Doing

Business in
Nepal - 2025

www.nbsm.com.np

Doing Business in Nepal - 2025 1

2 Doing Business in Nepal - 2025
 CONTENTS
ACRONYM 4    3.6 Other Mode of Investments and Repatriation of Capital... 19
FOREWORD 5    3.7 Miscellaneous Provision of FITTA 2019 20
PART I ABOUT NEPAL 6    3.8 Industrial Enterprises Act (IEA) – 2020 21
   1.1 Nepal at a Glance 7
1.2 Geographical and Demographical Background 7 PART IV TAXATION OF NEPAL 24
   1.3 Political & Legal System 8    4.1 Direct Tax 25
   1.4 Economy 8    4.2 Indirect Tax 29
   1.5 Nepal Ranking in World 8    4.3 Anti-Tax Avoidance Arrangements 30
   1.6 Population, Language, Currency and Labour Participation 9   
   1.7 Other Economic Indicator 9 PART V EXEMPTIONS, BENEFITS OR FACILITIES 32
   1.8 Nepal as an Emerging Destination for Foreign Investment 10    5.1 Under Income Tax Act 33
   1.9 Country wise FDI in Nepal upto FY 2023-24( (Till Jestha 2081) 10    5.2 Under Custom Act 35
   1.10 Trend of Industries Establishment with FDI 10    5.3 Benefits and Concessions for Micro Industries 36
   5.4 Concession for Women Entrepreneurs 36
PART II ENTERING THE NEPALESE MARKET 11    5.5 Additional Benefits and Concessions Under Industrial ... 36
   2.1 Operating as a Nepalese Company 12
   2.2 Operating as a Foreign Company 12 PART IV OTHER RELEVANT LAW FOR ENTITIES BRINGING FDI 37
   6.1 Labor Act - 2017 38
PART III REGULATION OF FOREIGN INVESTMENT 13    6.2 Bonus Act - 1974 39
   3.1 Relevant Law Governing Foreign Investment 14    6.3 Special Economic Zone 40
   3.2 Regulatory Bodies for Foreign Investment 14
   3.3 Foreign Investment & Technology Transfer Act (FITTA) 2019 14 PART VII EXIT PROVISION 43
   3.4 Documents Required to Obtain Approval for Foreign ... 16    7.1 Exit Provision 44
   3.5 Threshold, Time Limit to Bring FDI, Reinvestment & ... 18
 ACRONYM
AGM : Annual General Meeting IRD : Inland Revenue Department
AoA : Articles of Association JVA : Joint Venture Agreement
BFI : Bank and Financial Institution MIGA : Multi-Lateral Investment Guarantee Agency
BIMSTEC : Bay of Bengal Initiative for Multi-Sectoral Technical And MoA : Memorandum of Association
Economic Co-operation MoICS : Ministry of Industry, Commerce and Supplies
BIPPA : Bilateral Investment Promotion and Protection Agreement MW : Mega Watt
BOT : Build Operate Transfer N.B.C. : Nuclear, Biological and Chemical
BRI : Belt and Road Initiative NFRS : Nepal Financial Reporting Standards
CIB : Credit Information Bureau NRB : Nepal Rastra Bank
Covid : Corona Virus Disease NPR : Nepalese Rupees
CSR : Corporate Social Responsibility NTIS : National Integrated Trade Strategy
DoI : Department of Industry OCR : Office of Company Registration
DTA : Double Taxation Agreements OSSC : One Stop Service Center
DTAA : Double Taxation Avoidance Agreements PAD : Project Department Agreement
EIA : Environment Impact Assessment PAN : Permanent Account Number
EPF : Employee Provident Fund PIA : Project Investment Agreement
EU : European Union SAARC : South Asian Associations for Regional Co-operation
FCC : Financial Credibility Certificate SEBON : Securities Board of Nepal
FDI : Foreign Direct Investment SEZ : Special Economic Zones
FITTA : Foreign Investment & Technology Transfer Act SSF : Social Security Fund
GAAR : General Anti- Avoidance Rule TCS : Tax Collection on Service
GATT : General Agreement on Tariffs and Trade TDS : Tax Deducted at source
GDP : Gross Domestic Product TTA : Technology Transfer Agreement
GoN : Government of Nepal UNCTAD : United Nation conference on Trade and Development
HSN : Harmonized Commodity Description and Coding System UNESCAP : United Nations Economic and Social Commission for
IBN : Investment Board of Nepal Asia and the Pacific
ID : Identification Document USD : United States Dollar
IEA : Industrial Enterprises Act VAT : Value Added Tax
IEE : Initial Environment Examination VCF : Venture Capital Fund
IIPB : Industrial and Investment Promotion Board WTO : World Trade Organization
INR : Indian Rupees

4 Doing Business in Nepal - 2025

Foreword
Nepal as an Investment Destination!
Nepal is growing. The importance of production This in-depth document examines Nepal as a
and service delivery has been emphasized by potential investment destination. Investing in Nepal
Nepal’s consecutive governments as the most now has a lot of advantages. Nepal extends favorable
crucial factor in the nation’s development. The investment regulations and preferential trade benefits
government of Nepal is not only focusing on the to foreign investors. The paper provides a step-by-
home grown investments but also the foreign step guide to the procedures involved in establishing
investments in various sectors like manufacturing, businesses, together with information on available
Energy, Infrastructures, Tourism and Information incentives, taxes, financial and economic data, and
Technology. To entice investments, government regulations and policies that must be followed in
of Nepal has implemented a number of reforms in order to attract investment in Nepal.
the areas of foreign investment and related taxes.
As a result, Nepal has been witnessing the growth As NBSM, a member of Moore Global, we expect
of both local and Foreign Investments in various that the report will be a useful document for the
sectors in the last few decades. potential investors who are considering making
investments in this beautiful nation. But this
In Nepal, domestic consumer demand has publication is essentially meant to be a beginning
significantly increased along with rising per capita point as a guide. Our consultants will be pleased Nil Saru
income and an expanding middle class. More to help if you require any additional information. We Managing Partner
importantly Nepal has got population of more than are eager to support your commercial endeavors in
30 million, ranking it as the 49th largest country by Nepal.
population. Further, Nepal is land linked between
two largest populous countries in the world, which We appreciate your insightful comments and
gives investors an opportunity to leverage the recommendations, and we are always looking to
demands arising out of the one third population of enhance the report.
the world.

Doing Business in Nepal - 2025 5

 PART I :
ABOUT NEPAL

6 Doing Business in Nepal - 2025

1.1 NEPAL AT A GLANCE: is the lowland region containing some hill ranges. The plains were formed
and are fed by three major Himalayan rivers: the Koshi, the Narayani, and
Nepal, nestled between the Himalayas and the Ganges Plain, offers a unique
the Karnali as well as smaller rivers rising below the permanent snowline.
blend of cultural richness, natural beauty, and an emerging market brimming
This region has a subtropical to tropical climate. The outermost range of the
with potential. This guide aims to equip entrepreneurs and investors with
foothills called Sivalik Hills or Churia Range, cresting at 700 to 1,000 metres
the necessary knowledge to navigate the landscape of doing business in
(2,300 to 3,280 ft), marks the limits of the Gangetic Plain; however broad,
Nepal in 2025. The geographical position of the country plays a significant
low valleys called Inner Terai Valleys (Bhitri Tarai Upatyaka) lie north of these
role for its development as a business hub as it lies in between the world’s
foothills in several places.
two giant economy - India and China. Nepal is one of the world’s lesser
developed countries and has immense potential for development, especially
in the natural resource, tourism and hydroelectricity sectors. 1.2 GEOGRAPHICAL AND DEMOGRAPHICAL
BACKGROUND
Area : 147,516 sq. km
Geography : Situated between China in the North and India in the Nepal is of roughly trapezoidal shape, about 800 kilometres (500 mi) long
East, West and South. and 200 kilometres (120 mi) wide, with an area of 147,516 sq. km of land and
Capital : Kathmandu lies between latitudes 26° and 31°N, and longitudes 80° and 89°E. Nepal
Highest Point : Mount Everest falls in the temperate zone north of the Tropic of Cancer. Nepal has vast
Lowest Point : Mukhiyapatti Musharniya water systems which drain south into India. The country can be divided into
Population : 29 million(2021 Census) three main geographical regions: Himalayan region, mid hill region and the
Currency : Nepalese Rupees (NPR) Terai region. The Himalayan region contains highest elevations in the world
Religion : Hinduism, Buddhism, Muslim and others including 8,848.86 m Mt. Everest (Sagarmatha in Nepali). Seven other of the
People : Nepal has m`ore than 125 ethnic groups and over 123 world’s “eight-thousanders” are in Nepal or on its border with Tibet: Lhotse,
spoken languages. Makalu, Cho Oyu, Kangchenjunga, Dhaulagiri, Annapurna and Manaslu
Language : Nepali is the national language. However, travel-trade Pahad is the mountain region that does not generally contain snow. Terai
people understand and speak English as well. is the lowland region containing some hill ranges. The plains were formed
Time Zone : GMT + 5:45 and are fed by three major Himalayan rivers: the Koshi, the Narayani, and
the Karnali as well as smaller rivers rising below the permanent snowline.
Nepal is of roughly trapezoidal shape, about 800 kilometres (500 mi) long
This region has a subtropical to tropical climate. The outermost range of the
and 200 kilometres (120 mi) wide, with an area of 147,516 sq. km of land and
foothills called Sivalik Hills or Churia Range, cresting at 700 to 1,000 metres
lies between latitudes 26° and 31°N, and longitudes 80° and 89°E. Nepal
(2,300 to 3,280 ft), marks the limits of the Gangetic Plain; however broad,
falls in the temperate zone north of the Tropic of Cancer. Nepal has vast
low valleys called Inner Terai Valleys (Bhitri Tarai Upatyaka) lie north of these
water systems which drain south into India. The country can be divided into
foothills in several places.
three main geographical regions: Himalayan region, mid hill region and the
Terai region. The Himalayan region contains highest elevations in the world
including 8,848.86 m Mt. Everest (Sagarmatha in Nepali). Seven other of the
world’s ‘‘eight-thousanders’’ are in Nepal or on its border with Tibet: Lhotse,
Makalu, Cho Oyu, Kangchenjunga, Dhaulagiri, Annapurna and Manaslu
Pahad is the mountain region that does not generally contain snow. Terai

Doing Business in Nepal - 2025 7

 1.5 NEPAL RANKING IN WORLD
1.3 POLITICAL & LEGAL SYSTEM
S.N. CREATERIA RANKING
Nepal is governed according to its current Constitution and is the fundamental
law of Nepal. The governance of Nepal is based on a multi-party, competitive, 1 Ease of Doing Business 94
federal democratic republican parliamentary system with an elected Prime Minister 2 Start a Business in Nepal 135
responsible to Parliament as executive head. The judicial system comprises of 3 Dealing with Construction Permits 107
three types of court: Supreme Court, High Courts, and District Courts. Judicial 4 Getting Electricity 135
power of Nepal is exercised by the courts and other judicial authorities pursuant 5 Registering Property 97
to the Constitution and other laws and recognized principles of justice. 6 Getting Credit 37
7 Protecting Minority Investors 79
1.4 ECONOMY 8 Paying Taxes 175
9 Trading across borders 60
Nepal is among the least developed countries in the world with a developing/
10 Enforcing Contracts 151
emerging economy, with almost one-quarter of its population living below the
poverty line. The Gross Domestic Product (GDP) in Nepal was approximately 11 Resolving Insolvency 87
$ 40.83 Billion US dollars in 2023, according to official data from the World
Bank. GDP growth rates of Nepal and regional economies
Agriculture is the major economic activity which employs about 65% of the 30.0%
population and contributes to about 26.5% of the GDP. Industrial activity mainly 20.0%
involves the processing of agricultural products, including pulses, jute, sugarcane,
10.0%
tobacco, and grain. Nepal’s natural resources, tourism, and hydroelectricity are
0.0%
regarded as the driving forces of the economy and significant progress has been Nepal Afghanistan Bangladesh Bhutan India Sri Lanka Maldives Pakistan
-10.0%
made in these areas. Nepal has considerable scope for exploiting its potential in
hydropower, with an estimated 42,000 MW of feasible capacity. -20.0%
-30.0%

Other areas of opportunity and expansion include tourism. Nepal, especially its -40.0% 2019 2020 2021 2022 2023
adventure tourism sub sector, has benefited from the recent boom in global tourism.
This services sector, too, has enormous potential for future development. The export
of readymade garments, woolen carpets, cardomons, pashmina products, leather GDP Growth of Nepal in last five years is moderate in comparson to other South
& leather products, pulses, handicrafts, etc. have increased significantly in recent Asian Nations. Nepal grew on and average 3%-4% dispite the challanges
years. More importantly, in 2020 doing business report, Nepal jumped by 16 spots caused by the COVID pandemic. It has now projected to grow above 5% in the
to 94 out of 190 countries in comparison to 110 rank of previous year in 2018 to years to come.
94 in 2020 .

