Investment Company Registration in Nepal

Introduction: Navigating Investment Company Registration in Nepal

Nepal’s emerging economy presents significant opportunities for both foreign investors and local entrepreneurs looking to establish investment companies. With recent regulatory reforms and a government focused on attracting foreign direct investment, understanding the investment company registration process in Nepal has become essential for business success. This comprehensive guide walks you through the complete registration journey, from initial application to final approval, covering legal requirements, regulatory frameworks, and practical considerations for establishing your investment company in Nepal.

Whether you’re a foreign investor exploring Nepal’s market potential or a local entrepreneur seeking to formalize your investment activities, this guide provides the essential information needed to navigate the registration process efficiently and compliantly.

Nepal’s Regulatory Framework for Investment Companies

Investment company registration in Nepal operates under a structured legal framework designed to promote investment while protecting national interests. The primary regulations governing investment companies include:

• Companies Act 2063 (2006): The foundational legislation governing company registration, operation, and management in Nepal
• Foreign Investment and Technology Transfer Act (FITTA) 2075 (2019): Regulates foreign investment, technology transfer, and investment facilitation
• Industrial Enterprise Act 2076 (2020): Provides the framework for industrial enterprises, including investment companies
• Investment Board Nepal Act 2071 (2015): Establishes the Investment Board Nepal (IBN) and outlines its functions

These regulations create a tiered system where different types of investment companies fall under different regulatory authorities based on factors like investment amount, sector, and ownership structure.

Types of Investment Companies in Nepal

Investment companies in Nepal can be categorized based on ownership structure and investment scale:

Domestic Investment Companies

• Wholly owned by Nepali citizens or entities
• Registered under the Companies Act 2063
• Governed primarily by the Company Registrar’s Office
• No minimum capital requirements specified by law (except for certain regulated industries)

Foreign Investment Companies

• Can be wholly foreign-owned or joint ventures with Nepali partners
• Require approval from either the Department of Industry (DOI) or Investment Board Nepal (IBN) depending on investment size
• Subject to minimum capital requirements (typically NPR 5 million for service industries and NPR 10 million for manufacturing)
• Must comply with sectoral restrictions on foreign investment

Regulatory Bodies Governing Investment Company Registration

Understanding which regulatory body governs your investment company is crucial for a smooth registration process:

Investment Board Nepal (IBN)

• Jurisdiction over investments exceeding NPR 6 billion
• Handles large-scale infrastructure projects and special economic zones
• Provides one-stop approval services for qualifying projects
• Offers additional facilities and incentives for qualifying investments

Department of Industry (DOI)

• Jurisdiction over foreign investments between NPR 5 million and NPR 6 billion
• Processes foreign investment proposals and issues approval letters
• Handles technology transfer agreements
• Monitors compliance with foreign investment regulations

Company Registrar’s Office (CRO)

• Handles all company registration processes after investment approval
• Manages company name registration, incorporation, and post-registration filings
• Maintains the official company registry
• Issues certificates of incorporation

Nepal Rastra Bank (NRB)

• Regulates financial institutions and certain types of investment companies
• Provides necessary approvals for companies engaged in financial activities
• Monitors foreign exchange transactions related to investment

Eligibility Criteria for Investment Company Registration

For Foreign Investors

• Minimum investment of NPR 5 million for service industries and NPR 10 million for manufacturing
• Must obtain prior approval from DOI or IBN before company registration
• Must comply with negative list of sectors where foreign investment is restricted or prohibited
• Required to submit a detailed project report and business plan
• Must demonstrate financial capability and technical expertise

For Local Entrepreneurs

• No minimum capital requirement (except for certain regulated industries)
• Must be Nepali citizens or entities owned by Nepali citizens
• Must comply with sector-specific licensing requirements
• Must have a registered business address in Nepal
• Required to submit citizenship documents and personal details

Step-by-Step Investment Company Registration Process

Pre-Registration Phase

1. Determine Investment Type and Scale

• Assess whether your investment falls under DOI or IBN jurisdiction
• Identify if your business sector is open for foreign investment
• Evaluate minimum capital requirements for your industry

