Doing business in Nepal, particularly for foreign investors, involves a structured process governed by laws like the Foreign Investment and Technology Transfer Act (FITTA) 2019 and the Companies Act 2006.
Here is a general outline of the steps and key requirements:
1. Investment Approval
The first major step for foreign investors is securing approval for the investment.
- Approving Authority: Depending on the size of the investment, approval is obtained from either the Department of Industry (DOI) or the Investment Board Nepal (IBN). The IBN typically handles large-scale projects.
- Minimum Investment: As of recent regulations, there is a minimum foreign direct investment (FDI) threshold (which has been reduced but is often around the equivalent of USD 50,000 or NPR 20 million, subject to the latest official amendments).
- Restricted Sectors: Certain sectors, such as retail trading, are restricted from foreign investment.
2. Choose a Business Structure
The most common structure for foreign investment is a Private Limited Company (often incorporated as a subsidiary), though others like a Public Limited Company or a Branch/Liaison Office are possible.
- Private Limited Company: A separate legal entity with limited liability. Can be wholly foreign-owned.
3. Company Registration
Once foreign investment approval is secured, the company must be legally registered.
- Name Reservation: Reserve a unique company name online through the Office of the Company Registrar (OCR) portal.
- Document Preparation: Prepare the Memorandum of Association (MOA) and Articles of Association (AOA), along with other required documents like the foreign investment approval letter and promoter/shareholder details.
- Registration at OCR: Submit the documents and the application to the OCR to obtain the Certificate of Incorporation.
4. Tax Registration
After company registration, you must register with the tax authority.
- PAN/VAT Registration: Obtain a Permanent Account Number (PAN) from the Inland Revenue Department (IRD). If the nature or volume of the business requires it, you will also need to register for Value Added Tax (VAT).
5. Industry Registration and Other Licenses
You must register the industry and acquire any necessary sector-specific licenses.
- Industry Registration: Register with the Department of Industry (DOI) within a stipulated time frame after company incorporation.
- Local Level Registration: Register with the relevant local body (Municipality or Ward Office) where the business is operating.
- Sectoral Licenses: Obtain any specific licenses required for the industry (e.g., tourism license for travel agencies, approvals for financial institutions).
6. Capital and Banking
- Open a Bank Account: Open a business bank account with an authorized commercial bank.
- Bring in Capital: The foreign investor must transfer the committed foreign investment amount into the company’s bank account in Nepal.
- Investment Recordal: The receipt of foreign investment must be officially recorded with Nepal Rastra Bank (NRB), the central bank.
7. Visas and Permits
- Business Visa: Foreign investors and their authorized representatives can apply for a Business Visa for the duration of the investment.
- Work Permit: Foreign employees must obtain a Work Permit from the Department of Labor.
Key Regulations and Compliance:
- FITTA 2019: Governs foreign investment, technology transfer, and repatriation of profits.
- Companies Act 2006: Governs company formation, governance, and compliance.
- Labor Act 2017: Governs employment terms, social security contributions, and labor relations.
- Tax Compliance: Adherence to corporate income tax (standard rate is often 25%), VAT (currently 13%), and timely filing of tax returns.
It is highly recommended to consult with a local corporate lawyer or a consulting firm in Nepal to navigate the specific legal, regulatory, and bureaucratic processes efficiently.