8 Doing Business in Nepal - 2025

1.6 POPULATION, LANGUAGE, CURRENCY & LABOR 2023 Labour Force Participation Rate by Age and Sex
PARTICIPATION
100 87.23 89.34
Nepal’s population stands at approximately 30.9 million people. About 22.1% of 80.12
80 70.45 72.56 67.89
the population resides in urban areas, and the sex ratio is 94.2 males per 100 59.84
60 54.32
females. While Nepali remains the primary language, English is widely spoken
and commonly used for business transactions. The currency of Nepal is Nepalese 40 29.56
22.68 15.78
Rupees (NPR). The currency of Nepal is pegged with Indian Currency (INR). 20 10.91
0
15-24 25-34 35-44 45-54 55-64 65+
Population of Nepal (in Millions)
32.00
31.00 1.7 ECONOMIC INDICATOR
30.00
29.00 Approved GDP at GDP GDP Per Foreign Exports Imports
Year FDI (NPR Producer Growth Capita Exchange (NPR in (NPR in
28.00 in Billion) Price (NPR Rate (%) Current Rate per 1 Billion) Billion)
27.00 in Billion) US $ US $
2019 2020 2021 2022 2023 2018/19 16.5 3,456 6.34% 1,034 110.6 105.8 1,156.4
2019/20 18.2 3,518 -2.42% 1,047 113.5 109.5 1,276.8
Population by age and sex (in Millions) 2020/21 19.6 3,636 3.83% 1,045 116.2 111.2 1,366.7
2021/22 21 3,814 5.49% 1,051 118.9 115.1 1,456.3
2022/23 22.5 4,012 5.8% 1,075 120.3 120.3 1,546.9
14.00
12.00
10.00 Nepal’s GDP growth experienced fluctuations over the past five years. It was
8.00
6.00 strong at 7% in 2019, but the COVID-19 pandemic caused a sharp decline to
4.00 2.3% in 2020. A mild recovery followed with growth at 3.8% in 2021, slowing again
2.00 to 2% in 2022 due to weak investment and industrial performance. In FY2024,
0.00
growth improved to 3.9%, driven by tourism, hydropower, and agriculture. GDP
64+

64+

64+

64+

64+
0-14

0-14

0-14

0-14

0-14
15-64

15-64

15-64

15-64

15-64

per capita mirrored this trend, starting at $1,047 in 2019, rising modestly over
the years, and reaching an estimated $1,232 in 2023, supported by remittances
2019 2020 2021 2022 2023 and gradual economic recovery. Further, though the value of export is not very big
Male Female incomparison to the value of import, but still export are also growing in last few
years.

Doing Business in Nepal - 2025 9

1.8 NEPAL AS AN EMERGING DESTINATION FOR 1.9 COUNTRY WISE FDI IN NEPAL UPTO FY 2023-24 (TILL
FOREIGN INVESTMENT JESTHA 2081)
9 Strategic Location Approved GDP at GDP Growth GDP Per Foreign Exports Imports
• Strategic location between two most populous countries, India and China Year FDI (NPR in Producer Rate (%) Capita Exchange (NPR in (NPR in
Billion) Price (NPR in Current US $ Rate per 1 Billion) Billion)
• Easy market access to adjoining borders Billion) US $
• Duty free and open border to India
• Duty free and Quota free access to EU. 2018/19 16.5 3,456 6.34% 1,034 110.6 105.8 1,156.4
2019/20 18.2 3,518 -2.42% 1,047 113.5 109.5 1,276.8
9 Labor Availability 2020/21 19.6 3,636 3.83% 1,045 116.2 111.2 1,366.7
• 57% active population (15-59 years) 2021/22 21 3,814 5.49% 1,051 118.9 115.1 1,456.3
• Low cost of labour 2022/23 22.5 4,012 5.8% 1,075 120.3 120.3 1,546.9
• Availability of cheap labor force compared to other peer countries
• Provision of social securities for labor
• Working visa, work permit & labor permit for foreign worker 1.10 TREND OF INDUSTRIES ESTABLISHMENT WITH FDI
2080/81
9 International and Regional Agreements & Treaties related to trade FY (Till 2079/80 2078/79 2077/78 2076/77 2075/76 2074/75 2073/74 2072/73 2071/72 2070/71 2069/70
Jestha)
• Member country of SAARC, MIGA, BIMSTEC, WTO, UNCTAD, BRI,
UNESCAP 100% 250 100 58 52 144 212 281 277 232 268 215 205
FDI
• BIPPA signed with France, Germany, UK, Mauritius and Finland
Domestic
• DTTA signed with Austria, Bangladesh, China, India, Republic of Korea, & 24 28 10 14 14 60 74 61 39 59 44 60
• Mauritius, Norway, Pakistan, Qatar, Sri Lanka & Thailand Foreign
JV
• Bilateral agreement under Belt and Road Initiative Framework
• Treaty of trade and treaty of transit with India 100 Local 130 194 240 137 119 167 143 170 137 139 112 181
Investment
• Transit and transport agreement with China
Total 404 322 308 203 277 439 498 508 408 466 371 446

9 Status in Index and Reports

• 3rd Most Favorable Business Climate in South Asia, Ease of Doing Industry Registration Data
Business 2020
• 4th Most Competitive Economy in South Asia, Global Competitiveness
Index 2019
• 5th Most Competitive Trade Logistics Performer in South Asia, Logistics
• Performance Indicator 2022

10 Doing Business in Nepal - 2025

PART II :
ENTERING
INTO NEPALESE
MARKET

Doing Business in Nepal - 2025 11

ENTERING THE NEPALESE MARKET • Rendering professional or consultancy services.
• Carrying out research work in which the parent company is engaged that
2.1 Operating as a Nepalese Company: promotes technical or financial collaborations between Indian companies
Wholly-Owned Subsidiary Company and a parent or overseas group company.
A foreign company can set up a wholly-owned subsidiary company in Nepal to • Representing the parent company in India and acting as a buying/selling
carry out its activities. Such a subsidiary is treated as a Nepali resident and a agent in Nepal.
Nepali company for all Nepali regulations (including Income Tax, Foreign Exchange • Rendering services in information technology and development of software
Regulation Act, 2019 and the Companies Act), despite being 100% foreign- in Nepal.
owned. • Rendering technical support for the products supplied by parent/group
companies.
Joint Venture with a Nepalese Partner (Equity Participation) • Acting as a foreign airline/shipping company.
Although a wholly-owned subsidiary has proved to be the preferred option, foreign • In general, manufacturing activity cannot be undertaken through a branch
companies have also begun operations in Nepal by forging strategic alliances with office.
Nepalese partners. The trend is to choose a partner who is in the same field/ • However, foreign companies can establish a branch office/unit for
area of activity or who brings synergy to the foreign investor’s plans for Nepal. manufacturing in a Special Economic Zone subject to the fulfilment of
Sometimes joint ventures are also necessitated due to restrictions on foreign certain conditions.
ownership in certain sectors.

2.2 Operating as a Foreign Company:

A. Liaison Office
Setting up a liaison or representative office is a common practice for foreign
companies seeking to enter the Nepalese market. The role of such offices is limited
to collecting information about the possible market and to providing information
about the company and its products to prospective Nepalese customers. Such
offices act as listening and transmission posts and provides a two-way information
flow between the foreign company and the Nepalese customers. A liaison office
is not allowed to undertake any business activities other than liaison activities
in Nepal and cannot, therefore, earn any income in Nepal, under the terms of
approval granted by the NRB.

B. Branch Office
Foreign companies engaged in manufacturing and trading activities abroad can
set up branch offices in Nepal for the following purposes, with the prior approval
of NRB:
• Export/import of goods.

12 Doing Business in Nepal - 2025

PART III :
REGULATION
OF FOREIGN
INVESTMENT

Doing Business in Nepal - 2025 13

3.1 RELEVANT LAW GOVERNNING FOREIGN INVESTMENT Negative List of FITTA 2019:
In the following sectors foreign investment is not allowed in Nepal:
• The Foreign Investment and Technology Transfer Act, 2075 (2019)
• Poultry farming, fisheries, bee-keeping, fruits, vegetables, oil seeds, pulse
• The Industrial Enterprises Act, 2076 (2020)
seeds, milk industry and other sectors of primary agro-production,
• Industrial Enterprises Development Institute Act, 2053 (1996)
• Cottage and small industries,
• The Companies Act, 2063 (2006)
• Personal service business (hair cutting, tailoring, driving etc.),
• Special Economic Zone Act, 2073 (2017)
• Industries manufacturing arms, ammunition, bullets and shell, gunpowder
• Public Private Partnership and Investment Act, 2076 (2019)
or explosives, and nuclear, biological and chemical (N.B.C.) weapons;
• The Environment Protection Act, 2076 (2019)
industries producing atomic energy and radio-active materials,
• Private Firm Registration Act, 1958 (2014)
• Real estate business (excluding construction industries), retail business,
• Bonus Act, 2030 (1974)
internal courier service, local catering service, money changer, remittance
• Partnership Act, 2020 (1964)
service,
• The Patent, Design and Trade Mark Act, 2022 (1965)
• Travel agency, guide involved in tourism, trekking and mountaineering
• Nepal Standards (Certification Mark) Act, 2037 (1980)
guide, rural tourism including homestay,
• Nepal Petroleum Act, 2040 (1983)
• Business of mass communication media (newspaper, radio, television, and
• Mines & Minerals Act, 2042 (1985)
online news) and motion picture of national language,
• Standard Measurement and Weight Act, 2025 (1968)
• Management, account, engineering, legal consultancy service and language
• Accreditation Act, 2079 (2023)
training, music training, computer training, and
There is no restriction on who can invest in Nepal. It can be individuals, corporate • Consultancy services having foreign investment of more than fifty-one
entities or firms. However, in certain sectors like financial institutions, investment percent.
can be made only by foreign financial institutions. • Ride sharing with foreign investment more than 70%

3.2 REGULATORY BODIES FOR FOREIGN INVESTMENT Mode of Investment in Nepal as per FITTA:
• Department of Industries (“DOI”). Foreign investment is allowed in industrial sector which has been classified as
• Investment Board of Nepal (“IBN”). “Industry” under Industrial Enterprises Act, 2076 (2020) and includes the
• Nepal Rastra Bank (“NRB”) • Investment in shares of an industry, in foreign currency,
• Reinvestment of dividend/profits from foreign currency,
3.3 FOREIGN INVESTMENT & TECHNOLOGY TRANSFER • Investment through lease financing in airlines, ships, plant & machineries,
ACT (FITTA) 2019 and construction equipment (up to the prescribed threshold),
• Investment in equity through “Venture Capital Funds” (VCFs) by institutional
The FITTA was enacted by GON to reform the existing legal framework of foreign foreign investors with approval of SEBON,
investment in Nepal to attract more foreign investments. The new act has included • Investment in listed securities through secondary market by VCFs,
other forms of foreign investment; in addition to the earlier provision of investment • Investment through acquisition of shares or assets of existing companies
and re-investment in shares and Technology Transfer, such as Incorporating a registered in Nepal,
Branch Office, Lease Financing, Investment in secondary stock market, Investment • Issuance of securities in foreign capital market through Banking Channels,
in equity through Venture Capital Fund and investment by issue of securities in • Investment made through technology & know-how transfer agreement, and
foreign stock markets. • Investment maintained by establishing and expanding an industry in Nepal.

14 Doing Business in Nepal - 2025

Approving Authority for Foreign Investment: Process: Setting up a foreign investment project in a new
The FITTA requires that foreign investment and technology transfer should be industry
approved by the approving authority according to the investment amount which The process of obtaining approval for foreign investment in Nepal for establishing
is as follows: a new Industry is as follows:
• Foreign investment to be made as per this act shall be approved by the • Identify a project and initial consultation with approving authority stated
Department of Industry (DOI) above.
• File an application in the prescribed form together with the relevant
Limit on ownership:
document (foreign investment approval document) with the approving
Foreign investment can be made by purchasing upto 100 % of shares or property
authority. The timeframe for the receipt of the investment must also be
of an industry other than those listed in the negative list of FITTA 2019. However,
provided.
there are certain sectors which has ceiling of foreign ownership, for example:
• An approval letter will be obtained within 7 days from the date of the
Maximum foreign application, if the application is complete in all respects.
S. N. Sectors Relevant law • Approval for reinvestment in the same company, or in other industries,
ownership %
1 Telecommunication 80 Tele communication Policy, 2004. from profits earned, not included in the negative list is not required by an
Aviation industry which has already been granted approval.
i. Domestic air passenger service 49 • Once approval of foreign investment is obtained, the investor must
2. ii. International air passenger service 80 Aviation Policy, 2006 incorporate a company under the Companies Act 2006 and submit the
relevant documents.
iii. Flying School 95
• Register the entity with the Inland Revenue Department and obtain a
iv. Repair & Maintenance Institutions 95
Permanent Account Number (PAN).
Directives on Registration of Insurer and
3. Insurance 80 Operation of Insurance Services 2019. • Open Bank Account with the prior approval of NRB.
• Register the industry with the DOI and obtain an industry registration
certificate.
Time taken for a Foreign investor to obtain approval and • Register the business with the local authority.
set up business: • After obtaining foreign investment approval, the foreign investor should
It generally takes about 2-3 months to obtain approval from DOI and NRB and set notify NRB when the investment can be obtained in Nepal (through the
up business in Nepal for Foreign investors. However, if approval from IIPB/IBN is banking channel) in a convertible currency [except for Indian investors who
necessary, it may take up to 6 months. can invest in Indian currency].
• Other approvals may be required prior to commencement of business,
for Environmental clearances where applicable, and licenses for specific
industries.
• Project Development Agreement (PDA) for PPP Projects and Project
Investment Agreement (PIA) for Private Projects shall be negotiated for
industries with project of more than NRP 6 Billion.