1. Business Name Reservation

• Submit name reservation application to Company Registrar’s Office
• Provide 3-5 proposed company names in order of preference
• Ensure names comply with Nepal’s naming conventions
• Timeline: 2-3 days

1. Initial Consultation with Relevant Authority

• Foreign investors: Consult with DOI or IBN based on investment size
• Local investors: Consult with Company Registrar’s Office
• Obtain preliminary feedback on investment proposal

Foreign Investment Approval Phase (For Foreign Investors)

4. Prepare Investment Proposal

• Develop comprehensive project report
• Include financial projections and technology transfer details
• Outline employment generation and economic benefits

4. Submit Application to DOI or IBN

• Complete application form with all required details
• Submit supporting documents as per checklist
• Pay application fee

4. Review and Approval Process

• Authority reviews application for completeness and compliance
• May request additional information or clarification
• Site visit may be conducted for certain types of investments
• Timeline: 15-30 days for DOI, 30-45 days for IBN

4. Receive Investment Approval Letter

• Issued upon successful review
• Contains conditions and requirements for investment
• Valid for specified period (typically 6 months to 1 year)

Company Registration Phase

8. Document Preparation

• Draft Memorandum of Association (MoA) and Articles of Association (AoA)
• Prepare all required documents as per checklist
• Obtain signatures from all promoters/directors

8. Document Submission to Company Registrar

• Submit all required documents along with registration fees
• Documents are verified for completeness and compliance
• Timeline: 3-5 days for initial verification

8. Review and Approval
   • Company Registrar reviews all documents
   • May request additional information or corrections
   • Timeline: 7-10 days for standard applications
9. Certificate of Incorporation Issuance
   • Issued upon successful completion of review process
   • Contains company registration number and date
   • Marks official establishment of the investment company

Post-Registration Phase

12. Tax Registration
    • Obtain Permanent Account Number (PAN) from Inland Revenue Department
    • Register for Value Added Tax (VAT) if applicable
    • Timeline: 3-5 days
13. Other Required Registrations
    • Industry-specific licenses as required
    • Social Security Fund registration
    • Import/export license if applicable
    • Timeline: Varies by industry (typically 7-15 days)
14. Bank Account Opening
    • Open corporate bank account with commercial bank
    • For foreign investors: process foreign investment remittance
    • Timeline: 3-5 days
15. Commencement of Business
    • File commencement of business certificate with Company Registrar
    • Required within 6 months of incorporation
    • Timeline: 2-3 days

Required Documents for Investment Company Registration

For Foreign Investors

1. Investment Approval Documents

• Investment approval letter from DOI or IBN
• Project report and business plan
• Technology transfer agreement (if applicable)

1. Company Incorporation Documents

• Duly filled company registration form
• Memorandum of Association (MoA) and Articles of Association (AoA)
• Notarized copy of passport and visa of foreign directors/promoters
• Proof of address of foreign directors/promoters
• Bank statement showing proof of investment funds
• Tax clearance certificate from home country (for foreign investors)

1. Additional Documents

• Board resolution authorizing investment in Nepal
• Power of attorney for local representative (if applicable)
• Annual report of parent company (for foreign companies)

For Local Entrepreneurs

1. Personal Documents

• Copy of citizenship certificate of all promoters/directors
• Recent passport-sized photographs
• Permanent address proof

1. Company Incorporation Documents

• Duly filled company registration form
• Memorandum of Association (MoA) and Articles of Association (AoA)
• Agreement for lease/rent of registered office premises
• Land ownership certificate (if owned property)

1. Additional Documents

• Consent letters from all directors
• Declaration of compliance with legal requirements

Timeline Breakdown for Investment Company Registration

Registration Stage	Minimum Timeline	Maximum Timeline	Notes
Name Reservation	2 days	3 days	Can be expedited
Foreign Investment Approval	15 days	45 days	Depends on investment size and complexity
Document Preparation	5 days	10 days	Depends on complexity
Document Submission & Verification	3 days	5 days	May require resubmission
Review by Company Registrar	7 days	10 days	Can be extended if clarification needed
Certificate of Incorporation	2 days	3 days	After successful review
PAN Registration	3 days	5 days	Required for tax purposes
Other Industry-Specific Licenses	7 days	15 days	Varies by industry
Total Process (Foreign Investors)	44 days	96 days	Approximately 1.5-3 months
Total Process (Local Investors)	22 days	36 days	Approximately 1-1.5 months

