[dropcap type=”default”]T[/dropcap]o start a business in Nepal, investors need to incorporate a company. The agency responsiblefor the incorporation of a company is the CompanyRegistrar Office (CRO) under the Ministry of Industry.
We are a leading provider of company formation and administration services for small to medium-sized private limited companies in Nepal. We assist various international and domestic to incorporate companies each year. Our incorporation service includes:
- Name Reservation
- Documentation Services [drafting of Memorandum of Association (MOA) and Articles of Association (AOA), application for incorporation]
- Document Processing [Submit application and all the necessary documentations for incorporation]
The Company Act 2006 provides following types of companies:
Private Limited Company
- Limits the number of shareholders from 1–50
- Cannot make an invitation to the general public for share subscription
Profit Not Distributing Private Limited Company
- Can be started by at least 5 members
- Ideal for NGOs
Public Limited Company
- Has minimum of 7 shareholders and no maximum limit
- Has minimum paid-up capital of NPR 10 million
- May also offer shares to the public at the Nepal Stock Exchange (NEPSE) under the Company Act and Securities Act
- A company carrying on the business of banking, financial transactions, insurance related transactions, a stock exchange, pension or mutual fund, or any other related business or transactions must be incorporated as a public limited company.
The fees for registering a company are set out in the tables.
Registration Fee for Private Limited Company (USD)
|Capital Investment||Registration Fee (Minimum)|
|0 to 1,000||10|
|1,000 to 5,000||45|
|5,000 to 25,000||95|
|25,000 to 1,000,000||160|
Registration Fee for Public Limited Company (USD)
|Capital Investment||Registration Fee (Minimum)|
|0 to 100,000||180|
|100,000 to 1,000,000||400|
|1,000,000 to 2,000,0000||700|
|2,000,000 to 3,000,000||1,000|
|3,000,000 to 4,000,000||1,300|
|4,000,000 to 5,000,000||1,600|
Our Company Incorporation Service Package also includes support and assistance in tax registration and opening of bank account.
Foreign investors are required to obtain foreign investment approval before incorporating a company in Nepal. We can guide foreign investors and entrepreneurs through the entire process and provide customized services that include obtaining all approvals, incorporating a company, obtaining tax registration and assisting in opening a bank account. To know more about foreign investment approvals, check our Foreign Investment Facilitation Section.
Foreign Company Registration Options in Nepal
Of all the choices you make when deciding on incorporating an entity in Nepal, one of the most important is the type of business structure (i.e. legal entity) you choose for your business. Your decision can affect how much you pay in taxes, what activities you can undertake, image and perception of your business among your clients and suppliers, the amount of paperwork your business is required to do, the personal liability you face, ability to borrow money, and the ability to expand your business.
Foreign companies wishing to setup a presence in Nepal can choose to register a Branch Office, Subsidiary Company, or a Representative (Liaison) Office. We can assist you in the overall registration process.
The following are the main setup options for the foreign companies. The specific option that best suits the needs of a foreign company will depend on the company’s business plan and strategic goals.
Option 1: Subsidiary Company
A subsidiary company is a locally incorporated private limited company whose majority shareholder is another local or foreign company. Nepal allows 100% foreign ownership in companies subject to foreign investment approval. Therefore a foreign company may incorporate a local limited liability company in Nepal (i.e. subsidiary company) and own 100% of the shareholding.
A Nepal subsidiary is the most preferred registration option for small to mid-size foreign businesses interested in establishing their presence in Nepal. A properly structured local subsidiary company is an excellent tax efficient corporate body. A Nepal subsidiary company is considered a separate entity from the foreign company even if the foreign company is the only shareholder. The liabilities of the subsidiary company are not extended to the parent company.
The name for the subsidiary can be different from that of the parent company and is subject to approval by the Office of Company Registrar (OCR). The Companies Act 2006 requires the appointment of one or more directors or the operations may be carried out through a representative of the shareholder without any provision for a board of directors. There is no restriction regarding the nationality of the director or the authorised representative. A Nepal subsidiary must maintain a registered office in Nepal and keep its statutory documents in that office. For taxation purposes, the subsidiary may be treated as a Nepal resident company and as such eligible for tax exemptions and incentives available to local companies.