Doing Business in Nepal - 2025 15

3.4 DOCUMENTS REQUIRED TO OBTAIN APPROVAL FOR The non-refundable fees for the Company Registration are as given below:
FOREIGN INVESTMENT - NEW COMPANY Range of Authorized Capital Fee

At IBN for FDI approval for projects above NPR 6 Billion: 500,000 < Authorized Capital ≤ 2,500,000 9,500
• Preliminary Feasibility Report (must include following information) 2,500,000 < Authorized Capital ≤ 10,000,000 16,500
1. Project Design 10,000,000 < Authorized Capital ≤ 20,000,000 16,500
2. Estimated Cost of the Project 10,000,000 < Fixed assets 20,000
3. Proposed Financial Resources
4. Business/Operation Plan Similarly, the additional fee will be calculated at the rate of Rs. 30 per Rs. 100,000
5. Preliminary EIA Report of Authorized Capital
6. Proposed Revenue model Credit: https://www.doind.gov.np
7. Proposed Royalty / Fee to Government
At IBN for FDI approval for projects above NPR 6 Billion:
• Joint Venture Agreement (JVA), in case of more than one investor,
• Citizenship certificate of local investor or Certificate of Incorporation, • Preliminary Feasibility Report (must include following information)
including Memorandum of Association and Articles of Association, 1. Project Design
Shareholder’s register, tax clearance certificate if the local investor is a 2. Estimated Cost of the Project
company 3. Proposed Financial Resources
• Notarized Copy of passport of foreign investor or Certificate of 4. Business/Operation Plan
Incorporation, including Memorandum of Association and Articles of 5. Preliminary EIA Report
Association if the party is a company 6. Proposed Revenue model
• Bio-data / Company profile of the foreign party 7. Proposed Royalty / Fee to Government
• Financial Credibility Certificate (FCC) of the Foreign Investor provided by a • Joint Venture Agreement (JVA), in case of more than one investor,
home country bank or domiciled country bank. • Citizenship certificate of local investor or Certificate of Incorporation,
• Authority letter from the concerned companies or individuals to carry out including Memorandum of Association and Articles of Association,
any necessary work on their behalf, if applicable Shareholder’s register, tax clearance certificate if the local investor is a
• Other documents as demanded later based on the progress. company
• Notarized Copy of passport of foreign investor or Certificate of
The refundable amount to be deposited at the time of Foreign Investment Incorporation, including Memorandum of Association and Articles of
Approval after the operation of industry are as follows:: Association if the party is a company
• Bio-data / Company profile of the foreign party
Range of Fixed Asset Deposit • Financial Credibility Certificate (FCC) of the Foreign Investor provided by a
Fixed assets ≤2,500,000 4,000 home country bank or domiciled country bank.
• Authority letter from the concerned companies or individuals to carry out
2,500,000 < Fixed assets ≤5,000,000 7,000
any necessary work on their behalf, if applicable
5,000,000 < Fixed assets ≥ 10,000,000 10,000
• Other documents as demanded later based on the progress.
10,000,000 < Fixed assets 20,000

16 Doing Business in Nepal - 2025

At DOI for Industry Registration • Citizenship certificate of local party or Certificate of Incorporation including
• Dully filled up online form, Memorandum of Association and Articles of Association, if local party is a
• Copies of Company Registration, Tax registration, FDI approval, company,
Memorandum & Articles of Association, • Copy of passport of foreign party/or Certificate of incorporation, including
• No objection Certificate from Local Authority, Memorandum of Association and Articles of Association, if participant is a
• Other documents of the Foreign Investment, as required by DOI. company,
• Any additional documents as required by the OCR.
At Nepal Rastra Bank for FDI approval
• FDI approval letter from DOI, At Local Authority for Business registration
• Notarized copy of the Charter, certificate of incorporation, Memorandum • Board minute for registration,
& Articles of Association of the foreign company, and Nepalese translation • Forms dully filled up,
thereof, • Copies of company registration certificate,
• Notarized copy of citizenship of local investor and notarized copy of • Copies of Articles and Memorandum of Association,
passport of foreign investor or their authorized representative • Copy of rental agreement (office),
• Tax Registration Certificate (PAN Certificate). • Deposit of TDS of Rent amount,
• Copy of Industry Registration of Local company • Stamp of the company,
• Commitment letter from Foreign investor, for not taking back the investment • Any additional documents as required by the Local Authority.
for 1 year.
• Bank Statement of foreign bank of investor and proof of the Source of At Inland Revenue Department (IRD) for PAN registration
investment • Dully filled up online form and acknowledgement received online from IRD’s
• If Money is not coming at once, then should submit the investment website.
schedule or a commitment to do investment as prescribed by the Industrial • Copies of company registration certificate,
Enterprise Regulation • Copies of Articles and Memorandum of Association,
• Audit report of the Foreign Company as applicable (if more than one year of • Copy of rental agreement (office) with TDS deposit slip,
operation) • Stamp of the company,
• Credit Information Bureau (CIB) report for not being blacklisted for Local • Any additional documents as required by the IRD.
Company
• Documents showing ultimate beneficiary in case foreign investor is a At Department of Industry
company • Proposed Business Plan and Shareholding Structure
• Request from the Investor
At Office of Company Registrar (OCR) for Company Incorporation • Request from the Seller
• Online Application to reserve the Name of the Company, • Share Purchase Agreement (2 copies)
• Application along with Approved Name of the Company, Articles of • In case foreign investor is a natural person, his/her notarized copy of the
Association and Memorandum of Association in 2 sets, Passport or other ID proving citizenship and personal bio-data
• Unanimous Agreement between promoters, if any, • In case foreign investor is a company, notarized copy of Certificate of
• Promoters’ minutes to register a company, if applicable • Incorporation, including Memorandum of Association and Articles of
• FDI approval letter and JV if applicable from DOI, • Association, Directors and shareholders register, company profile and

Doing Business in Nepal - 2025 17

 • Minute of board meeting deciding to invest in Nepal. • Audit Report of the foreign company if investor is a company (if more than
• In case foreign investor is a firm, notarized copy of certificate of registration, one year of operation)
documents evidencing the partners of the firm, firm profile and minute of • Letter of Commitment from Foreign investor
partners meeting deciding to invest in Nepal, • Letter of declaration and proof of source of investment from Foreign
• In case foreign investor is a foreign citizen of Nepalese origin or Nepalese investor
citizen residing abroad, documents evidencing such status. • Valuation Report of local company
• In case foreign investor is an International organization, charter documents • Documents showing ultimate beneficiary of foreign company with their IDs
of such organization, documents showing introduction of its directors, or Passport
profile of the organization and its decision to make investment in Nepal.
• Original Financial Credibility Certificate (FCC) of the Foreign Investor 3.5 THRESHOLD, TIME LIMIT TO BRING FDI,
provided by a home country bank or domiciled country bank
REINVESTMENT & PROVISION OF VISAS
• Where the foreign investor cannot be present for application, authority
letter from the concerned companies or individuals to carry out any Minimum & Maximum threshold for foreign investment
necessary work on their behalf and documents showing identification of the The current minimum investment threshold for a foreign investor is NPR 20 million
individual who is given such authority. (approximately USD 155,000). The amount can be invested in tranches within
• Any additional documents required by the FDI approving authority. prescribed time frame.
• Current Share Holders’ List of local company as certified by the Company No maximum ceiling of the amount to be invested and the share of investment
Registrar’s Office by a foreign investor wishing to make investment in Nepal shall be prescribed.
• Current Directors’ List of local company as certified by the Company However, a limit may be imposed for investments:
Registrar’s Office • For investment made through a Venture Capital Fund (VCF);
• Latest Auditor’s Report of the local company • For investment in the Service Sector which shall nevertheless be not lower
• Tax registration and Latest Tax clearance certificate of local company than the commitment given by Nepal in its WTO agreement.
• Valuation Report of local company
Time limit to bring FDI into Nepal
At Nepal Rastra Bank
• FDI approval letter from DOI FDI approval amount Minimum amount to be brought within 1 year of approval
• Company Registration certificate
Up to minimum threshold (i.e., NPR 20 Million) 25% of approved amount
• Articles and Memorandum of the company
• Tax registration certificate and Tax clearance certificate More than the threshold limits up to NPR 250 Million 15% of approved amount
• Credit Information Bureau (CIB) report for not being black listed for Local More than NPR 250 Million up to 1,000 Million 10% of approved amount
Company More than NPR 1,000 Million 5% of approved amount
• Financial Credibility Certificate of the Foreign Investor provided by the bank
• Payment Schedule if the investment is coming in phases/tranches of as However, in any case, at least 70 percent of the approved amount must be
prescribed. brought prior to the commercial production or transaction and balance amount to
• Notarized Passport copy of Investor or Passport of the Authorized be brought within two years from the date of the commencement of commercial
Representative if investor is a company production or transaction from such industry or business.
• Registration documents of the investor, if investor is a company

18 Doing Business in Nepal - 2025

In case any foreign investor has taken approval for foreign investment by 3.6 OTHER MODE OF INVESTMENTS AND REPATRIATION
purchasing shares of an existing operating industry, then the investor has to make OF CAPITAL & DIVIDENDS
the investment within 1 year of such approval.
Other Mode of investment:
In case any industry with FDI has not brought foreign investment at the start of Investment through a Venture Capital Fund
this FITTA RULES 2077, then such industry has to submit and get approved A foreign investor can invest in the equity shares of a company in Nepal after
its foreign investment plan and bring the foreign investment according to that obtaining approval from Securities Board Nepal (SEBON) by establishing a
approved plan. Venture Capital Fund.

Reinvestment of Earnings from foreign investment Dealing in Securities Transactions

Foreign investor can invest, out of its earnings, in same industry or other industry Entities establishing a venture capital fund may transact in securities through
where foreign investment is allowed. For such re-investment, the minimum the stock exchange’s secondary market after registering with the SEBON. The
threshold shall be adjusted as below: minimum shares to be purchased, the investment limit, minimum share holding
period, and foreign currency reserve fund, is yet to be prescribed.
Particulars Minimum amount to be invested
Re-investment made in same industry 10% of existing threshold
Issue of Foreign Currency Bonds, Debentures or Securities
Re-investment made in other Industry Equal to the existing threshold Only public and listed companies established in Nepal (or a company obtaining
approval for issuing debentures in accordance with the relevant Act) can issue
Provisions for Visas bonds, debentures, or securities to obtain a loan or foreign currency. Such loan
Non-tourist Visa: Is allowed up to 6 months to the foreign national for conducting amounts, or foreign currency, must be invested in Nepal. This provision will be
study, research and survey for foreign investment and for the period as per the applicable after the Nepal Government publishes a notice in Nepal Gazette.
industry requirements to high-skilled specialist, technical or managerial personnel
after evidencing that equivalent workers are not available in Nepal after undergoing Raising Foreign Currency Loans
a vacancy procedure as per the prevailing laws. Any company with foreign investment can raise loans from foreign governments,
banks, and financial institutions to fulfill a project loan or project financing
Business visa: Is allowed up to the period of foreign investment to the investor agreement after obtaining the approval from the Ministry of Industry, Commerce
and his/her family member or 1 authorized representative of the investor and his/ and Supplies (MOICS) and NRB.
her family member. Maximum of 2 person and their family members can obtain
business visas if the investor is a company. Repatriation of Capital and Dividends:
The foreign investor can repatriate capital and income earned from its operations
Residential Visa: Is allowed up to the period of foreign investment to foreign after payment of all the taxes pursuant to Nepalese Laws and by using a bank
investors who invest greater than USD 1 Million at a time or its equivalent to the transfer or transfers in the currency in which the investments were made, after
investor or its authorized representative and his dependent family members. obtaining approval.
In addition, the following amounts can be repatriated by the foreign investor:
• Amount received from the sale of share of foreign investment,
• Amount received on account of profit or dividend from foreign investment,
• In cases of liquidation, on cancellation of the company – the amount

