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Payroll in Nepal

Step-by-Step Guide to Company Registration in Nepal

Nepal offers several advantages for businesses looking to operate in the country. The country has a large population with a growing middle class that is increasingly interested in consumer goods and services. Additionally, the government has tried to liberalize trade and investment policies, making it easier for foreign companies to do business in Nepal.

The country has a rich cultural heritage and a growing tourism industry, which can provide business opportunities in sectors such as hospitality and tourism. The country is strategically located between two major markets, China and India, which offers significant opportunities for businesses looking to access these markets. The labor cost in Nepal is also relatively low, which can be an advantage for businesses looking to reduce their costs.

Overall, while there are still challenges to doing business in Nepal, the country offers several advantages and opportunities for businesses looking to expand their operations in South Asia. If you wish to start a business in Nepal, this article will provide insights into offshore company registration in Nepal. 

Business Opportunities in Nepal

Nepal presents several business opportunities for entrepreneurs investing in a growing market. With a population of over 29 million and a growing economy, the country offers various opportunities in various sectors. The tourism industry is an essential benefactor to Nepal’s economy, with a steady influx of visitors each year, making it an ideal sector for businesses that cater to the tourism industry.

Given the country’s fertile land and varied climate, agriculture is another promising sector, creating an ideal crop production environment.

Additionally, there are opportunities in the technology and IT sector, given the country’s growing number of internet users and the government’s push for digitalization. With a favorable regulatory environment and government incentives, Nepal presents an attractive business opportunity for entrepreneurs looking to expand their operations in a dynamic and growing market.

Benefits of Starting a Business in Nepal

Nepal offers several advantages of doing business in Nepal to owners looking to set up an offshore company. If you desire to start a business in Nepal, here are some benefits to consider:

  • Growing economy: Nepal’s economy has been steadily growing in recent years, with a projected growth rate of 6.5% in 2022, according to the International Monetary Fund (IMF). This growth creates opportunities for entrepreneurs to tap into new markets and expand their businesses.
  • Low labor costs: Nepal’s affordability in terms of living expenses and labor costs make it a desirable destination for businesses seeking to lower their operational expenditures. This can be especially beneficial for enterprises that heavily depend on manual labor or necessitate significant workforce size.
  • Strategic location: Nepal is strategically located between India and China, two of the world’s largest economies. This location can allow businesses to access these markets and leverage the region’s growing economic power.
  • Government incentives: The Nepalese government has implemented several initiatives to encourage entrepreneurship and foreign investment, such as tax holidays, duty-free imports of machinery and raw materials, and subsidies for specific industries.

Starting a business in Nepal can be a promising venture, provided entrepreneurs do their research and clearly understand the local market and regulatory environment.

Requirements for Starting a Business in Nepal

It could seem like an excellent idea to start a business in Nepal, but with the correct guidance, it can be more accessible. 

To start a business in Nepal, companies must know the correct procedures. The Nepal company incorporation requirements are as follows:

Taxation

  • When starting a business in Nepal, it’s essential to understand the country’s tax system. The government of Nepal imposes various taxes on businesses, including income tax, value-added tax (VAT), customs duty, excise duty, and local taxes.
  • All businesses registered in Nepal must obtain a Permanent Account Number (PAN) from the Inland Revenue Department (IRD) and comply with the tax regulations. 
  • Business income is taxed at 25% for domestic and 40% for foreign companies. 
  • However, the government offers tax holidays and reduced tax rates for certain types of businesses in specific sectors or regions.
  • In Nepal, VAT is levied at a standard rate of 13% on the supply of goods and services. VAT registration is required for businesses with an annual turnover of NPR 2 million. 

Permanent Account Number (PAN)

  • In Nepal, obtaining a Permanent Account Number (PAN) card is mandatory for individuals and companies engaging in business activities. 
  • The PAN card functions as a unique identification number for taxation and is required to file tax returns, open a bank account, and conduct financial transactions.

