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Payroll in Nepal

Sole Proprietorship in Nepal

In recent years, Nepal has made significant changes to its policies leading to impressive progress in its economic infrastructure. In 2022, the country recorded a GDP of 36.71 billion USD, attracting several investors. Furthermore, the government has also encouraged economic liberalization making the country open to foreign investments. 

The country offers a low tax rate and high return on investment (ROI) as the Nepal Government supports all forms of investments. It is working towards creating a social and economic system where people can access education, jobs, and start-up opportunities. Companies can leverage this opportunity to establish a business in Nepal and get easy access to Chinese and Indian markets. 

Setting up a sole proprietorship in Nepal is relatively simple and an attractive business opportunity for entrepreneurs. In this article, we will discuss how to register a sole proprietorship in Nepal. 

Do You Have to Register Your Sole Proprietorship in Nepal?

Yes, it is mandatory to register a sole proprietorship in Nepal to operate legally in the country. 

The Private Firm Registration Act of 1958 controls sole proprietorship or private firm registrations in Nepal. You must the registration-related documents to one of these three government bodies for registration:

  • Department of Cottage and Industry: In the case of small-scale firms
  • Department of Commerce: In the case of firms dealing with commercial and trading goods
  • Department of Industry: Relevant for businesses operating in any other kind of industry

Any individual cannot register two different private firms or sole proprietorships with the same or similar business objectives. 

Benefits of Sole Proprietorship in Nepal

There are tons of benefits to establishing a sole proprietorship in Nepal, which are as follows:

  • More control: A sole proprietorship is operated by a single person entirely in charge of the company and all its decision-making. Hence, it becomes easier for an entrepreneur to control such a business and make quick decisions without waiting for approval. 
  • Easy to establish: The bureaucratic work related to setting up a sole proprietorship in Nepal is relatively less. Hence, this is a hassle-free option, especially for entrepreneurs venturing into business for the first time. 
  • Higher profit: Since sole proprietorships only have one person operating the business, the entire profit becomes theirs. Hence, the personal profit gained from such a business model is relatively high compared to partnership businesses.
  • Easier tax setup: A significant advantage of setting up a sole proprietorship in Nepal is straightforward tax requirements. Business income and losses are reported on an individual’s tax return; therefore, individuals are not required to pay tax separately. 

Documents Required for Registering Your Business in Nepal

To set up a sole proprietorship in Nepal, the following documents are essential: 

  • Name of the business
  • Address and rent agreement letter of the business
  • Name and address of the business owner
  • Citizenship certificate of the business owner
  • Name and address of the business owner’s parents and grandparents
  • Self-declaration letter that states the intent to register the business
  • Objective and function of the sole proprietorship business
  • Goods (if any) that the business will transact

Other Criteria for Registering a Sole Proprietorship in Nepal

Depending on the type of business activity, a sole proprietorship in Nepal may have to obtain licenses or permits from the following bodies:

  • Department of Roads
  • Department of Electricity Development
  • Department of Industry
  • Nepal Rastra Bank
  • Department of Agriculture

Other than that, sole proprietors must also set up a separate bank account for business transactions. 

How to Register a Sole Proprietorship Company in Nepal

The registration process for a sole proprietorship in Nepal has the following steps: 

  1. The first step is to submit the above documents and sole proprietorship application to the relevant authority in Nepal. Companies can also register their sole proprietorship online via cro.gov.np. 

  2. After submission of the documents, the applicant will be required to pay a registration fee. The fee is based on the capital of the private firm. 

Capital 

Registration Fee

1,00,000 NPR or less

600 NPR

1,00,001 NPR to 3,00,000 NPR

2,000 NPR

3,00,001 NPR to 5,00,000 NPR

4,000 NPR

5,00,001 NPR to 10,00,000 NPR 

7,500 NPR

10,00,001 NPR to 50,00,000 NPR

10,000 NPR

Over 50,00,000 NPR 

15,000 NPR

3. Once a sole proprietorship is registered in Nepal, the next step is registering the firm with the country’s tax authorities. 

  • Visit the website of the Inland Revenue Department (IRD) and click on the Tax-payer Portal.
  • Then, choose the application for registration option and provide all the necessary details.
  • Next, select the IRD office that is in your area. 
  • Subsequently, you will get your submission number, after which you must fill in your details.
  • Lastly, print the filled-in form and take it to the IRD office you selected for verification.
  • You will receive your Permanent Account Number (PAN) within a day, and your business will be successfully registered for tax. 

4. The last step in setting up a sole proprietorship in Nepal is opening a currency account at the Nepal Rastra Bank in the business’s name. 

How Multiplier Can Help You

A sole proprietorship is the most straightforward business to establish. However, once a sole proprietorship is set up, business owners might need help managing employees and their payroll while complying with the local rules and regulations. Therefore, many entrepreneurs partner with PEO platforms to delegate these tasks. 

So, if you are considering setting up a sole proprietorship in Nepal, you may want to outsource your employee and payroll management tasks to Multiplier. Our years of experience and robust technology-based approach create the perfect infrastructure for employee and payroll management that can be accessed with just a click. Hence, partner with us to take care of your sole proprietorship most effectively!

Frequently Asked Questions

The VAT rate is 21% for private firms in Nepal.

The minimum wage in Nepal is 15,000 NPR per month.

Registering a business in Nepal usually takes 7 to 15 days.

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