Doing Business in Nepal - 2025 19

 remaining after fulfilling all obligations, Step II - Get Approval letter from DOI.
• Royalty amount received from a technology transfer. (However, except Step III - Apply to NRB for Repatriation for final approval along with the approval
in case of an industry exporting 100% of its liquor or liquor products, an letter from DOI and all the documents submitted to DOI for the approval.
industry producing liquor and/or liquor products, which shall not repatriate Step IV - After getting final approval from NRB, repatriate the sale proceed/loan/
income not more than prescribed), income as the case may be.
• Lease rentals amount, amount received as compensation after the
settlement of legal disputes or arbitration,
3.7 MISCELLENEOUS PROVISION OF FITTA 2019
• Amount received from the auction of property situated in Nepal accepted
as collateral in providing loan to any industry or company, in case of default
Single Point Service Centre
of such loan,
Government of Nepal through FITTA 2019 has introduced Single Point (One
• An amount prescribed by any prevailing laws.
Window) Service Center to provide necessary concessions, facilities, rebates,
services or incentives to the Foreign Investor through this Centre in an easy and
Procedure for repatriation
spontaneous manner. In addition, other administrative services such as approval,
Step I - Apply to DOI for approval of repatriation with following documents
registration, expansion and approvals for industries will be provided from the
• Application in the prescribed format
Centre on a timely manner.
• Copy of the Board of Director’s resolution
• Updated Shares and Directors Register from the OCR
Services provided by the Centre
• Latest Audited Financial Statements & Tax Clearance Certificate
• Industry Registration, industry administration & its related services,
• Endorsement letter from NRB as a proof of Foreign investment made and
• Foreign Investment and loan approval,
recorded in NRB
• Company registration, administration & its related services,
• Approved Share Sale/Purchase agreement
• Labour & work permission (Work Permit),
• Approval letter of Share sale/purchase form DOI/OCR
• Visa Facilities,
• Proof of payment of required tax in the concerned tax office,
• Environment Impact Assessment (EIA) Approval,
• Decision of the BOD and AGM for the dividend and Bonus allocation /
• Focal Point for energy & infrastructure development & necessary facilitation,
approval, in case of repatriation of dividend income
• Provide Permanent Account Number (PAN)
• Proof of distribution of bonus to employees as required by the Bonus Act,
• Quality Measurement and control of products of the industry
in case of repatriation of dividend income.
• Concession, rebate & facilities for the Industries
• In case company has gone into liquidation, Tax Clearance certificate and
• Approval for Foreign Exchanges
the proof of any residual amount,
• Any other services required under FIITTA and its rules.
• Share Valuation Report
• Approved technology transfer documents along with the calculation of the
Foreign Exchange Facilities for the Foreign Investor
fees and Approved TTA/ lease rent agreement for repatriation of fees as per
Foreigners and companies can open and operate bank accounts in any commercial
Technology Transfer Agreement (TTA),
bank in Nepal and transact in the Nepalese currency, foreign currency or both
• Letter of approval of the loan agreement, for sending out the principal and
(with prior approval of NRB). Foreign investors can utilize a range of foreign
interest on foreign loan obtained with the approval of DOI,
exchange facilities in the open market for the following purposes:
• CIB Report whether blacklisted or not,
• Any other documents as may be required by the DOI.

20 Doing Business in Nepal - 2025

 • Payment to experts, highly skilled technicians, managerial level employees; 3.8 INDUSTRIAL ENTERPRISES ACT (IEA) - 2020
• Payment of the principal, or interest, of bond or debenture issued in the
Registration of an Industry
capital market of the foreign country;
Industrial Enterprises Act, 2020 has been introduced repealing the Industrial
• Repatriation of foreign investment or income earned by an entity.
Enterprises Act, 2016 (the “Previous Act”). The Act is a principal legislation for
registration, establishment and pre/post operational compliances of industry.
Hiring Expatriates
No person (either natural or legal) is permitted to operate its business without
Hiring of expatriates as management experts, technical experts, managerial, and
establishing industry under this Act. The IEA 2020 has decentralized the
technical staff can be undertaken by entities only when qualified Nepali citizens
registration process by granting authority to provincial levels for registration,
are not available for such positions. The concerned industry must provide the
renewal and regulation of industries. However, following industries related to
training and development to Nepali staff to eventually replace such expatriates
atomic energy, radioactive materials and industries related to atomic energy and
and shall provide particulars of hired expatriates to the DOI. Furthermore, the
uranium-based energy production shall be established and operated under GON:
labour law has restricted the number of expatriates that can be hired by an entity
• Industry requiring permission as listed in of the IEA 2020
to a maximum of 5% of the total workforce.
• Established with Foreign Investment
• Related to the Schedule 5 of constitution
Setting Up Company: Acquisition or Lease of Land
• Industry operating in two or more province
An entity with approved foreign investment can acquire land for setting up an
• Providing educational consultancy services pertaining to diplomatic
industry or can lease land for this purpose. Where land cannot be identified by
matters.
the investor, or where the land required is in excess of the prescribed ceiling,
However, the DOI, federal authority shall continue to be responsible for
the approving authority shall provide necessary arrangements, approvals and
registration, renewal and regulation until the provincial governments make
facilitations to identify the required land.
necessary arrangement in the provincial laws.
Funding opportunities in Nepal Every industry has to apply for registration before establishment or operation.
Foreign entities can conveniently get access to funding from local financial The registration document has to be issued by the authority within 5 days if all
institutions for short and long-term investments, including loans for working documents are submitted along with application. Investor, if required, needs
capital and trade financing. to conduct Environmental Impact Assessment (EIA) or Initial Environmental
Examination (IEE), in some instance may require to give Brief Environmental
Currently, the financial sector has 20 Class ‘A’ Commercial Banks, 17 Class
Report without going to IEE or EIA process. IEA 2020 has introduced a new
‘B’ Development Banks, 17 Class ‘C’ Finance Companies, 52 Class ‘D’ Micro
concept of unit industry, eliminating the concept branch industry. Any industry
Finance Financial Institutions and1 Infrastructure Development Bank.
desirous of operating an industry at a different location from that of main industry
Apart from raising debt-based funding, investors may also consider securing shall do so by registering a unit of the industry. IEA 2020 requires all existing
equity based financing from the country’s capital market. Nepal currently has one branch industries to either register itself as a separate industry within a year from
stock exchange, which is growing in tandem with the country’s growth. As of the date of enactment of this act or establish it as a unit of the main industry.
January 2024, 249 companies are listed with market capitalisation of USD 25
billion.

Doing Business in Nepal - 2025 21

Industry Classification on the Basis of Fixed Capital Tourism, Sports Tourism, Religious Tourism, Cultural Tourism, Amusement
Park Construction and Operation, Wildlife Sanctuary
S.N. Industry Fixed Capital (NPR in Other Criteria
Million) • Mining and mineral industries, petroleum and natural gas and fuel exploration
1. Cottage - Traditional skill and tech based, labor intensive using local and production of clinker and cement using exotic limestone, lead fiber (pulp)
resources, technology and energy usage of <50kwh and paper, sugar, chemical fertilizers (excluding mixtures), organic fertilizers,
2. Micro <2 Value excluding house and land owned by proprietor, 9 slippers, yarn production, animal husbandry, fish farming, poultry and bee
employees, annual transaction less than NPR 10 Million keeping, Floriculture, early processing of rubber based on indigenous raw
3. Small < 150 Industries other than micro and small industries materials and production of rubber products, powdered milk, pharmaceutical
4. Medium 150 – 500 - products, waste and waste treatment, fuel saving equipment manufacturing
5. Large 500 - industries, pollution reducing equipment manufacturing industries and
equipment manufacturing equipment for the disabled, agricultural machinery
Industry Classification on the Basis of Nature of Product or Services and industrial machinery manufacturing industries, electricity.
• The industry of producing moving vehicles, the industry of making medicine
S.N. Industry Criteria
for snake bites, the industry of producing artificial eye lenses.
1. Energy based Industries mentioned in Schedule III • Hospitals, Nursing Homes, Veterinary Hospitals and Hospitals, Health
2. Manufacturing Industries producing goods using raw materials or semi or processed raw Testing Services, Health Laboratories, Biological Research and Teaching
materials.
and Training Institutions to be establishment outside of Kathmandu Valley,
3. Agro Forest based Industries based on agriculture or forest products: Industries prescribed in Area of Metropolitan and Sub metropolitan city of Terai area.
Schedule IV
• Information Technology Industry, Film making
4. Mineral Industry Industry producing metal or minerals other than metals through excavation or
processing. • Industrial zones to be built and operated by the private sector, special
5. Construction Industry Industries prescribed in Schedule - V operated using constructed physical economic zones and industries established in industrial villages,
infrastructure • The GON has set the required criteria and identified the high price and
6. Tourism Industry Industries related to tourism services as prescribed in Schedule VI. low weight volume (High Price Low Weight /Volume) and published the
7. Information Technology, Industries prescribed in Schedule VII information in the Nepal Gazette.
Information Transmission and • Industries manufacturing goods or services as determined by the National
IT service-based industry Integrated Trade Strategy (NTIS) approved by the GON.
8. Service Oriented Industry Service production or service provider-based industries as prescribed in
Schedule VIII
Fixed Capital of Industry
Following asset shall be taken as base for determining the fixed capital of an
National Priority Industries industry:
The following have been classified as national priority industries: • Infrastructures in land, underground, space, water or underwater
• Cottage Industries, Energy- Based Industries, infrastructure Industries • Infrastructures on land (like sewage, Internal road, water canal)
• Industries based on Agriculture and Forest Products • Industry’s office, factories, building or warehouse.
• Export Oriented Industries • Housing constructed for employees or worker, capital equipment and objects
• Adventure Tourism with Infrastructure, Rural Tourism, Environmental Tourism, • Machineries and system, related with supply of electricity
Golf Course, Polo, Pony Trekking, Hiking Tourism, Rafting, Shaja Conference

22 Doing Business in Nepal - 2025

 • Machinery, equipment and their parts, Transportation vehicles, Furniture &
fixtures
• Communication tools and so related equipment
• Also following expenses incurred during or before commencement of industry
can also be considered as fixed capital.
• Capital nature technical and supervision expenses
• Previous investment or operational expenses, interest expenses of capitalised
nature
• Environment research and study expenses before operation of industry

Other Highlights of Industrial Entreprises act

• The GON assured no nationalization, directly or indirectly acquire industries
established under the IEA except for public interest after following the
specified procedures.
• GON shall provide industrial security to all the industries.
• Medium or large-scale industry or cottage/ small scale industry with annual
turnover of more than NPR 150 Million has to allocate at least 1% of its net
profit for CSR activities every year. The amount so allocated should be used
for the specified areas and shall be allowed as expenses for the purpose of
tax provisions. Also, detailed progress report of CSR activity planned and
performed during the year should be submitted to registering authority within
6 months of end of financial year.
• Notwithstanding anything provided in any prevailing laws, exemptions either
fully or partially from payment of tax, duty, fees etc. shall be provided to
industries which have been declared as sick with respect to the import of
plant & machinery and tools for the purpose of extension, re-structuring or
diversification of such sick industries.
• Industry can hire a foreign national for a maximum period of five years (may
be extended for further two years), in a high level managerial position, where
no Nepalese national can be hired because of the lack of skill and expertise,
and recommended by the DOI with the permission from the Department of
Labor.
• A foreign national, working in any industry with prior approval of the Department
of Labor, may repatriate his/her salaries, allowances, emoluments, etc. in
convertible foreign currency in an amount not exceeding 70% percent of
such salaries, allowances and emoluments.

Doing Business in Nepal - 2025 23

 PART IV :
TAXATION OF
NEPAL

24 Doing Business in Nepal - 2025

4.1 DIRECT TAX Forward of Losses
Losses can be carried forward up to 7 years from the year of occurrence.
Corporate Tax Rates:
However, in case of projects carried out under BOT (build-operate-transfer),
Industry / Nature of Business projects involved in Electricity Power House, Generation and Transmission and
Corporate tax rate 25% business extracting petroleum products are allowed to carry forward up to 12 years.
In case of long term contract obtained from international bidding losses can be
Banks & Financial Institutions
carried back.
Entities Carrying out the Financial Transactions (Bittiya Karobar)
General Insurance Business Annual Tax Returns
Merchant Banks, Telecommunication and Internet Services Industry, Money Transfer Capital Market, 30%
All taxpayers (assesses) are required to submit their tax return within three
Commodity Future Market, Securities Brokers and Companies involved in securities business months from the end of financial year i.e. by 15 October (Approx.) of each year.
Entities producing/transacting in cigarettes, cigars, liquors and other related products An extension of three months may be requested and is generally granted. The
Entities engaged in Petroleum Business under Petroleum Act, 2040 financial statements shall be audited by an auditor holding certificate of practice.
Entities engaged in telecommunication and internet related services Tax returns shall be certified by the auditor and submitted along with the audited
accounts within the specified time. If there is any discrepancy in the income tax
Dividend Distribution Tax rate 5%
return submitted by a person within due date, such return can be amended within
Non resident carrying on air and water transport and Telecommunication services in Nepal : 30 days from the date of filing of return.
a.) 5%
a.) If the goods and Passengers embarking from Nepal b.) 2%
b.) If a person books a ticket from Nepal but the departure is from any foreign country
Repatriation by Foreign Permanent Establishment (FPE) of a Non-resident 5% For Resident Person
Assessed as Individual
Business Income Income Level (NPR) Tax Rate FY 2081/82 Income Level (NPR) Tax Rate FY 2080/81
Income from business or profession is computed in accordance with the method Up to 5,00,000 1%* Up to 5,00,000 1%*
of accounting regularly followed and subject to the adjustments/deductions as Next 2,00,000 10% Next 2,00,000 10%
prescribed in the Ordinance. The income is subject to tax at the rates as mentioned Next 3,00,000 20% Next 3,00,000 20%
above.
Next 10,00,000 30% Next 10,00,000 30%
Tax on Cooperatives: Next 30,00,000 36% Next 30,00,000 36%
Above 50,00,000 39% Above 50,00,000 39%
Co-Operatives Tax Rate for FY 2080/81
Assessed as Couple
Exempt Co-operatives covered under Section 11 Nil
Income Level (NPR) Tax Rate FY 2081/82 Income Level (NPR) Tax Rate FY 2080/81
Saving & Credit Co-operatives operated in Metropolitan City 20%
Up to 6,00,000 1%* Up to 6,00,000 1%*
Saving & Credit Co-operatives operated in Sub-Metropolitan City 15%
Next 2,00,000 10% Next 2,00,000 10%
Saving & Credit Co-operatives operated in Sub-Metropolitan City 10% Next 3,00,000 20% Next 3,00,000 20%
Other than Exempt/Saving & Credit Co-operatives operated in Metropolitan City 10% Next 9,00,000 30% Next 9,00,000 30%
Other than Exempt/Saving & Credit Co-operatives operated in Sub-Metropolitan City 7% Next 30,00,000 36% Next 30,00,000 36%
Other than Exempt/Saving & Credit Co-operatives operated in Sub-Metropolitan City 5% Above 50,00,000 39% Above 50,00,000 39%