Costs and Fees Breakdown for Investment Company Registration

Government Fees

1. Name Registration Fee

• NPR 100 per name proposed

1. Registration Fee (Based on Authorized Capital)

• Up to NPR 1 million: NPR 2,500
• NPR 1 million to 5 million: NPR 5,000
• NPR 5 million to 10 million: NPR 10,000
• NPR 10 million to 50 million: NPR 15,000
• Above NPR 50 million: NPR 20,000

1. Foreign Investment Processing Fee

• DOI: NPR 15,000 to 50,000 (based on investment size)
• IBN: NPR 50,000 to 500,000 (based on investment size)

1. PAN Registration Fee

• NPR 500

1. Other Fees

• Stamp duty on MoA and AoA: NPR 2,000 to 10,000
• Legal document notarization: NPR 500 to 2,000 per document

Professional Fees

1. Legal Consultation Fees

• Initial consultation: NPR 5,000 to 10,000
• Full registration service: NPR 50,000 to 150,000 (depending on complexity)

1. Accounting Fees

• Financial projections: NPR 15,000 to 30,000
• Tax registration assistance: NPR 5,000 to 10,000

1. Other Professional Fees

• Document translation: NPR 500 to 2,000 per page
• Technical report preparation: NPR 20,000 to 50,000

Estimated Total Cost

• Local Investment Company: NPR 75,000 to 200,000
• Foreign Investment Company: NPR 150,000 to 500,000 (excluding investment amount)

Tax Implications for Investment Companies in Nepal

Corporate Tax Rates

• Standard Industries: 25% of net profit
• Manufacturing and Export Industries: 20% of net profit
• Hydropower, Transmission Line, and Cable Car: 20% of net profit
• Special Industries (as notified by government): 15% of net profit

Other Tax Considerations

• Value Added Tax (VAT): 13% on taxable goods and services
• Withholding Tax: Varies from 1.5% to 15% depending on transaction type
• Customs Duties: Varies by product category
• Tax Incentives: Available for certain industries and regions

Double Taxation Avoidance

Nepal has Double Taxation Avoidance Agreements (DTAAs) with several countries including India, China, and Sri Lanka. Foreign investors from these countries may benefit from reduced withholding tax rates on dividends, interest, and royalties.

Post-Registration Compliance Requirements

Annual Compliance

1. Annual Return Filing

• Due date: Within 3 months of fiscal year end
• Filed with Company Registrar’s Office
• Late filing penalty: NPR 500 to 5,000

1. Annual Financial Statements

• Must be audited by a registered auditor
• Filed with Company Registrar’s Office
• Due date: Within 6 months of fiscal year end

1. Tax Filing

• Annual tax return: Within 3 months of fiscal year end
• Advance tax payments: Quarterly
• VAT returns: Monthly or bi-monthly

Ongoing Compliance

1. Board Meetings

• Minimum 4 board meetings per year
• Minutes must be maintained and filed

1. Shareholder Meetings

• Annual General Meeting (AGM) within 6 months of fiscal year end
• Extraordinary General Meetings (EGM) as required

1. Foreign Investment Reporting

• Annual report to DOI or IBN
• Foreign exchange utilization reports
• Technology transfer implementation reports

Recent Policy Changes Affecting Investment Company Registration

Foreign Investment and Technology Transfer Act 2075 (2019)

• Introduced more streamlined processes for foreign investment approval
• Expanded sectors open for foreign investment
• Simplified technology transfer procedures
• Enhanced protection for foreign investors

Industrial Enterprise Act 2076 (2020)

• Replaced previous Industrial Policy
• Introduced new categories of industries with different incentives
• Simplified registration processes for certain industries
• Provided additional tax incentives for priority sectors

Companies Act Amendments (2021-2023)

• Introduced provisions for one-person companies
• Simplified compliance requirements for small companies
• Enhanced corporate governance standards
• Digitalized many registration and filing processes

