Doing business in Nepal

How quickly can I set up a business?

• Domestic (Nepali-only) Company: 10 to 15 working days
• Foreign-Invested (FDI) Company: 4 to 8 weeks, including DOI/IBN approval and NRB capital verification

This is including document preparation, all the regulatory approvals as well as tax registrations.

What is the minimum investment needed?

For Domestic Investors

• Sole Proprietorship / Partnership: No statutory minimum capital requirement.
• Private Limited Company: No statutory minimum capital requirement.
• Public Limited Company: Minimum authorised capital of NPR 1,00,00,000 (NPR 1 crore).

For Foreign Investors (FDI)

• General Minimum FDI Threshold: NPR 20,000,000 per foreign investor (approx. USD 135,000)
• IT/Technology Sector: No minimum capital requirement for Information Technology companies using the automatic route.
• Automatic Route (up to NPR 500 million): Investments up to approximately USD 3.7 million can receive online preliminary approval immediately. This route was launched following the Nepal Investment Summit in April 2024.

How can I raise finance?

Domestic Financing Options

Nepal’s financial system is regulated by Nepal Rastra Bank (NRB) under the Bank and Financial Institutions Act, 2073 (BAFIA). The principal domestic financing channels are as follows:

• Commercial Banks (A-Class): Nepal has 20 A-class commercial banks offering term loans, working capital facilities, and overdraft products. Business registration and PAN are prerequisites.
• Development Banks & Finance Companies (B/C-Class): Provide SME-targeted credit products, often with lower collateral requirements.
• Microfinance Institutions (D-Class): Serve micro and small enterprises, particularly in rural and agricultural sectors.
• Capital Market: Public limited companies may raise equity capital through Initial Public Offerings (IPOs), Further Public Offerings, or Rights Issues, regulated by the Securities Board of Nepal (SEBON) under the Securities Act, 2063.
• Citizen Investment Trust (CIT) & Employee Provident Fund (EPF): Government-affiliated institutions providing investment and loan facilities.
• Private Equity & Venture Capital: Available for businesses with significant growth potential.

Foreign Investment & Financing

• Foreign Direct Investment (Equity): Under FITTA 2019, foreign investors may hold up to 100% equity in most sectors. Capital must be remitted through authorised banking channels in convertible foreign currency (Indian rupees are permitted for Indian investors).
• Foreign Loans / Project Finance: The NRB Foreign Investment and Foreign Loan Management Bylaw, 2021 allows foreign loans up to 100% of equity (raised from the prior 60% ceiling). NRB approval is required before loan drawdown.
• Venture Capital / Specialized Investment Funds: A March 2025 Ordinance amending FITTA now allows foreign investors to invest through venture capital funds or specialized investment funds registered in Nepal.

Note: Nepal was grey-listed by FATF in March 2025, which may temporarily increase the cost and scrutiny of cross-border financial transactions. Investors should plan for enhanced due diligence requirements.

What are the legal requirements for setting up my business?

1. Private Limited Company (Pvt. Ltd.)
   Supports 1 to 101 shareholders. Shares cannot be publicly traded and transfer requires board approval. There is no specified minimum authorized capital. The company enjoys separate legal personality, limited liability, and perpetual succession, and requires at least one director.
2. Public Limited Company (Ltd.)
   Requires a minimum of 7 shareholders with no upper limit. The minimum authorised capital is NPR 1 crore. Public companies can raise equity via NEPSE through an IPO and must have at least 3 directors, conduct a mandatory annual audit, and hold an Annual General Meeting (AGM).
3. Single Shareholder Private Limited Company
   Fully legal under Companies Act 2063. One person may be the sole director and shareholder. Ideal for solo founders or wholly-owned subsidiaries.
4. Branch Office (for Foreign Companies)
   A foreign company may establish a branch in Nepal to conduct business activities, enter contracts, and generate revenue. Prior approval from the Department of Industry (DOI) is required before OCR registration.
5. Liaison / Representative Office
   Limited to non-commercial activities such as market research, quality control, and coordination with a parent company. Cannot generate revenue. NRB clearance may be required depending on the nature of operations.
6. Sole Proprietorship
   Simple registration at the local Ward Office and IRD for PAN/VAT. There is no liability separation from the owner. Recommended only for small, low-risk, and informal business operations.
7. Partnership Firm
   Governed by the Partnership Act, 2020 (1964). Supports 2 to 20 partners, registered at the local administration office. Suitable for professional services firms.