Doing Business in Nepal - 2025 25

* Does not apply to Proprietorship Income, Pension Income, Income from 8. In case the employee posted outside Nepal is getting a foreign allowance
Contribution based Pension Fund, and the employment income of the person will get a 75% rebate of such allowance.
depositing the amount in the Social Security Fund (SSF) 9. In the case of the female employee whose taxable income is only from
employment then a 10% rebate is allowed on tax liability.
For Non-Resident Person 10. Any resident natural person having pension income will get an additional
S. N. Nature of transaction FY 2081/82 FY 2080/81 deduction from taxable income of the amount equivalent to 25% of the
1. Income earned from normal transactions. 25% flat rate 25% flat rate amount of the first slab from the taxable income.
11. In case of gain on disposal of listed securities owned by a resident
a. Income earned from providing shipping, air transport or 5% 5%
telecommunication services, postage, satellite, optical fiber project. natural person, the concerned stock exchange at the time of settlement of
b. Income earned providing shipping, air transport of telecommunication 2% 2% transaction shall levy tax at the rate of:
services through the territory of Nepal. 9 5% of profit if held for more than 365 days and
c. Repatriation by Foreign Permanent Establishment. 5% 5% 9 7.5% of profit if held for a period of 365 days
12. In case of gain on disposal of Non Business Chargeable Asset (Land &
Other Points Building) tax shall be levied at the rate of:
9 5% of profit if held for 5 years or more than 5 years
1. Natural person working in remote areas is entitled to get a deduction from
9 7.5% of profit if held for less than 5 years
taxable income to a maximum of Rs. 50,000.
13. Tax shall be levied at the rate of 5% on any resident natural person not
2. Social Security Tax shall not be applicable for natural persons having
involved in the operation of the business but receiving payment in foreign
Pension income, Persons contributing to SSF & Proprietorship Firm.
currency for providing software or similar kind of other electronic service
3. Incapacitated natural persons shall be entitled to get a deduction from
outside Nepal.
taxable income an additional 50% of the amount prescribed under the first
14. Tax shall be levied at the rate of 5% on any resident natural person not
tax slab.
involved in the operation of the business but receiving payment in foreign
4. A Resident natural person who has procured life insurance and paid the
currency for providing consultancy service outside Nepal.
premium amount thereon shall be entitled to a deduction of the actual
15. Tax shall be levied at the rate of 5% on any resident natural person not
annual insurance premium or Rs. 40,000 whichever is less from gross
involved in the operation of the business but receiving payment in foreign
taxable income.
currency for uploading audio-visual material in social network.
5. A Resident natural person who has procured Health Insurance and paid
the premium amount thereon shall be entitled to a deduction of the actual
annual insurance premium or Rs. 20,000 whichever is less from gross
taxable income.
6. A Resident natural person who has procured an Insurance Policy for his
house and premium thereon shall be entitled to a deduction of the actual
annual insurance premium of Rs. 5,000 whichever is lower from his gross
taxable income.
7. In the case of the employee employed at the foreign diplomatic mission of
Nepal only 25% of the foreign allowances are to be included in the income
from salary.

26 Doing Business in Nepal - 2025

Advance Tax: 119(1)(4)(ka) Failure to pay tax on or before the date on which
Income tax shall be paid in three advance instalments by all entities during an the tax is payable. 15% p.a. on the outstanding amount
income year. The payment deadlines are 14 January, 13 April, and 15 July. 120(ka) & (Kha) Making false or misleading statements to the IRD 100% & 50% of the amount of short tax for
The income tax to be paid should be calculated at the applicable rates on the knowingly, recklessly or unknowingly
knowingly and unknowingly, respectively
estimated profits of the entity for the entire year. Advance tax shall be deposited 121 A person who knowingly or recklessly aids or
is as follows: abets another person to commit an offence under 100% of the underpayment of tax
the law.
Particulars Due Date Amount
1st Installment Poush end (14th January approx.) 40% of total estimated tax liability of the year Residential Status
2nd Installment Chaitra end (13th April approx.) 70% of total estimated tax liability of the year Individual:
A person is deemed resident in Nepal if they have resided in Nepal for a period of
Final Installment Ashad end (15th July approx.) 100% of total estimated tax liability of the year
183 days or more in any financial year, or their normal place of abode is in Nepal.
Repatriation by Foreign
Permanent Establishment.
5% 5% Dual residence is not recognized for the purposes of Nepalese tax.

Tax Payments and Refunds: Short-term visitors

Income tax payments are made in the year in which the income is earned in the There is no separate provision for taxing the income of short-term visitors.
form of withholding tax and advance tax. The taxpayer is required to estimate Depending on the duration of stay, they will be classified as resident or non-
their taxable income and make advance payments in three instalments spread resident and Nepal sourced income shall be taxed accordingly
over the year. Income from services including contract payments is subject to tax
withholdings that may be adjusted for the purposes of calculating advance tax.
Arrangements have been made by the IRD to refund (within 60 days) the excess
money deposited by taxpayers (in practice may take longer).

SECTION CIRCUMSTANCE FY 2023 - 24

Non filing of:
117(1)(Ka) Estimated Tax Return under Section 95 (1)
Higher of Rs 5000 or 0.1% of assessable
117(1)(Kha) Advance Withholding Tax Return income1.5% p.a. of the WHT amountHigher of
117(1)(Ga) Income Tax Return Rs 100 per month or 0.1% on the amount of
inclusions0.1% p.a. on the amount of receipts
117(1)(Gha) Financial Statement
117(2) Failure to maintain proper documentation Higher of Rs 1000 or 0.1% of the amount of
inclusions
117(3) Failure to file withholding tax returns
2.5% p.a.of the the WHT amount
118(1)(Ka) Instalment tax to be deposited under Section 94
is not made as prescribed 15% p.a. on the outstanding amount

Doing Business in Nepal - 2025 27

Withholding Taxes
S. N. Nature of transaction FY 2081/82 FY 2080/81 S. N. Nature of transaction FY 2081/82 FY 2080/81
A. Interest income from deposit up to Rs 10000 under 'Micro Finance S. TDS on Payment by Resident Person for utilizing services related 10% 10%
Program', 'Rural Development Bank', 'Postal Saving Bank' & Co- Exempt from tax Exempt from tax with Satellite, Bandwidth, Optical Fiber, equipment relating to
Operative (u/s-11(2ka) in Village Municipality areas telecommunications or electric transmission
B. Wind fall gains T. Dividend Paid by Partnership Firm to its Partners 5% 5%
Wind fall gains from Literature, Arts, Culture, Sports, Journalism, 25% 25%
Science & Technology and Public Administration amount received up U. Payment for the freight to transportation service or Renting of 2.5% 2.5%
Nil Nil Transporation vehicle (In case Service provider is Not registered in VAT)
to 5 lacs
C. Payment of rent by resident person having source in Nepal 10% 10% V. Payment for the freight to transportation service or Renting of 2.5% 2.5%
However, no TDS on payment of rent to natural person. Transpiration vehicle (Service provider Not registered in VAT)
D. On dividend paid by the resident entity. 5% for both 5% for both W. Payment for the freight to transportation service or renting of 1.5% 1.5%
-To Resident Person Transportation vehicle (Service provider registered in VAT)
-To Non Resident Person X. Renting of Passenger Vehicle
E. On payment of gain in investment insurance 5% 5% -VAT Registered 1.5% 1.5%
-No VAT Registered 10% 10%
F. On payment of gain from unapproved retirement fund 5% 5% Y. Payment made against question setting, answer evaluation 15% 15%
G. On payment of interest or similar type having source in Nepal to Z. Payment to Non Resident Company against Commission paid for 1.5% 1.5%
natural person [ not involved in any business activity by Resident Bank, 6% 6%
Reinsurance
financial institutions or debenture issuing entity, or listed company
AA. Payment made to Consumer Committee 1.5% 1.5%
H. Payment for articles published in newspaper No TDS No TDS AB. Interest paid by resident bank and financial institution to foreign Bank/ 5% 10%
FI
I. Interest payment to Resident bank, other financial institutions No TDS No TDS
AC. Encouragement amount received by consumer of good and services for
J. Interregional interchange fee paid to credit card issuing bank No TDS No TDS the payment made through payment cards, E-Money (Wallet), Mobile No TDS No TDS
K. Interest or fees paid by Government of Nepal under bilateral agreement No TDS No TDS Banking and electronic payment during purchases as per the prevailing
laws, no tax shall be deducted.
L. On payment of general insurance premium to resident insurance No TDS No TDS
company AD. Interest on Deposit of Life Insurance Companies 5% 5%
M. On payment of premium to non-resident insurance company 1.5% 1.5% AE. Royalty to resident person for Literary articles or write up (Rachana) 1.5% 15%
N. Contract payment exceeding Rs 50,000 for a single contract within 10 1.5% 1.5% AF. Interest on Loan paid to Foreign Bank/FIs by the reservoir or semi 5% 5%
days. reservoir based Hydropower above 200 MW,
O. Interest & Dividend paid to Mutual Fund No TDS No TDS
P Payment of consultancy fee:
- to resident person against VAT invoice 1.5% 1.5%
- to resident person against non VAT invoice 15% 15%
Q. Payment on contract to Non Resident Person
-On repair of aircraft & other contract 5% 5%
-Other than above 5% 5%
R. TDS deducted on payment of dividend made by Mutual fund to natural 5% 5%
Person

28 Doing Business in Nepal - 2025

Tax Collection on Services (TCS) 4.2 INDIRECT TAX
S. N. Nature of transaction FY 2081/82 FY 2080/81
Value Added Tax (VAT):
A. Profit and Gain from Transaction of commodity future market 10% 10%
Standard VAT rate of 13% is applicable on supply of both goods and services
in Nepal. Certain prescribed goods and services are chargeable at 0%. Also,
B. Payment made against question setting, answer evaluation 15% 15%
there are some items that are exempted from VAT. VAT is imposed on goods
C. Payment to Non Resident Company against Commission paid for 1.5% 1.5% and services at each stage of import, manufacturing, supply and trading. Input
Reinsurance tax credit is available at each stage where goods and services are supplied at
D. Payment made to Consumer Committee 1.5% 1.5% standard VAT rate of 13% & 0%. Recipient of service is liable to pay VAT under
E. Commercial Import of Buffalo, Goat, Sheep, Fresh & Frozen Fish, 5% of Custom 5% of Custom reverse charge in respect of import of service.
Fruits, Value Value
F. On Import of Meat, Milk Product, Egg, Honey, Millet, Buckwheat, 2.5% 2.5% Goods and services notified in Schedule 1 of the Act are charged VAT at 0% &
Junelo, Rice, Wheat Flour, Meslin Flour, Other Flours, Herbs, Schedule 2 of the Act are exempt from payment of VAT.
Sugarcane, Herbal products
Person supplying the goods crossing transaction threshold of NPR 5 million and
G. Foreign Currency Exchange service by resident bank for students
going abroad for study making payment for language exam and 15% 15% supplying services or goods & services both crossing the limit of NPR 3 million are
standardized test required to be registered under VAT. However, certain prescribed good & service
H. Interest paid by resident bank and financial institution to foreign Bank/FI 10% 10% providers are required to mandatorily register themselves in VAT regardless of the
I. In case of the encouragement amount received by consumer of good No TDS No TDS transaction threshold.
and services for the payment made through payment cards, E-Money
(Wallet), Mobile Banking and electronic payment during purchases as VAT is payable on a monthly/ trimester basis within 25th of next month/ trimester
per the prevailing laws, no tax shall be deducted. and monthly/ trimester VAT return is also required to be filed within 25th of next
1% 1% month. At present VAT return can be filed online through IRD’s website.
J. Payment received by a person in foreign currency for providing To be Collected by To be Collected by
software or other electronic services of similar nature outside Nepal. Bank/FI/Money T/F Bank/FI/Money T/F
K. Interest on Deposit of Life Insurance Companies 5% 5% Excise Duty:
Excise Duty is payable on the local manufacture of movable goods and on the import
L. Royalty to resident person for Literary articles or write up (Rachana) 1.5% 1.5%
of certain goods. Excise Duty is governed and regulated by the Excise Act 2002,
M. Interest on Loan paid to Foreign Bank/FIs by the Dam or PROR based 5% 5%
Hydropower subject to certain condition and the Excise Regulation 2003. As provisioned in the law, Excise commodities
N. A resident e-commerce operator while making payment for sale of 1% 1% are closely controlled and supervised by the GON, from the production stage
goods, services or goods & services from its platform. To be collected by the To be collected by the through to the selling stage.
E-Commerce Operator E-Commerce Operator
O. Profit and Gain from Disposal of Shares: No one can manufacture, import, sell, or store excisable goods or deliver a related
In case of Natural Resident Person service without obtaining a license. Similarly, the law prohibits the import of
• Listed Shares held for more than 365 days 5% 5%
• Listed Shares held for 365 days or less 7.5% 7.5% excisable services without a license.
• Non Listed Shares 10% 10% A person, firm, or institution that requires such a license may submit an application
Resident Entity
• Listed Shares 10% 10% in the prescribed form before an Excise Officer at the concerned IRD office.
• Non Listed Shares 15% 15% Every registered person must file an Excise Duty return by the 25th day of following
Others
• Listed Shares 25% 25% month, even where transactions have not occurred.
• Non Listed Share 25% 25%