Option 2: Branch Office
A Nepal branch office like a subsidiary is a registered legal entity however unlike a subsidiary, a branch office is treated as an extension of the foreign company. This is an important point since it means that the foreign company’s head office bears the ultimate responsibility for any liabilities arising due to the acts of commission or omission of the Nepal Branch Office. From a taxation point of view, a branch office is generally considered a non-resident entity and therefore not eligible for the tax exemptions and incentives available to local companies in Nepal. Consequently, setting up a branch office is a less attractive option for small to mid-size businesses.
The name of the Nepal branch office must be the same as that of the head office and must be approved first before branch office registration. The company registrar generally approves the proposed name unless a name is identical to an existing company name.
A Nepal branch office is allowed to conduct any type of business activity that falls within the scope of its parent company and can repatriate its earnings and capital. The portion of the income of the branch office, which is derived from or attributable to the operations carried out outside Nepal, will not be subject to taxes. Only the earnings derived from its operations in Nepal will be subject to the prevailing local corporate tax rates.
Option 3: Representative (Liaison) Office
Foreign companies that are only interested in exploring the market or managing the company affairs without conducting any business activity of profit yielding nature, can setup a representative office in Nepal. A representative office is a temporary setup without any legal persona. Therefore it cannot enter into any contract, engage in trading directly or on behalf of the foreign company, lease warehouse, raise invoices, open letter of credit, etc. Representative office in Nepal can only undertake market research or feasibility studies on behalf of its parent company and are allowed to maintain liaison on behalf of the foreign company, help the Nepalese clients of foreign company during import or use of its products and services, and coordinate with the agents of the foreign company in Nepal.
The foreign company bears implicit liability for the activities of the representative office in Nepal. The representative office must be staffed by a representative from the foreign company’s head office and can engage local support staff.
Which option to Choose?
Subsidiary or Branch or Representative Office
|Nepal Subsidiary||Nepal Branch Office||Nepal Representative Office|
|Legal Type||Separate legal entity distinct from its parent company||Not a separate legal entity but an extension of the parent company||Has no legal status but just a temporary administrative arrangement|
|Liabilities||Liabilities limited to subsidiary||Liabilities extend to parent company||Liabilities extend to parent company|
|Entity Name||Can be the same or different from parent company||Must be the same as the parent company||Must be the same as the parent company|
|Allowed Activities||Can be the same or different from parent company||Must be the same as the parent company||Can only conduct market research or feasibility studies [not allowed to undertake any income generating activity]|
|Normal Registration Time||4-6 weeks||4-6 weeks||2 weeks|
|Taxation||Taxed as Nepal resident entity, local tax benefits available||Taxed as non-resident entity, local tax benefits not available||N/A as Rep Office cannot generate income|
|Annual Filing||Must file accounts of the Nepal subsidiary||Must file branch office as well as parent company’s accounts||Must file representative office as well as parent company’s accounts|
|Bank Account||Can open bank account in Nepal||Can open bank account in Nepal||Can open bank account in Nepal to run the cost centre operations. Must be funded by the parent company.|
|Staff Hiring||No restrictions on hiring local staff [Foreign staffs can only be hired in certain circumstances ]||No restrictions on hiring local staff [Foreign staffs can only be hired in certain circumstances, click here to know more]||Must appoint a Representative from the parent company No restrictions on hiring local staff [Foreign staffs can only be hired in certain circumstances]|
|Registration Process||Well established||Not so well defined||Well established and relatively easy|
|Minimum Investment||USD 50,000||Not defined||Not required|
|Additional Approvals||Foreign Investment Approval from Department of Industries or Industries and Investment Promotion Board or Investment Board Nepal depending upon the amount of investment Approval from the central bank of Nepal||Approval from the central bank of Ne|