Opening a bank account

  • Opening a corporate bank account is essential in starting a business in Nepal. 
  • To open a corporate bank account, the company must submit certain documents, including the Certificate of Incorporation, the Articles of Association, and the Memorandum of Association.

Types of Business Structures in Nepal

In Nepal, several business structures are available for entrepreneurs planning to start a business in Nepal, each with its benefits and requirements. Here are the options for business to do in Nepal:

Sole proprietorship 

  • In Nepal, the most basic and popular type of business structure is a sole proprietorship. 
  • In this type of business, a single individual owns and manages the entire business.

Partnership 

  • A partnership refers to a business arrangement where two or more individuals mutually agree to collaborate and jointly run a business, sharing the profits and the losses incurred.
  • Each partner has a specific role and manages the business.

Limited liability company (LLC) 

  • In Nepal, an LLC (Limited Liability Company) is a business structure where the owners are afforded limited liability for the company’s debts and obligations.
  • This means that the owner’s assets are protected from any liabilities incurred by the company.

Corporation

  • In Nepal, a corporation is considered an independent legal entity distinct from its shareholders or owners.
  • The shareholders own the company and elect a board of directors to manage the business. 
  • The corporation is responsible for its debts and obligations.

Branch

  • A branch office is another business structure in Nepal. 
  • A branch office extends a company’s existing business and is set up in a different location. 
  • The branch office legally depends on the parent company and is responsible for its operations and liabilities. 
  • The branch office can engage in the same business activities as the parent company but operates in a different geographical area. 
  • This business structure is advantageous for companies seeking to expand their operations in Nepal without establishing a distinct legal entity.

Company Registration Process

For company registration in Nepal, specific tasks must be completed. The following are the steps to incorporate a company in Nepal:

  • To begin the company registration process in Nepal, choosing a name that hasn’t already been registered with the Office of Companies Registrar is crucial. The Registrar will only approve names that are unique and not similar to those of existing companies. 
  • When registering a company in Nepal, choosing an appropriate business model that aligns with the nature of the company’s commercial activities is essential. This decision will impact how the business files taxes and conducts itself in the market. The available legal structures per the Companies Act of Nepal include a Limited Liability Company, a Public Limited Company, a Private Limited Company, and a Non-Profit Company. Foreign companies usually adopt the private limited company model for their business structures. 
  • The applicant must pay the registration fee and provide the necessary documents. The applicant can apply online through the official OCR website or in person at the OCR office. 
  • Once the Registrar approves the necessary forms and documents, the owner of the proposed company can obtain the Certificate of Incorporation and Business Registration Certificates from the official OCR website in electronic format. However, if the owner requires hard copies, they must make a special request through the portal. 

How Much Does it Cost to Incorporate a Company in Nepal?

The cost of incorporating a company in Nepal for the first year will be US$5,550. The average fee per engagement, which includes Nepal company incorporation, corporate bank account setup, legal registered office, and all government registration fees, amounts to US$14,500.

Entity types

Cost (USD)

LLC

14, 500

Corporation 

15, 500

Branch

16, 800

Are Foreigners in Nepal on Certain Passes Allowed to Start a Business in Nepal?

Starting a business in Nepal as a foreign national requires obtaining the necessary visa and permits to operate legally. There are different types of visas for business purposes, including the Business Visa and Non-Tourist Visa.

To apply for a Business Visa, the applicant must submit a copy of the company’s registration certificate, an invitation letter from a Nepalese company, and other required documents. The visa allows for a maximum validity of six months and can be extended to five years.

Meanwhile, the Non-Tourist Visa, also known as Work Visa, is necessary for foreign nationals who plan to stay in Nepal for more than six months. It is granted to those who have secured employment or started a business in Nepal. To obtain this visa, the applicant must submit a copy of the company’s registration certificate, a recommendation letter from the Ministry of Industry, Commerce, and Supplies, and other necessary documents. The visa has a duration of one year and can be extended on an annual basis.