Doing Business in Nepal - 2025 29

Custom Duty • Re-characterize an arrangement or a part of an arrangement that is entered
Customs duty is levied on the import of goods into, and export from Nepal. The rate into or sought to be entered into as part of a tax avoidance scheme,
of customs duty applicable to a product to be imported/exported depends upon • Disregard an arrangement or a part of an arrangement that does not have
on its classification under the Schedule 1 & 2 of Finance Act, 2081. The Customs substantial economic effect, or
Tariff is aligned with the internationally recognized Harmonized Commodity • Re-characterize an arrangement or a part of an arrangement that does not
Description and Coding System of Tariff Nomenclature (HSN) provided by the reflect its substance.
World Customs Organisation.
Customs Duty is calculated at the Nepal border on the import of goods and is based Income Splitting
on the transaction value. The valuation system is aligned with the WTO/ General In case a person attempts to split income with another person, and in case it is
Agreement on Tariffs and Trade (GATT) valuation. On items that are commonly found that will cause a reduction in the amount of tax payable, the Department
imported, duty is levied on an ad valorem basis. There are few exceptions, where may, by notice in writing, adjust amounts to be included or deducted in calculating
duty is based on quantity (volume or weight). the income of each person to prevent any such reduction in the amount of tax
payable.
A Customs service fee of NPR 500 applies per declaration (form) and is charged
at the time the goods are imported into Nepal. (NPR 100 per declaration (form) is The attempt to split the income includes, but not limited to, a transfer of the
charged at the time goods are exported from Nepal). Custom Duty is revised each following amounts so as to reduce the total tax payable by the person or an
year by the Finance Act. Customs Duty ranges from 0% to 80% of the transaction associate, either directly or indirectly through one or more interposed entities:
value. • Amounts to be derived or costs to be incurred, or
• An amount received or enjoyed by the transferee of an asset (i.e., derived
from the asset); or the amount paid or expenses incurred in owning the
4.3 ANTI-TAX AVOIDANCE ARRANGEMENTS assets.
Bilateral Double Taxation Avoidance Agreements (DTAA) To determine whether the person is splitting his/her income, IRD or IRO shall
For foreign investors, double taxation may be avoided on the basis of Bilateral consider the market value of any payment made for the transfer.
Double Taxation Avoidance Agreements (DTAA). GON is authorized to negotiate
Double Taxation Agreements (DTA) with foreign countries to promote FDIs in Transfer Pricing
Nepal. The DTA is an agreement between two countries seeking to avoid double In any arrangement between persons who are associates, the Department may,
taxation by defining the taxing rights of each country with regard to crossborder by notice in writing, distribute, apportion, or allocate amounts to be included or
flows of income and providing for tax credits or exemptions to eliminate double deducted in calculating income between the persons as is necessary to reflect the
taxation. DTAA enable exchange of information between treaty partners regarding taxable income or tax payable that would have arisen for them if the arrangement
evasion of tax. Currently Nepal has signed bilateral tax treaties with 11 countries had been conducted at arm’s length.
(Austria, Bangladesh, China, India, Republic of Korea, Mauritius, Norway, Pakistan, In making any adjustment, the IRD may
Qatar, Sri Lanka and Thailand). • re-characterize the source and type of any income, loss, amount, or
payment; or
General Anti-Avoidance Rule (GAAR) • allocate costs, including head office expenses, incurred by one person
General Anti-Avoidance Rule means any arrangement, one of the main purposes in conducting a business that benefit an associate or associates in
of which is the avoidance or reduction of the liability to tax. For the purpose of conducting a business to the associates based on the comparative
determining tax liability under the Income Tax Act, the IRD may: turnovers of the businesses.

30 Doing Business in Nepal - 2025

Income Tax Act, 2002, contains provisions as to the power conferred to IRD to
re-characterize any transactions between associates in case IRD thinks that the
transactions are not in arm’s length. A detailed Transfer Pricing Guidelines 2081
has been issued by IRD.
In case a tax jurisdiction does suspect that the transaction between the entities
of an Multi National Enterprises group is not in arm’s length, then the taxation
authority may re-characterize the transactions based on Arm’s Length.

Foreign Tax Credit

In case that a resident person has paid overseas income tax on its taxable income
derived from sources outside Nepal, the income tax paid overseas can be adjusted
against its tax payable in Nepal. However, the adjustable amount of overseas
income tax cannot exceed the amount of income tax otherwise payable in Nepal
in respect of non-Nepal sourced income. If the taxpayer wishes for deduction of
foreign tax from its foreign income, the deduction is permitted.

Doing Business in Nepal - 2025 31

 PART V :
EXEMPTIONS,
BENEFITS &
FACILITIES

32 Doing Business in Nepal - 2025

5.1 UNDER INCOME TAX ACT 4 Interest Income Earning interest income from deposits in a micro 100%
Any Person financial institution, rural developmentbank, postal saving bank
Tax incentives are given under the Income Tax Act for various category of industries and cooperative pursuant to sub-section (2) upto Rs. 25000 p.a
including tax concessions for establishment in rural and remote areas and also on
5 Agricultural production or manufacturing industry not producing 20%
the basis of employment generation etc. The summary of such incentives are
Special Industries alcohol or tobacco productFully operated throughout the year
given below: But As per clause 1 of negative list of FITTA, foreign investment
is disallowed in agricultural activities.
Industries based on tobacco and alcohol are not entitled to receive any income 6
tax facilities and concessions. However, their expenses on employee welfare, Direct employment to: a) 90%
Special Industry a) 100 or more Nepali Citizens in a year
expenses or investment on system or machinery tools to reduce environmental and Information b) 80%
b) 300 or more Nepali Citizens in a year c) 75%
impact, R&D, expenses to increase energy efficiency is deductible. technology c) 500 or more Nepali Citizens in a year
industry d) 70%
d) 1000 or more Nepali Citizens in a year
Industry will have a choice of selecting any one of the exemptions if it is eligible (Employment
Based) 10% Additional
for multiple exemption for same income. 100 or more Nezdisable
Except for the industry based on tobacco, liquor and casinos, all other industries 7 Exemption for 10 Year after commencing production or
shall utilize its accumulated profits for expansion of its capacity or investment transactions located in:
a) Remote a) 90%
in equity of production based, energy based, agricultural/forest produce based Special b) Undeveloped b) 80%
industry and dividends received from such investments will be exempt from Industry(Area c) Less Developed c) 70%
dividend distribution tax. Based) But If any other person has used the properties for the operation
of the industry of the same type previously, the period during
Cottage and small-scale industries registered and in operation before enactment which they have been so used shall also be reckoned, while
reckoning the time-limit
of this Act and those registered with fixed capital up to NPR 10 Million shall get
8 Special Industry 100% for first 15 Years
tax concession of 50%. ( Established from the date of startof
on mountainous Direct employment to: operation of business
areas of Karnali a) 100 or more Nepali Citizens in a year
S.N Aseessee Criteria Exemption and Farwestern
1 Any person other Agricultural ActivitiesEarning agricultural Income other than Province)
than Registered earned on agricultural business in land as referred to in clauses 9 After commencement of
Firm, Company, (d) and ( e) of section 12 of Land Act, 2021. But As per clause 100% a) Newly setup industry or tourism industry (except Casino) operations
Partnership & 1 of negative list of FITTA, foreign investment is disallowed in Special - Invested more than 1000 million rupee, gives direct a) First 5 years-100%
Industry(Based on employment to more than 500 personsb) Existing industry Next 3 years-50%
Corporate agricultural activities. b) First 5 Years- 100%
new or additional - Increased its current capacity by at least 25%, make its Next 3 Years-50%
2 Registered investment) existing capital more than 2000 million rupee and give direct
Activities related to agricultural business, vegetable dehydration (On income from enhanced
firm, company, 100% employment to more than 300 persons capacity)
and Cold Storage BUT As per clause 1 of negative list of FITTA,
partnership & foreign investment is disallowed in agricultural activities.
corporate
3 a) Income derived from sericulture and silk production, fruit
farming, production and processing of fruits, animal husbandry,
Any Cooperatives dairy farming, poultry farming, fish farming, tea farming and
or Association 100%
processing, coffee farming and processing, ginger farming
registered with and processing, vegetable seed production, beekeeping, honey
Cooperative Act production, rubber farming, and community forestry, as well as
2074 businesses related to agricultural and forest products,
b) Dividend distributed by such organization

Doing Business in Nepal - 2025 33

 S.N Aseessee Criteria Exemption S.N Aseessee Criteria Exemption
10 a) First 10 years- 15 Income earned from following activities are exmepted for 10
100% Subsequently year after the commencement of operation
a) Mountainious and hilly district specified by GON -50%
a) operation of a tram or trolley bus a) 40%
Any Entity
b) First 5 years-100% b) build and operation of a ropeway, cable car orsky bridge b) 40%
b) SEZ other than specified above
Indutry located in Subsequently-50% c) construction and operation of road, bridge,tunnel road, tunnel, c) 50%
Special Economic railway and airport
First 5 years-100%
Zone c) Dividend distribution Next 3 years-50% 16 Income from
(Transaction or
operation have d) Foreign technology or management service charge or royalty 50% a) production based, tourism service, hydropower
already started) income of foreign investor generation,distribution and transmission
Listed entity b) software development, data processing, cybercafe, digital 15%
But If the property is an old property used by other person for mapping located in zoological, geological, biotech park
the operation of industry or business of the same kind or other operationand technology park63 specified by the Government
kind, the facilities shall not be available of Nepal
17 Entity engaged After commencement
Located in
in brandy, cider of operation
11 After commencement a) Remote area
Any Person engaged & wine based on a) 40%
of operation b) underdeveloped area
in exploration fruits b) 25%
and excavation of
Business started till Chaitra 2080(mid-April 2024) First 7 years-100%
minerals,petroleum Next 3 years-50% 18 Income from Intellectual property right by way of a) 25%
product, natural gas Any person a) Royalty Income b) 50%
and fuel b) Transfer/sale of IPR
12 Industry located 19 After commencement
in specified Income from Software development, data processing, cybercafe, Operating international flight or tourism related company with of operation
zoological, digital mapping fees capital investment more than 1000 million rupee First 5 years-100%
geological, But If the property is an old property used by other person for 50% Next 3 years-50%
biotech park, the operation of industry or business of the same kind or other Entity engaged in After commencement
operation and kind, the facilities shall not be available tourism or airlines Operating international flight tourism related company with of operation
technology park company capital investment more than 3000 million rupee First 10 years-100%
13 After commencement Next 5 years-50%
a. Production, transmission or distribution of electricity (Hydro, of business After commencement
solar, wind & biological substance) started till chaitra 2084 (mid Operating international flight tourism related company with
Licensed person First 10 years-100% of operation
march 2028). capital investment more than 5000 million rupee
or entity engaged Next 5 years-50% First 15 years-100%
in electricity b. Reservoir and semi reservoir water Hydropower projects with First 15 Years- 100% 20 Special industry Dividend Distribution Capitalizes its accumulated profit into
business a capacity of 40 megawatts whose financial closure has been Next 6 Years- 50% or industry related shares for increase in capacity have distributed dividend from 100%
completed within chaitra 2085 and lower coastal hydropower to tourism sector such capitalization
projects that will be operated in tanam with those projects.
21 Company(Conversion Paid up capital 500 million or more. However, companies First 3 years-10%
14 Income earned from exportation of goods or services from Private to Public) established under the Company Act, 2063 shall not be eligible for
a) By resident individual taxable @ 20% a) 25%b) 50%c) 20% these benefits.
b) By resident individual taxable @ 30% d) Till FY 2084/85,
Export Oriented c) other entity 50% on Foreign 22 Entity engaged in 1. Domestic tea producing and processing industry, dairy
Industries d) Earning foreign currency by Business process outsourcing, Currency earnings. tea, dairy or textile industry having transaction in milk products 50%
software programming, industry 2. Textile industry
cloud computing, etc 23 Community Institution Health institution operation 20%

