Although the law of Nepal provides for doing business in the country through entities of various organizational and legal forms, in practice, foreign investors establish private limited liability companies or public limited liability companies in Nepal.

Private limited liability company

Private company is established by at least one shareholder (and may have no more than 50 shareholders), and its shares and other securities may not be subscribed to by the public.

Public limited liability company

Public company is established by at least seven shareholders (maximum number of shareholders is not limited) and may offer its shares and other securities to the public.

Under the Nepal Companies Act, the nominal value of one share of both private and public company is NPR 100 (US$1 is NPR 75).

Nepal supports and encourages foreign investments and seeks to increase the private sector’s role in the development of the country. However, far from all sectors of the economy are provided for investment, although foreign participation in Nepalese companies, except for some industries, may reach 100%. The Foreign Investment and Technology Transfer Act guarantees that foreigners may repatriate profits and dividends in full volume.

If a company established in Nepal has assets (including equipment, technology, etc.) not exceeding NPR 1 billion, a foreign investor must file an application with the Ministry of Industry of Nepal. If an estimated value of invested assets exceeds NPR 1 billion, the Nepal Industrial Development Board’s approval is required to establish the company.

Foreign investments are not permitted in the following areas:

• organising handicraft industry
• hairdressing services, beauty parlours, ready-made dress tailoring, training in car driving
• organising companies related to armaments, military equipment and radioactive materials
• manufacturing of explosives
• real estate transactions (other than construction)
• making films in the Nepalese language
• printing of securities, banknotes and stamping of coins
• retailing
• organising travel agencies
• providing agency services for people and goods transportation
• organising production and trade in tobacco products and alcohol (other than companies exporting more than 90% of such products)
• organising internal courier service
• bee-keeping, poultry production and fisheries
• providing consulting services in the field of management, accounting and mechanical engineering
• legal services

Registration of a service company is regulated by such laws in certain sectors of the economy as the Law on Agencies, the Law on Financial Institutions, etc.

Application for registration as well as the company’s Charter and the Memorandum of Association and the State duty payment receipt should be filed with the the Registrar of Companies in Nepal; the Registrar makes necessary inquiries, and if needed, holds an interview with the founders. The Registrar may reject the establishing if, for example, the future company’s name is already registered in Nepal, or if the company’s purposes are in conflict with the existing regulations and public morality. If the founders meet all provisions of the Companies Act, the Registrar issues a certificate of incorporation within 15 days.

Each company has to appoint an auditor certified by the General Directorate of Auditors of Nepal. Before starting operations, the company is also required to get registered at the district office of the Tax and Customs Authority of Nepal. The registration is required for purchasing real estate and importing the company's property into Nepal.

A Nepalese company’s profits are subject to corporate tax at a rate of 33%.

Expenses related to advertising, creation of comfortable conditions in the interests of business and other similar expenses may be deducted from the tax base of industrial enterprises in the amount of 5% of gross profit.

Deduction related to depreciation of plant and machinery ranges from 15% to 25% per year. Deduction related to depreciation of industrial and commercial constructions ranges from 5% to 7% per year. Vehicles may be subject to depreciation within 15% to 25% per year, and furniture items – within 10% to 15% per year.

Customs duty is charged in Nepal for all imported goods and may be up to 110%.

No capital gains tax is charged in Nepal.

Nepal is not a tax heaven or offshore jurisdiction, and a concept of Nepal tax exempt company (and/or Nepal offshore company, trust, foundation etc. registration) does not exist in Nepal as such. A company formation in Nepal could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Nepal. To set up a company in Nepal is possible by correspondence, but to open a bank account in Nepal will, most probably, require a personal visit.

Nepal Double Taxation Agreements

Bangladesh, India, Pakistan, and Sri Lanka.

99 classical offshore, onshore and midshore jurisdictions of Europe, America, Middle East, Asia, Africa and Oceania