Common Challenges in Investment Company Registration

For Foreign Investors

1. Sectoral Restrictions

• Certain sectors remain restricted or prohibited for foreign investment
• Requires careful navigation of negative lists and sector-specific regulations

1. Minimum Capital Requirements

• Meeting minimum capital requirements can be challenging for smaller investors
• Capital repatriation restrictions may apply

1. Documentation Complexities

• Translation and notarization of foreign documents
• Additional verification processes for foreign documents

1. Processing Delays

• Longer processing times compared to local investors
• Additional reviews and approvals required

For Local Entrepreneurs

1. Access to Finance

• Difficulty securing sufficient capital for investment
• Limited access to formal financial institutions

1. Technical Expertise

• Lack of technical knowledge in certain specialized sectors
• Difficulty preparing comprehensive project reports

1. Regulatory Compliance

• Complex regulatory requirements across multiple agencies
• Frequent changes in regulations and procedures

Frequently Asked Questions About Investment Company Registration in Nepal

Q1: Can a foreign investor own 100% of an investment company in Nepal?

Yes, foreign investors can own 100% of investment companies in most sectors, except those specifically restricted or prohibited by the negative list. However, they must obtain prior approval from either the Department of Industry or Investment Board Nepal depending on the investment size.

Q2: What is the minimum capital requirement for foreign investment in Nepal?

The minimum capital requirement is NPR 5 million for service industries and NPR 10 million for manufacturing industries. Certain specialized sectors may have higher minimum capital requirements.

Q3: How long does it take to register an investment company in Nepal?

For local investors, the process typically takes 1-1.5 months. For foreign investors, it can take 1.5-3 months due to additional approval requirements.

Q4: Can a foreign investor repatriate profits from Nepal?

Yes, foreign investors can repatriate profits after paying applicable taxes. However, they must follow proper procedures through authorized banking channels and maintain documentation for all foreign exchange transactions.

Q5: What are the main taxes applicable to investment companies in Nepal?

Investment companies are subject to corporate income tax (typically 25%), value added tax (13%), and various withholding taxes. Tax rates may vary based on industry and location.

Q6: Is it mandatory to have a local partner for foreign investment in Nepal?

No, it is not mandatory to have a local partner in most sectors. Foreign investors can establish wholly-owned subsidiaries, except in restricted sectors where local partnership is required.

Q7: What is the role of the Investment Board Nepal (IBN)?

The Investment Board Nepal (IBN) handles large-scale investments exceeding NPR 6 billion, particularly in infrastructure, energy, tourism, and manufacturing sectors. It provides one-stop approval services for qualifying projects.

Q8: Can an investment company engage in multiple business activities?

Yes, an investment company can engage in multiple business activities, provided they are all approved in the original investment proposal. Any new business activity outside the approved scope requires additional approval.

Q9: What happens if the investment company registration is rejected?

If registration is rejected, applicants can address the issues mentioned in the rejection letter and reapply. Common reasons for rejection include incomplete documentation, non-compliance with sectoral requirements, or failure to meet minimum capital requirements.

Q10: Is it necessary to maintain a physical office in Nepal for investment company registration?

Yes, investment companies must maintain a registered office address in Nepal. The address must be provided during registration and cannot be a P.O. Box address.

Conclusion: Simplifying Your Investment Company Registration Journey

Registering an investment company in Nepal requires careful navigation of legal requirements, regulatory procedures, and compliance obligations. While the process may seem complex, proper planning and professional guidance can significantly streamline your registration journey.

For foreign investors, understanding the distinction between DOI and IBN jurisdictions, meeting minimum capital requirements, and preparing comprehensive documentation are crucial for success. Local entrepreneurs should focus on developing robust business plans, securing adequate financing, and ensuring compliance with industry-specific regulations.

As Nepal continues to reform its investment climate and simplify procedures, opportunities for both foreign and domestic investors are expanding. By following the steps outlined in this guide and seeking appropriate professional assistance, you can establish your investment company efficiently and position it for long-term success in Nepal’s growing economy.

Ready to start your investment company registration in Nepal? Contact our legal team of experts who specialize in Nepal’s investment regulations and company registration procedures. We offer comprehensive services from initial consultation to final registration and post-registration compliance support. Schedule a consultation today to discuss your specific investment plans and requirements.