Business Options Available for the NRN in Nepal

1. Governing laws:

• The Non-Resident Nepali Act, 2064,
• The Companies Act, 2063,
• The Foreign Investment and Technology Transfer Act, 2075 (“Foreign Investment Act”),
• The Foreign Investment and Technology Transfer Rule, 2077,
• The Industrial Enterprise Act, 2076 (“Industrial Enterprise Act”),
• The Industrial Enterprise Rule, 2078 , and
• Foreign Exchange (Regulation) Act,1962 (“Foreign Exchange Act”).

2. Concerned Authorities:

a. Office of Company registrar (“OCR”),

b. Department of Industry (“DOI”) and Investment Board of Nepal (“IBN”)

c. Inland Revenue Office (“IRO”)

d. Concerned Local Government (“Local Government”)

e. Nepal Rastra Bank (“NRB”)

3. Viable Business Option for the NRN in Nepal

The NRN have economic, social and cultural rights in accordance with the Constitution of Nepal. To enjoy the economic rights given by the Constitution of Nepal by the NRN, following business options are available. They are:

a. Establishment of the Company by the NRN in Nepal through the foreign direct investment (“FDI”),

b. Establishment of the Company by the NRN in Nepal without the FDI,

c. Establishment of the branch office or liaison, if the investor has already established an entity in foreign country,

a. Establishment of Company by NRN through FDI process:

One of the business vehicle to do a business in Nepal is establishment of the company through the FDI by the NRN. It is one of the most common and structured forms of an investment in Nepal.

I. Minimum capital requirement

A minimum capital of NPR. 20 million (Approx. USD 1,50,000) must be invested to establish a company through foreign investment by each foreign investor. However, there is no minimum threshold of the investment for the IT industries.

II. Repatriation

The NRN can repatriate profits, dividends, or capital invested by the NRN back to the NRN’s home country.

III. Procedure:

Click to the below link for the applicable procedure for establishment of a company through foreign investment.

Read More: Foreign Direct Investment in Nepal

b. Establishment of the Company by the NRN without FDI:

As a matter of practice, an NRN can establish a business in Nepal without the FDI. However, the dividends generated from such investment cannot be repatriated outside Nepal. A declaration letter must also be submitted, stating that the dividends generated from the investment will not be taken outside Nepal and must instead be either expended or reinvested within Nepal.

I. Procedure

• Incorporation of the company at the OCR,
• Business registration at Local Ward Office,
• Tax registration at IRO,
• Opening of the Bank Account,
• Obtaining license, approval (if required)

II. Minimum Capital Requirement

There is no minimum investment threshold if the investment is made by the NRN within Nepal without the FDI.

c. Registration of Branch Office and Liaison office by the NRN.

Third options for the NRN to carry out the business activities in Nepal may be Branch Office or Liaison Office in Nepal. For this option, the NRN shall own any entity in any country outside the Nepal, then the Establishment of the Branch Office or the liaison office is another option to do a business in Nepal.

I. Business activities by establishing a Branch Office in Nepal:

The branch office can carry out the business activities that the Investor carries out in the country of its incorporation as stated in the Memorandum of Association or related incorporation documents.

Unlike subsidiaries, branch offices are not legally separate entities, they operate as part of the parent company, sharing the same legal identity.

Procedure of Establishment of Branch Office in Nepal:

The following procedure is applicable for registration of branch office in Nepal:

a. Application for registration of branch office registration must be made at the OCR;

b. An approval for branch office registration must be obtained from the concerned Ministry;

Kindly note that if any foreign company is selected by any competent body of government of Nepal, or enters into contract with any competent body of government of Nepal, for any business in Nepal, it deemed to be the approval given by the concerned Ministry.

• Branch registration at the OCR is undertaken after Ministry approval;
• Business registration at the local ward office must be done; and
• Tax registration at the concerned IRO.

Minimum Capital requirement

There is no minimum investment threshold for the establishment of the Branch Office.

II. Business activities by the Liaison Office in Nepal

A Liaison Office is a representative office established by a company, typically a foreign entity, in another country to facilitate communication and coordination between the parent company and local entities or stakeholders. It acts as a channel for promoting business interests without engaging in direct commercial or revenue-generating activities.

Purposes of Liaison office:

A liaison office registered in Nepal may undertake the following activities:

• Making contacts and correspondence on behalf of the foreign company in Nepal.
• Providing necessary assistance without charging any fees to persons in Nepal who require help in importing and using the foreign company’s products and services.
• Coordinating with agents of the foreign company in Nepal, if any such agents exist.

Limitation:

It shall not engage in market promotion, market expansion, advertising and similar activities for the foreign company’s products or services.

Procedure:

The following procedure is applicable for registration of branch office in Nepal:

• Application for registration of Liaison office registration must be made at the OCR;
• Liaison registration at the OCR;
• Business registration at the local ward office must be done; and
• Tax registration at the concerned IRO.

Minimum Capital requirement

There is no minimum investment threshold for the establishment of the Branch Office.