Government Assistance for Foreign-owned Businesses

The Nepalese government has implemented specific business regulations, making the process of company incorporation in Nepal more accessible.The following are a few grants to start a business in Nepal: 

  • The Government of Nepal (GoN) acknowledges the significance of foreign investment to enhance economic growth and attain its objective of transitioning to a middle-income nation by 2030. Despite the GoN’s positive outlook toward Foreign Direct Investment (FDI), there is still a gap between intentions and actions.
  • Nepal’s foreign investment laws include various regulations such as the revised Foreign Investment and Technology Transfer Act (FITTA) of 2019, the Foreign Exchange Regulation Act of 1962, the Public-Private Partnership and Investment Act (PPIA) of 2019, the Immigration Rules of 1994, the Customs Act of 2007, the Industrial Enterprise Act of 2016, the Special Economic Zone (SEZ) Act of 2016, the Electricity Act of 1992, the Company Act (2006), and the Privatization Act of 1994.
  • Nepal’s annual budget also plays a crucial role in determining customs, duties, export service charges, sales, airfreight, income taxes, and other excise taxes that can impact foreign investment.
  • The FITTA aimed to create a more welcoming environment for foreign investors. It simplified the process for inbound foreign investment by requiring approval of FDI within seven days of application. Similarly, the FITTA made the profit repatriation approval process more efficient, with decisions required within 15 days. 
  • The revised FITTA established a Single Window Service Center, enabling foreign investors to access the complete range of services provided by various government agencies involved in investment approvals, including the Ministry of Industry, Commerce, and Supplies (MOICS), the Labor and Immigration Departments, and the Central Bank. The FITTA included a provision mandating the government to establish a minimum threshold for foreign investment and publish it in the Nepal Gazette. 
  • On May 23, 2019, the government raised the minimum foreign investment threshold tenfold to NPR 50 million (USD 415,000) from the previous NPR 5 million (USD 41,500), citing this provision. The new FITTA commits to offering “national treatment” to all foreign investors and assures that foreign companies will not be nationalized. Under the FITTA, investments up to NPR 6 billion (USD 52 million) fall under the MOICS Department of Industry (DOI) purview, including approval authority. In contrast, anything above that amount falls under the authority of the Investment Board of Nepal (IBN).
  • In addition to the laws mentioned earlier, other relevant laws for foreign investors in Nepal include the Industrial Enterprise Act, the SEZ Act, an updated Labor Act (2017), and a pending Intellectual Property Rights Act. 
  • The Industrial Enterprise Act promotes industrial growth in the private sector and contains provisions such as “no work, no pay.” It also allows companies to take certain steps, such as buying land and establishing a line of credit while regulatory requirements are being met. 

How Can Multiplier Help?

Setting up a company in Nepal can be complex, requiring careful planning, research, and financial considerations. However, businesses can simplify the process by partnering with a Professional Employer Organization (PEO) and Employer of Record (EOR) provider like Multiplier.

With a comprehensive range of HR, payroll, and compliance solutions, Multiplier can help businesses manage their global workforce, streamline the onboarding process for new hires, and handle payroll without the need to establish a subsidiary. This enables businesses to expand their reach globally and easily recruit employees from all over the world.

Moreover, Multiplier’s qualified professionals offer day-to-day HR support, allowing businesses to focus on growing their company while we handle the administrative aspects. By partnering with Multiplier, businesses can avoid costly penalties and legal issues, ensuring compliance with all relevant laws and regulations.

Frequently Asked Questions

The minimum capital requirement to register a company in Nepal depends on the type of company being registered. For instance, a private limited company must have a minimum authorized capital of NPR 1 lakh, whereas a public limited company must have a minimum authorized capital of NPR 5 crore.

The registration process for a company in Nepal can take 10 to 20 days. However, the time frame may vary depending on the company type and the required documents’ completeness.

Foreigners can own 100% of a business in Nepal, subject to certain restrictions and regulations. For example, foreign investors may not be permitted to invest in certain sectors or industries and must comply with foreign investment laws and regulations. In some cases, they may also be required to obtain special permits or approvals from relevant authorities.

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