34 Doing Business in Nepal - 2025

S.N Aseessee Criteria Exemption Notes:
1. If any person carries on transactions qualifying for different tax exemption
24 First 7 Years-100%
Commencement of Business/Transactions facilities as mentioned above, income shall be computed to obtain such
Additional 3 Years
Micro-enterprise But Due to clause 2 of negative list of FITTA 2019, such (If operated by women facility as if that income were derived by separate persons
investment is disallowed for foreign investor entrepreneur)
2. A person who is in a position to have more than one exemption in respect
25 1. operates any project such as building
Entity 2. operate public infrastructure to be transferred to GON 20% of the same income pursuant this Section shall enjoy only one exemption
3. Building powerhouse chosen by him.
4. Generation & Transmission of electricity
26 After commencement Meaning:
Special of operation or
Industry(Industrial Established and operated on industrial region or industrial village transaction 1. “Agricultural business” means a business of producing crops from a public
region or village) First 3 years-50% or private land or acquiring rent or crops from a tenant using the land.
Next 5 Years- 25%
2. “Special industry” means a production based industry, industry based
27 Any Person
Raw material or Auxillary Raw material produced in nepal and 20% on such income on agriculture and forest products and mineral industry as classified in
sold to special industries.
subsection (2) of Section 15 of the Industrial Enterprises Act, 2076 (2019)
28 Start up Business with 100% for first 5 Years
annual income upto 1 a.) with innovative knowledge, thinking, skills, diversity etc. after commecncement other than any industry producing cigarette, Bidi, cigar, tobacco, Khaini,
crore Nepali rupees of operation. Gutkha, Pan Masala, other goods of the same nature involving tobacco as
29 After commencement the principal raw materials, liquors, beer and products of similar kind.
Any special industry of operation after
operating in the Relocates outside the valley relocation
Kathmandu Valley First 3 years-100% 5.2 UNDER CUSTOM ACT
Next 2 Years- 50%
Industries registered under this IEA will be entitled to the following exemptions,
30 After commencement
Producing new products that have a significant impact on the of operation benefits or facilities:
Industries
environment For first 3 years-50% • Export industries not utilizing the bonded warehouse facility or cash deposit
Next two years-25%
can claim duty drawback through One Stop Service Centre (OSSC).
31 After commencement • Industry not using bonded warehouse facility but exports its products
of operation
Industries Producing vaccines, oxygen gas, and sanitary pads through proper banking channel or sells its goods inside the country
For first 5 years-100%
Next two years-50% in foreign currency, can import raw materials, auxiliary raw materials or
32 Indutry After commencement packaging materials (provided it is certified and recommended by DOI that
established with Production and assembly of electric vehicles of operation
in Ashar 2082 For first 5 years-100% packaging material is not produced in Nepal) by providing guarantee in line
with customs regulation.
33 After commencement
Industries Production of agricultural tools of operation For first 5 • Customs duty of raw materials, auxiliary raw materials and packaging
years-100% materials will be one slab lower than applicable for the imported finished
34 Any person The tax facilities goods made from such materials.
engaged in Agreement with Government of Nepal for construction and provided by the • Industry can import machinery, transformer, generator with the capacity of
construction operation of any infrastructure and income earned from such relevant laws in effect
or operation of activities till its conclusion at the time of that more than 10 KW and industrial tools in the lowest slab of customs duty.
infrastructure agreement • Quality testing laboratory can import machinery and scientific equipment
for the purpose of testing quality as well as machinery and equipment for

Doing Business in Nepal - 2025 35

 research and development in the lowest slab of customs duty. small industry to establish industry in Remote areas.
• Those industries producing Intermediate goods used for exporting industrial • Industry established with foreign investment, or multi-national company, can
goods shall be eligible for refund of duty paid in input goods on the ratio of import new products or goods, produced by its mother company in other
actual export. Such application is to be made within 1 year of export. country, into Nepal for limited period with stated terms and conditions, to
promote it or for its market development.
5.3 BENEFITS AND CONCESSIONS FOR MICRO INDUSTRIES • Except for the industry based on tobacco, liquor, industry mentioned
No registration charges and fees is levied on micro industries and are entitled to in Section 17(2) like production based, agricultural/forest produce
receive full income tax exemption from the date of its enactment. based industry & mining industry can be provided exemption, facility and
concession specified by GON.
5.4 CONCESSION FOR WOMEN ENTREPRENEURS • Concession on import duty can be provided on import of machinery,
Industry, with ownership of women entrepreneurs only, is entitled to 35% discount equipment, tools and new technology for increasing capacity of a micro,
on industry registration and 20% discount on industrial property registration. cottage & small industry.
Priority is given to women entrepreneurs in allocating areas for establishment • The GON can provide for additional exemption, facilities and concession
of industry in industrial zones and are entitled to receive export loan as per their for industrial area, product specific zone and industrial village.
credibility to export their industrial products. • The GON can provide for additional exemption, facilities and concession
for industry registered in extremely undeveloped, undeveloped and
5.5 ADDITIONAL BENEFITS AND CONCESSIONS UNDER INDUSTRIAL
underdeveloped areas.
ENTERPRISE ACT
• Industry established in industrial area, cluster, corridor or village can be
The following additional exemptions, benefits and concessions are available to
provided specific benefits by GON.
specific industries:
• Right to use of Particular forest area can be provided on lease with
agreed terms and conditions to forest products-based industry as per the
prevailing law.
• No royalty or charges will apply to electricity produced for own
consumption and any spill-over electricity produced can be sold in mutually
agreed rate.
• GON via official gazette can provide additional concession or benefits
to export industry, industry established in SEZ, governmental or private
industrial area.
• Additional exemption, benefits and concession can be provided after
recommendation by Board to the industry under national priority, industry
using domestic raw materials, industry doing optimum utilization of labor
and skills and industry established by invention of goods & technology.
• Depending upon the proportion of non-supply of electricity to the industry,
concession on demand charges levied on bills paid by the industry for
electricity, may be provided by the GON.
• GON shall provide seed capital to cooperative, micro industry, cottage and

36 Doing Business in Nepal - 2025

PART VI :
OTHER
RELEVANT LAW
FOR ENTITIES
BRINGING
FDI

Doing Business in Nepal - 2025 37

6.1 LABOR ACT 2017 Probation Period
Labor Act 2017 applies to a company, private firm, partnership firm, cooperatives, The probation period is 6 months.
association, or other organization (“entity”) operating, established, incorporated,
registered, or formed under the prevailing laws to undertake industry, or business, Working Hours
or provide a service (or services) with or without a profit motive. It also applies to • Working hours continue to be 8 hours a day and 48 hours a week.
entities registered in foreign countries and engaged in the promotion of trade, the • Overtime has been increased to 24 hours per week and overtime pay is
sale of products, or the promotion of other works in Nepal. provided 1.5 times of regular remuneration.
The act is not applicable to: • A 30 minutes’ break is provided after 5 hours of work, where the work can
• Civil services, Nepal army, Nepal police, Armed police force etc. be interrupted. Where the work cannot be interrupted, a break is provided
• Entities incorporated under other prevailing laws or situated in Special after shifts.
Economic Zones (SEZ) to the extent separate provisions are provided. • The facility of replacement (in-lieu-of) leave is available for workers working
• Working Journalists, unless specifically provided in the contract. on public or weekly holidays.
Types of Employment
• Regulars: Persons hired for work or services other than work based, time Minimum Wages / Remuneration
bound, casual, or piece rate employment. The Ministry of Labour, Employment and Social Security has prescribed separate
• Work Based: Persons hired for rendering a specific service. minimum remuneration / wage for the workers / employees working:
• Time Bound: Persons hired for rendering services for a definite time period. 1. Tea Estate Minimum Wages:
• Casual: Persons hired for seven days or less in a month.
• Part-time: Persons hired for 35 hours or less in a week. Period Basic Pay Dearness Allowance Total
Monthly 8,934 4,959 13,893
Foreign National Employees Daily 323 177 500
Foreign National cannot be appointed as an employee without getting permission Hourly 43 23 66
from the Labor Department through employment agreement either in a language
Daily Allowances for the workers at tea refinery 63
understandable by the foreign national or in English. and tea factories including Sardar, Naike and
Gatekeeper working in the tea estate
A foreign skilled worker is hired only if a Nepali citizen is not available for such a
position.
2. Other Enterprises Minimum Wages:
Prior to engaging a foreign national in work, the entity must publish an advertisement
Period Basic Pay Dearness Allowance Total
in national level Daily Newspaper to fill the vacant posts by Nepali citizens. If no
application is submitted or if no local skilled person is available for any work Monthly 10,820 6,480 17,300
after the vacancy publication foreign national can be hired for the work with the Daily 418 250 668
approval of Labor Department. Hourly 56 33 89
A work permit is required and compulsory for all foreign nationals wishing to work, Per hour minimum remuneration of the part 95
time employees
except for foreign nationals having diplomatic immunity or for those exempted
from the requirement for a work permit under a treaty or agreement entered into
with the Nepal Government.

38 Doing Business in Nepal - 2025

Retirement Benefits Other Benefits
A. Provident Fund Other benefits are provided in the table below:
• Rate: 10% of basic remuneration. A. Festival Expenses: An amount equivalent to the monthly basic remuneration,
• Eligibility: since the first day of employment. once a year. The employee not completing 1 (one) year service is entitled
• Time of Allocation: Every month (time of payment of remuneration) to the expenses on a proportional basis.
• Deposited in Social Security Fund (Previously deposited in EPF or any B. Death Compensation: The nearest successor is entitled to the applicable
other approved Retirement Fund; or paid in cash along with remuneration). amount of accident insurance.
B. Gratuity C. Medical Insurance: Coverage: At least one hundred thousand rupees (NPR
• Rate of Gratuity: 8.33% of basic remuneration 100,000) per year for every worker.
• Eligibility: since the first day of employment Premium: Half by the employer, and half by the employee.
• Time of Allocation: Every month (time of payment of remuneration) D. Accident Insurance
• Deposited in: Social Security Fund(Previously deposited in EPF or any Coverage: At least seven hundred thousand rupees (NPR 700,000) for
other approved Retirement Fund; or paid in cash along with remuneration). every worker.
Premium: Fully paid by employer.
C. Leave Encashment
• Accumulation: Home Leave up to 90 days, sick Leave up to 45 days
• Encashment: At the time of termination of service, the rate of last drawn salary.
6.2 BONUS ACT - 2030 (1974)
Amount of Bonus to Employees
D. Leave and Holidays
Each profit-making enterprise (factories and commercial establishments other
Employee shall get paid leave as below:
than a government owned enterprise) must allocate an amount equivalent to
• Weekly leave of 1 day in each month.
10% of its net annual income of the financial year to be paid as a bonus to its
• 13 days of public holiday including May 1st for (male workers) and 14 days
employees.
of public holiday including international Women day for female employees
• Home leave at a rate of 1 day for every 20 days of service
Conditions
• Fully paid sick leave of 12 days per year
Employees should have worked at least half of the total period during the
• Pregnant woman can get leave up to 14 weeks, fully paid for 60 days.
financial year to be eligible for bonus. Overtime is not counted for this purpose.
Male employee can get up to 15 days, fully paid paternity leave if his wife is
For Employees working less than the prescribed period, Bonus amount shall be
pregnant
deducted proportionately
• Mourning leave of 13 days if father/mother died in case of male worker.
Also, allowed to female worker if she is required to stay in mourning on the
Limit of Bonus Amount
death of her father/mother or her father-in-law/mother-in-law.
The ‘bonus’ to be received by an employee should not exceed the following
• Leave in lieu for the employees put in work on public holiday or weekly off
amounts:
Employee can accumulate leave up to 90 days of home leave and 45 days
Employee shall not get bonus in excess of:
of sick leave and excess accumulation should be en-cashed every year.
• Amount up to 8 months of salary or remuneration or wage if the monthly
salary or remuneration or wage is up to two times of the minimum
remuneration fixed by the GON.

