits and public disclosure obligations.

Sole Proprietorship

Sole proprietorships represent the simplest business structure, owned and operated by a single individual. Registration occurs through the local municipality or rural municipality. This structure involves minimal registration costs but offers no liability protection, making it less suitable for technology businesses with significant operational risks.

Breakdown of Registration Costs

Government Registration Fees

The Office of Company Registrar charges fees based on the authorized capital of the company. According to the Company Regulations, 2064, the fee structure follows a progressive scale:

Authorized Capital Range	Registration Fee (NPR)
Up to NPR 100,000	1,000
NPR 100,001 to NPR 500,000	2,000
NPR 500,001 to NPR 1,000,000	3,000
NPR 1,000,001 to NPR 5,000,000	5,000
NPR 5,000,001 to NPR 10,000,000	10,000
Above NPR 10,000,000	15,000

Additional government fees include name reservation charges of NPR 100 and certificate issuance fees of NPR 500. Companies requiring expedited processing pay an additional 50% surcharge on standard fees.

Stamp Duty and Legal Documentation

Stamp duty applies to the Memorandum of Association and Articles of Association. The rate is NPR 1,000 for documents related to company formation. Legal documentation costs include:

• Memorandum of Association preparation: NPR 2,000 – NPR 5,000
• Articles of Association drafting: NPR 2,000 – NPR 5,000
• Shareholder agreements: NPR 5,000 – NPR 15,000
• Board resolutions and minutes: NPR 1,000 – NPR 3,000

Notarization fees for required documents range from NPR 500 to NPR 1,000 per document. Translation services for documents in foreign languages cost NPR 1,000 to NPR 3,000 per page.

Professional Service Fees

Most entrepreneurs engage professional service providers for company registration. Legal consultants and company registration firms charge between NPR 15,000 and NPR 50,000 for complete registration services. These fees typically include:

• Name search and reservation
• Document preparation and drafting
• Government liaison and submission
• Follow-up and certificate collection
• Basic consultation services

Chartered accountants charge NPR 10,000 to NPR 25,000 for initial accounting setup and tax registration. Legal advisors may charge hourly rates of NPR 2,000 to NPR 5,000 for specialized consultation.

PAN and VAT Registration Costs

Permanent Account Number (PAN) registration with the Inland Revenue Department is mandatory for all companies. The registration is free of charge but may involve documentation costs of NPR 500 to NPR 1,000 if using professional services.

Value Added Tax (VAT) registration becomes mandatory when annual turnover exceeds NPR 5,000,000 according to the Value Added Tax Act, 2052. The registration itself is free, but professional assistance costs NPR 3,000 to NPR 8,000.

Step-by-Step Registration Process

Name Reservation Process

1. Search available company names through the OCR online portal
2. Submit name reservation application with three preferred names
3. Pay NPR 100 name reservation fee
4. Receive name approval within 1-2 working days
5. Reserved name remains valid for 35 days

Document Preparation

1. Draft Memorandum of Association including company objectives
2. Prepare Articles of Association outlining internal governance
3. Obtain citizenship certificates of all shareholders and directors
4. Prepare passport-sized photographs of shareholders and directors
5. Create shareholder agreements if multiple shareholders exist
6. Prepare office rental agreement or ownership documents
7. Draft board resolutions for company formation

Submission and Approval

1. Complete online application form on OCR portal
2. Upload all required documents in specified formats
3. Pay registration fees through online banking or bank deposit
4. Submit physical documents to OCR office if required
5. Await verification and processing (typically 3-7 working days)
6. Receive company registration certificate
7. Collect Certificate of Incorporation and other documents

Post-Registration Requirements

1. Register with Inland Revenue Department for PAN within 7 days
2. Open company bank account with registration certificate
3. Register for VAT if applicable
4. Obtain municipal business license
5. Register with Social Security Fund
6. Complete labor office registration if hiring employees
7. Obtain sector-specific licenses if required

Additional Costs and Considerations

Office Space Requirements

IT companies must provide proof of physical office space during registration. Options include:

• Rental agreements: Monthly costs range from NPR 10,000 to NPR 100,000 depending on location
• Co-working spaces: NPR 5,000 to NPR 25,000 per month
• Virtual office services: NPR 3,000 to NPR 10,000 per month

Stamp duty on rental agreements is NPR 100 per year of lease term.

Technology Infrastructure Costs

Initial technology setup costs for IT companies include:

• Computer systems and hardware: NPR 50,000 to NPR 500,000
• Software licenses: NPR 20,000 to NPR 200,000
• Internet connectivity: NPR 2,000 to NPR 15,000 monthly
• Server and hosting: NPR 5,000 to NPR 50,000 monthly
• Communication systems: NPR 10,000 to NPR 50,000

Insurance and Compliance

Professional indemnity insurance for IT companies costs NPR 25,000 to NPR 100,000 annually depending on coverage. General liability insurance ranges from NPR 15,000 to NPR 50,000 per year.