Sector-Specific Structures

Banking & Financial Institutions: Governed separately by BAFIA 2073 and NRB licensing.

Cooperatives: Governed by the Cooperative Act, 2074 (2017).

Non-Profit / NGOs: Registered under the Social Welfare Act, 2049 (1992) or the Association Registration Act.

Insurance Sector: Governed by the Insurance Act, 2079 (2022), licensed and supervised by the Nepal Insurance Authority.

What structure should I consider?

Recommended: Private Limited Company (Pvt. Ltd.) for Most Investors
For the vast majority of foreign and domestic investors, the Private Limited Company structure under the Companies Act 2063 is the optimal choice for the following reasons:

• Limited Liability: Shareholders’ personal assets are protected; liability is capped at unpaid share capital.
• FDI Eligibility: Only a Pvt. Ltd. or Public Ltd. structure qualifies for foreign investment under FITTA 2019. Sole proprietorships and partnerships cannot receive FDI.
• Ownership Flexibility: Supports 1 to 101 shareholders, enabling joint ventures, phased equity dilution, and employee stock options.
• Operational Control: Simpler governance than a Public Ltd., with no mandatory public disclosure of shareholder details beyond OCR filings.
• Profit Repatriation: Dividends and capital gains can be repatriated under FITTA 2019 after satisfying tax obligations.
  Sector-Specific Guidance
• Technology / IT Startups: Pvt. Ltd. with no minimum FDI threshold. Consider the automatic FDI approval route for speedy process.
• Manufacturing / Export: Consider setting up within the Bhairahawa SEZ or Simara SEZ for income tax exemptions, customs duty waivers on raw materials and machinery, and direct access to industrial infrastructure. SEZ industries must export at least 60% of production from Year 2 of incorporation.
• Large Infrastructure (above NPR 6 billion): Route through Investment Board Nepal (IBN) under the Public Private Partnership and Investment Act, 2019 (PPPIA). IBN can facilitate a One Stop Service (OSS) for all approvals.
• Financial Services: Must incorporate under BAFIA 2073 with full NRB licensing, and significantly higher minimum capital.
• Short-Term Market Testing: A Liaison Office avoids the commitment of full incorporation but cannot earn revenue. Useful for 12 to 24 months of market research before full entry.

What advice can you give me in regards to payroll and taxation requirements?

A. Key Business Locations

Kathmandu Valley (Bagmati Province)
Kathmandu is the primary business, financial, and administrative hub of Nepal. It houses most government ministries, major commercial banks, the Nepal Stock Exchange (NEPSE), and key business organisations such as the FNCCI. The city hosts international companies and service providers, making it the most strategic location for establishing businesses, given its strong infrastructure, regulatory presence, and access to skilled manpower.

Pokhara
Pokhara is the key tourism and hospitality hub of Nepal, with a rapidly growing services sector. It serves as the headquarters of Gandaki Province. The Pokhara International Airport (opened in 2023) has significantly improved national and international connectivity, further strengthening its potential as a commercial and tourism investment destination.

Bhairahawa (Lumbini Province)
Bhairahawa is an emerging industrial and trade hub strategically located near the Indian border, making it highly suitable for cross-border commerce. It is home to Nepal’s first operational Special Economic Zone (Bhairahawa SEZ) and is located near Gautam Buddha International Airport, enhancing both cargo and passenger connectivity. It is considered ideal for manufacturing and export-oriented industries.

Simara (Madhesh Province, Bara District)
Simara hosts the Simara Special Economic Zone, located approximately 70 km south of Kathmandu. Originally a Garment Processing Zone, it has been upgraded to a broader industrial SEZ. Block A is currently operational with ongoing expansion. Total planned investment commitment is around NPR 10 billion and is expected to generate approximately 5,200 jobs.

Biratnagar (Koshi Province)
Nepal’s second-largest industrial city and a major economic hub in the eastern region. It hosts a strong base of manufacturing industries including jute, sugar, textile, and agro-based processing. Its strategic location near the Indian border makes it a key centre for cross-border trade and logistics.