Doing Business in Nepal - 2025 39

 • Amount up to 6 months of salary or remuneration or wage if the monthly Criteria and procedures for setting up industries inside an SEZ
salary or remuneration or wage is more than two times of the minimum The regulations will set out the list of industries that can be established and
wage fixed by the GON. operated inside an SEZ under the “add inverted” approach.
In addition to the industries included in the “positive list”, the Act has authorized
Payment
the authority to provide approval for the establishment of industries of a special
A bonus is required to be paid every year within a period of eight months from
nature inside the SEZ, even if such an industry has not been included in such a
the end of fiscal year or in certain cases, it can be paid the following year as an
list.
accumulated bonus for both years. The bonus shall be paid in cash.
A bonus is not paid for a period of absence from work (unless the period is an Licensing Requirements and Arrangements
exempted one) or for a period of staging an illegal strike. Investors wishing to establish industries inside an SEZ are required to submit
an application to the Authority for a license. The Authority grants the license to
Staff Welfare Fund establish an industry inside the SEZ after conducting a necessary evaluation of
From the balance remaining after the distribution of a bonus to the staff: the application.
• 70% must to be deposited into the welfare fund (established in accordance
with the prevailing laws of Nepal); and, The investor must furnish reports of environmental studies (IEE/ EIA) to the
• 30% must be deposited with the national level welfare fund. authority along with the application.
The duration of a license is a maximum of 30 years, depending upon the nature
Reporting to Labor Department of industry.
After completion of Bonus distribution, a report in the prescribed form shall be
An expired license can be renewed for up to 10 years at a time, if required.
submitted to the Labor Department within 7 days.
Where industries of similar nature apply for license to set up an industry in the
6.3 SPECIAL ECONOMIC ZONE SEZ, the authority shall issue license on a priority basis, if it is unable to provide
licenses to all applicants.
The ‘Special Economic Zone Authority’ serves as the primary regulator for the
operation and management of Special Economic Zone (SEZ) and industries Relocation of Industries in a SEZ
inside an SEZ. Relocation of any industry already established and operating inside a SEZ is
Areas identified by the Government of Nepal (GON) for SEZ’s include the not permitted. The use or transfer of tools or equipment previously used in other
following: industries within a SEZ is also not allowed.
Bhairahawa SEZ Dhanusha SEZ
Mandatory Export Requirement
Simara SEZ Kapilvastu SEZ
Industries established inside the SEZ are required to export 60% of their products
Nuwakot SEZ Rautahat SEZ or services outside of Nepal. Such industries can however sell up to 40% of their
Nepalgunj SEZ Jumla SEZ goods or services to the domestic market, subject to meeting certain conditions.
Panchkhal SEZ Siraha SEZ The GON has also permitted the license holder within SEZ to sell 100% of the
Jhapa SEZ Dhangadi SEZ goods or services in the domestic market in the first year of production.
Biratnagar SEZ Gorkha SEZ

40 Doing Business in Nepal - 2025

Facilities and Incentives to Industries established inside a SEZ Dividend:
The tax incentives, benefits and facilities provided to the industries established, 100% tax exemption on dividends distributed for the first 5 years from the date of
and operated, inside a SEZ are outlined below: commencement of a commercial transaction and 50% exemption for the next 3
years for the industries inside a SEZ.
One Window Service Note: The industries relocated from a SEZ are not entitled to the income tax
Services related to tax concessions and other benefits, company and industry exemptions listed above.
registrations, renewals, administrative formalities in relation to a company, industry
licenses, and visa requirements, will all be provided via a one-window service. VAT Exemption:
Tax incentives and benefits • 0% VAT on goods and services exported by industries in a SEZ.
Tax incentives and benefits to the industries inside SEZ are briefly set out as • 0% VAT on raw materials and finished goods purchased by industries in a
follows: SEZ.
Customs Duty Exemption:
Concessions in the rent of the land and buildings inside a SEZ: Industries inside a SEZ are entitled to a Custom Duty exemption under a Bank
• First year: 50% • Second year: 40% • Third year: 25% Guarantee and other facilities on the following goods:
• Raw materials, auxiliary raw materials, packaging and other materials used
Income Tax Concessions under the SEZ Act:
for producing export products.
All Industries: 100% Income Tax exemption for the first 5 years from the • Plants, machineries, equipment, tools and spare parts and maximum 3
commencement of a commercial transaction.50% Income Tax exemption for the vehicles depending upon the nature and size of industry.
next 5 years.50% exemption for the next 10 years if the industry utilizes a minimum • Custom Duty paid on any goods imported is refunded if such goods are
of 60% domestic raw materials. sold to industries inside SEZ under prescribed conditions.
Industries inside SEZ of Himalayan Region and Government specified Hilly • Products of the industries established in SEZ, if sold to other industries
regions established in SEZ will be treated as export and customs concession will
be provided.
100% income tax exemption for the first 10 years from the date of commencement In addition to the SEZ Act, the Industrial Enterprises Act 2016 and the Income
of a commercial transaction. Tax Act 2002 sets out benefits and incentives for industries inside a SEZ.
50% exemption for the next 10 years (note 1). Industries set up in SEZs are guaranteed on the stability of the tax incentives,
benefits, and other concessions, irrespective of any subsequent changes in the
Note 1:In accordance with Section 11 of the Income Tax Act 2002, the 100%
laws after setup.
exemption has been provided for the first 10 years whereas the 50% exemption
has been given for the remaining years. Accordingly, the 50% exemption is not
Repatriation
restricted to 10 years (in accordance with the Income Tax Act 2002).
A foreign company established in a SEZ can repatriate:
• Amounts received from a partial or complete disposal of the shares
acquired with a foreign currency;
• Dividends received from the foreign investment; and,
• The principal and interest of a loan in convertible foreign currencies.
The currency for the repatriation would be ‘as per the agreement’ made between

Doing Business in Nepal - 2025 41

the license holder and the Authority. Environmental Clearance
A foreign investor can open bank accounts in any commercial bank in a foreign Only certain industries that may have an impact on health & the environment are
currency, with the recommendation of the SEZ authority and can carry out required to obtain environmental clearance. There are two types of environmental
transactions in foreign currency. studies: Initial Environment Examination (“IEE”) & Environmental Impact
Assessment (“EIA”). The Environment Protection Rules 1998 has listed the
Others industries which are required to conduct IEE or EIA. The list of industries required
Opening of bank account to conduct IEE and EIA are regularly updated by the GON by publishing a notice
Foreign investors are required to transfer their investment amount to the bank in the official Gazette. Generally, EIAs are conducted in large scale projects
account of the local company. In order for the local company to open a bank like hydropower generation plants with capacity of more than 50 MW whereas
account, a decision of the board of directors, along with signatories, will need hydropower generation projects with capacity of less than 50 MW are required
to be submitted along with other documents such as certificate of registration of to conduct IEE. Similarly, hotels with 50-100 beds are required to conduct IEE
company, MOA, AOA, PAN certificate etc. and hotels with more than 100 beds have to conduct EIA. Further, the law also
provides for requirement to obtain pollution control certificate. However, this
Business specific license (if required) provision has not been implemented in actual practice.
A private company can commence its business once it is registered. Only certain
types of businesses require a business-specific license. For example, energy,
telecommunication services, banking, insurance, travel etc. require license from
the specified government agency or regulator. In addition to applicable licenses,
a public limited company is required to obtain a certification of commencement of
business from the OCR before starting the business.

Sector License Authority

Hydropower Department of Electricity
Banking and Financial Institutions NRB
Information & Communication Technology Nepal Telecommunication Authority
Transport Department of Roads
Education Department of Education
Health Care Department of Health Services
Agriculture Department of Agriculture
Tourism Department of Tourism
Mines and Minerals Department of Mines and Geology

42 Doing Business in Nepal - 2025

PART VII :
EXIT
PROVISIONS

Doing Business in Nepal - 2025 43

6.1 EXIT PROVISIONS Step 3 Notification to the Inland Revenue Office (IRO) and filing of final
tax returns
Voluntary liquidation of the Company a. The Company shall notify the IRO that the liquidation process has been
A company may be voluntarily liquidated under section 126 of the Companies Act initiated and of the appointment of the liquidator;
2006. Where a voluntary liquidation is not possible or desired, a company may b. The tax returns for the period will be submitted along with the audited
still be liquidated under the Insolvency Act 2006 where certain circumstances financial statements and tax clearance certificate shall be obtained.
are met.
Voluntary liquidation of a company requires the passing of a Special Resolution Step 4 The liquidator starts the process of liquidation
at a General Meeting, or it may be liquidated pursuant to satisfying the conditions
stipulated in the company’s MOA/AOA. a. Under the special resolution, a Liquidator is appointed from the list of
licensed practitioners under the prevailing law on insolvency to conduct
Eight steps of a Voluntary Liquidation of a Company: liquidation proceedings of a company and their remuneration agreed and
Step 1 Pass a Special Resolution fixed (see Step 1).
Pass a special resolution in the General Meeting of the shareholders to voluntarily b. This information shall be given to OCR within 7 days the appointment (Step 2).
liquidate the company. Amongst other matters the General Meeting shall also: c. The power related to the operation and management of company
A. Appoint the liquidator and agree remuneration; is exercised by the Liquidator and the services of all employees are
B. Appoint the auditor to audit the statement of the liquidators account and fix terminated except those retained by liquidator for assistance.
the remuneration; d. The liquidator shall complete the liquidation process within the period
C. A declaration from the directors that the company will settle its debt and specified at the time of appointment.
liabilities within one year should be provided and ratified. e. An auditor should also be appointed under the provisions of Section 111
of Companies Act, 2006 at the time of appointing the liquidator for auditing
Step 2 Submit application to Office of Company Registrar the statement of the liquidator’s accounts.
An application should be submitted to the OCR and DOI for the voluntary • The rights and duties of the directors shall cease on appointment of the
liquidation, to obtain agreement in principle and a no objection letter from the liquidator.
DOI for the liquidation, to be provided to the OCR, together with the following Rights of the liquidator
documents within 7 days from adopting the special resolution: • Recover all the amounts from the disposal of the assets and liquidate all
debts and liabilities;
a. Special resolution passed by the general meeting of the shareholders; • Remaining funds shall be distributed to the shareholders after approval in
b. Audited financial statements showing true and fair view until at least 15 the annual general meeting by 75% of the shareholders;
days before the director’s written declaration; • Submit the following reports to the OCR.
c. Appointment of the liquidator; a. Half yearly reports
d. Appointment of the auditor to audit the statement of the liquidator’s • Statement of liquidators account
account; • Progress report on liquidation for submission to the annual general meeting
e. The directors written declaration confirming the ability of the company to b. Final reports:
pay off its debt and fully settle its liabilities within one year from the date of • The certified final report of the liquidator shall be sent to the OCR together
adopting the special resolution. with the statement of liquidator’s account and details of the recoveries
made from assets, liabilities liquidated, and the amount distributed to the

44 Doing Business in Nepal - 2025

 Sales of Shares
shareholders. There shall be no assets or liabilities of the company in the
There are two stages to the sale of company shares (and repatriation of the
liquidator’s account.
proceeds):
• Audit report of the statement of liquidator’s account.
Step 1 Recommendation from DOI
• The statement of the liquidator’s account along with an application for the
A company may repatriate its investment by selling its shares as a whole or in part.
deregistration of the Company shall be submitted to the IRD.
To affect a sale of a company’s shares, an application must be filed to the DOI
with following details:
Step 5 OCR’s action after receiving the report from the liquidator
• Application
Following receipt of the Liquidator’s report, the OCR shall strike off the name of
• Decision of Board of Directors
the Company from the register and issue the order that registration of Company
• Approved Share Purchase Agreement (SPA) for shares sold
has been cancelled. A notice to this effect shall be published in the national daily
• Shareholders register (Share Lagat) endorsed by OCR
newspaper.
• Proof of investment through banking channel
• Audit Report and Tax Clearance Certificate
Based on the recommendation of the DOI, application shall be filed to the NRB
Step 6 DOI for repatriation of the sales proceeds.
The DOI shall strike off the name of the Company from the register and inform the
investor company that the cancellation has been completed. Step 2 Approval from NRB
For the purpose of a repatriation, NRB requires the following documents:
Step 7 Submission of original certificates a. Approval of doing business from DOI;
All original documents must be submitted to the respective offices prior to b. Approval from NRB to bring foreign investment in Nepal;
liquidation: c. Proof of investment by submitting bank statement or a certificate from the
At OCR: Certificate of Incorporation, MOA, AOA certified shareholders register respective BFI;
At DOI: Approval of FDI, Project Proposal, Industry Registration Certificate At d. Approved copy of Sale and Purchase Agreement from DOI;
IRO: Original PAN certificate. A letter may then be obtained from the OCR (and e. Valuation report of assets and liabilities of the company of which shares are
the respective offices) that the liquidation has been completed. sold;
f. Copy of PAN, MOA, and AOA;
Step 8 Repatriation g. Tax clearance certificate;
For the purposes of repatriation of funds/profits, an application must be made to h. Certified copy of share register (Lagat) from OCR;
the DOI. Based on the recommendation of the DOI, application to NRB shall be i. Proof that the buyer is not blacklisted by Credit Information Bureau (CIB) of
filed for the repatriation. Nepal;
After paying applicable taxes on the repatriation of profit, the company may j. For unlisted companies, valuation of share price based on fair value of
repatriate the amount outside Nepal. assets and liabilities pursuant to NFRS 3 - Business Combinations.
After obtaining approval from the NRB, the investor may repatriate the amount
abroad.

Doing Business in Nepal - 2025 45

 NBSM, founded in 2009, is a premier accounting and consulting firm in Nepal, offering audit, risk advisory, tax, M&A, and managed
services. With a team of 130 professionals, including 40 Chartered Accountants, NBSM delivers innovative, high-quality solutions to
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46 Doing Business in Nepal - 2025

Disclaimer:
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accuracy of the content, we recommend consulting with experts for a more detailed analysis
and professional advice before making any decisions based on this information.

NBSM shall not be held responsible for any loss or damage incurred due to reliance on the
contents of this document. We encourage all individuals to seek appropriate expertise before
taking any actions related to the matters discussed herein.

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Doing Business in Nepal - 2025 47

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