Annual compliance costs include audit fees (NPR 15,000 to NPR 50,000), annual return filing (NPR 2,000), and tax compliance services (NPR 20,000 to NPR 100,000).

Cost Comparison Table

Cost Component	Minimum Cost (NPR)	Maximum Cost (NPR)
Government Registration Fee	1,000	15,000
Stamp Duty	1,000	2,000
Legal Documentation	5,000	25,000
Professional Services	15,000	50,000
PAN/VAT Registration	500	8,000
Office Space (First Month)	3,000	100,000
Technology Setup	50,000	500,000
Insurance (Annual)	25,000	150,000
Total Estimated Cost	100,500	850,000

Required Documents for Registration

For Company Registration

• Completed application form from OCR
• Memorandum of Association (3 copies)
• Articles of Association (3 copies)
• Citizenship certificates of all shareholders (notarized copies)
• Passport-sized photographs of shareholders and directors
• Office rental agreement or ownership documents
• Consent letters from directors
• Name reservation approval letter
• Bank deposit slip for registration fees

For Foreign Investors

• Passport copies (notarized)
• Company registration certificate from home country
• Board resolution authorizing Nepal investment
• Bank statement showing investment capacity
• Technology transfer agreement (if applicable)
• Foreign Investment approval from Department of Industry

For Tax Registration

• Company registration certificate
• PAN application form
• Citizenship certificates of authorized persons
• Office location proof
• Bank account details
• Memorandum and Articles of Association

Tax Implications and Annual Costs

Corporate Income Tax

IT companies in Nepal are subject to corporate income tax at 25% of taxable income according to the Income Tax Act, 2058. However, the government provides tax incentives for IT businesses. Companies exporting IT services enjoy a 50% tax exemption on export income for the first five years of operation.

Value Added Tax

VAT registration becomes mandatory when annual turnover exceeds NPR 5,000,000. The standard VAT rate is 13% on goods and services. IT service exports are zero-rated, meaning no VAT applies but input VAT can be claimed.

Annual Compliance Costs

Compliance Requirement	Frequency	Estimated Cost (NPR)
Annual Return Filing	Yearly	2,000 – 5,000
Financial Audit	Yearly	15,000 – 50,000
Tax Return Filing	Yearly	5,000 – 20,000
Social Security Contribution	Monthly	Variable per employee
Municipal Tax	Yearly	2,000 – 10,000
License Renewal	Yearly	1,000 – 5,000

Time Frame for Complete Registration

The complete registration process typically takes 15 to 30 working days from name reservation to obtaining all necessary registrations. The timeline breakdown includes:

• Name reservation: 1-2 days
• Document preparation: 3-5 days
• OCR registration: 3-7 days
• PAN registration: 1-3 days
• Bank account opening: 2-5 days
• VAT registration: 3-7 days
• Municipal license: 5-10 days

Expedited processing is available for an additional fee, reducing the timeline to 7-15 working days.

Common Challenges and Solutions

Documentation Issues

Many applicants face rejection due to incomplete or incorrect documentation. Solutions include engaging professional service providers who understand OCR requirements and maintaining checklists for all required documents.

Capital Requirements

Meeting minimum capital requirements can challenge startup founders. Solutions include seeking angel investors, applying for startup grants from government programs, or starting with minimum capital and increasing through subsequent resolutions.

Foreign Investment Approval

Foreign investors must obtain approval from the Department of Industry, adding time and complexity. Early engagement with the department and proper documentation preparation helps streamline this process.

Read More:

1. https://lawaxion.com/registration-of-it-business-in-nepal-through-fdi/
2. https://lawaxion.com/process-of-obtaining-a-work-permit-in-nepal/
3. https://lawaxion.com/data-protection-and-privacy-law-in-nepal/
4. https://lawaxion.com/franchising-in-nepal-process-time-cost-laws/
5. https://lawaxion.com/legal-framework-governing-csr-in-nepal/

Government Incentives for IT Companies

The Government of Nepal provides several incentives for IT sector development:

• 50% income tax exemption on export earnings for five years
• Customs duty exemption on imported IT equipment
• Priority in government IT procurement
• Access to IT Park facilities at subsidized rates
• Startup grants through the Innovation and Startup Fund
• Training and capacity building support

These incentives significantly reduce the effective operational costs for IT companies, making Nepal an attractive destination for technology entrepreneurship.

Conclusion

The total cost of IT company registration in Nepal ranges from NPR 100,500 to NPR 850,000, depending on various factors including authorized capital, professional service engagement, office location, and initial technology infrastructure. The core registration costs remain relatively affordable, with government fees ranging from NPR 1,000 to NPR 15,000 based on authorized capital.

Entrepreneurs should budget for both immediate registration costs and ongoing compliance expenses. The government’s supportive policies for the IT sector, including tax incentives and infrastructure support, make Nepal an increasingly attractive destination for technology businesses. Proper planning, accurate documentation, and professional guidance ensure smooth registration and long-term compliance with Nepali laws.