SEZ Tax Incentives
Industries within Special Economic Zones receive income tax exemptions for initial years of operation, customs duty waivers on raw materials, auxiliary materials, and certified machinery (under bank guarantee), as well as dividend tax concessions, all as provided under the SEZ Act, 2075.

B. Payroll and HR Requirements
The primary instruments governing employment in Nepal are the Labour Act, 2074 (2017) and the Labour Rules, 2075 (2018).
Minimum Wage (effective 15 July 2025 / 1 Shrawan 2082 BS)

• Total: NPR 19,550 per month
  • Basic Salary: NPR 12,170
  • Dearness Allowance: NPR 7,380
• Wages must be paid within 7 days of the end of each month.

Working Hours

• Maximum 48 hours per week over 6 days (8 hours/day).
• Overtime is capped at 24 hours per week and compensated at 1.5x the ordinary wage rate (Labour Act 2074, Section 30).

Social Security Fund (SSF) – Mandatory for All Employers

Governed by the Social Security Act, 2074 (2017). The total contribution rate is 31% of basic salary:

Employee contribution: 11%

Employer contribution: 20% (covering provident fund, gratuity, and social security)

Contributions must be deposited within 25 days of month-end. Late deposits attract 10% annual interest. Enrolment is via the SOSYS portal. Non-compliance may result in fines up to NPR 1,00,000 or imprisonment of up to 1 year.

Mandatory Insurance

• Medical insurance: NPR 1,00,000 annual coverage (shared premium between employer and employee).
• Accident insurance: Minimum NPR 7,00,000 coverage, fully employer-funded.

Leave Entitlements

• Maternity leave: 98 days (60 days fully paid under SSF).
• Paternity leave: 15 days fully paid.
• Annual leave accrues at 1 day per 20 days worked.

Work Permits for Foreign Nationals
Foreign nationals require a valid work permit to be legally employed in Nepal. Employers must demonstrate that no suitably qualified Nepali national was available, including by advertising in national newspapers, before hiring a foreign employee (Labour Act 2074).

Employers with 10 or More Workers
Must establish a Workplace Grievance Handling Committee under the Labour Act, 2074.

Is there anything else that I should know?

Investment Protection & Dispute Resolution

FITTA Guarantee: FITTA guarantees national treatment – foreign investors are to be treated on par with domestic investors. The Act guarantees the right to repatriate all profits, dividends, capital gains, loan repayments, and technology transfer fees after fulfilling tax obligations.

Arbitration: FITTA provides for international arbitration for disputes between foreign investors and the Nepal Government. Nepal is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Double Taxation Avoidance Agreements (DTAA)

Nepal has signed DTAAs with India, China, Mauritius, South Korea, Norway, Austria, Sri Lanka, Pakistan, Thailand, and Qatar, among others. These agreements prevent businesses from being taxed twice on the same income earned across jurisdictions. Investors should verify applicable treaty provisions with a local tax advisor.

One Stop Service Centre (OSSC)

The Department of Industry (DOI) operates an OSSC in Kathmandu that coordinates approvals from multiple government agencies, including DOI, OCR, IRD, NRB, and MOFA, under one roof, significantly reducing the bureaucratic burden for foreign investors.

Restricted Sectors (Negative List)

Under FITTA 2019, foreign investment is prohibited in the following sectors:

Primary agriculture (fish farming, animal husbandry, horticulture, dairy)

Cottage and small enterprises

Personal service businesses (hair salons, tailoring, driving)

Arms, ammunition, and explosive industries

Real estate business (excluding construction)

Retail business; remittance services

Local catering, travel agencies, trekking agencies, homestay, and rural tourism

Additionally, certain sectors carry foreign equity caps:

• Telecommunications: Maximum 80% FDI
• Domestic Airlines: Maximum 49% FDI
• Consultancy Services: Maximum 51% FDI

Key Government Contacts & Resources

• Office of Company Registrar (OCR): camis.ocr.gov.np
• Department of Industry (DOI) / OSSC: doind.gov.np
• Investment Board Nepal (IBN): ibn.gov.np
• Nepal Rastra Bank (NRB): nrb.org.np
• Inland Revenue Department (IRD): ird.gov.np
• Social Security Fund (SSF): ssf.gov.np / sosys.ssf.gov.np
• Special Economic Zone Authority (SEZA): seznepal.gov.np