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Checklist for Starting a Business in Nepal — Registration & Compliance Guide

October 7, 2025 Business Guides by admin_lawsagar

Table of Contents

Introduction

This article is a lawyer-authored, step-by-step checklist for starting a business in Nepal. It covers selecting the right business form, company registration, business operating license, tax registrations (PAN/VAT), labour and social security obligations, sectoral approvals, foreign investment procedures (FDI), banking & finance steps, post-incorporation compliance, and a practical readiness checklist.

1. Pre-start decisions

Your first legal choice is your business form. The correct structure affects liability, taxation, governance, capital-raising, and compliance burden. Typical options in Nepal:

Sole proprietorship — simplest; owner is liable personally.
Partnership — shared management; partnership deed recommended.
Private Limited Company — limited liability; preferred for SMEs, startups and outside investment.
Public Limited Company — for larger capital-raising, IPO route.
Cooperative, NGO or non-profit sector-specific rules.

Practical counsel: For anything beyond two founders with investor intent, default to a Private Limited Company. It balances administrative cost with limited liability and investor comfort. The Office of Company Registrar (OCR) is the primary authority for company formation in Nepal; all company formations, MOA/AOA compliance and name reservations are processed via OCR systems.

2. Name reservation & pre-registration checklist

Before filing, complete this pre-flight checklist:

Shortlist 2–3 company names and check availability via OCR.
Prepare Memorandum of Association (MOA) and Articles of Association (AOA) — avoid boilerplate mistakes that conflict with sector rules. The Companies Act governs required clauses.
Identify directors and shareholders, collect their ID, address proof and passport (for foreign nationals).
Decide authorised capital and share structure (nominal vs issued capital).
Obtain digital signatures for signatories if using the online portal.
Draft shareholder agreements if multiple stakeholders are involved (especially if you plan future dilution or investor rounds).

3. Company registration — step-by-step

A practical 9-step process you can follow:

Name reservation at OCR — submit preferred names, wait for approval. (OCR online portal: ocr.gov.np).
Prepare MOA & AOA — ensure clauses align with chosen business scope and capital rules under the Companies Act.
File incorporation forms and upload required documents (copies of directors’ IDs, office address proof, and initial shareholder list). OCR issues the incorporation certificate once satisfied.
Pay statutory fees — based on authorised capital and applicable schedule. The Recorder will issue a Certificate of Incorporation.
Obtain company PAN from the Inland Revenue Department — mandatory for tax compliance. (PAN = Permanent Account Number).
Register for VAT (when the threshold is reached or if your sector is VAT-compulsory) — VAT Act and rules require timely registration.
Open a corporate bank account — use the incorporation certificate and PAN.
Trade license (business operating license) at the local municipality — each local government issues the trade license based on business type and location (municipal permitting).
Post-registration: statutory books & board meeting — first board meeting to adopt AOA, appoint auditors (if required), and file annual return schedule.

Caveat: Some sectors (healthcare, banking, telecom, hydropower) require sectoral permits prior to operation. Always confirm sectoral pre-conditions before you spend on lease or equipment.

4. Business Operating License (Trade License) & Sector Permits

Business operating license Nepal (trade license) is local: the municipality or metropolitan city issues the license. You must:

Provide proof of address/lease agreement.
Show registration document (incorporation certificate).
Provide sectoral clearances where required (environmental, health license, food license, etc.).

Sectoral permits: For regulated sectors (banking, insurance, telecom, education, health, hydropower), you must obtain prior approval from the relevant ministry or regulator before starting operations — failing this can lead to shutdowns or penalties.

5. Tax registrations: PAN, VAT & corporate tax landscape

Key fiscal registrations:

PAN registration (company and authorised signatories) — compulsory for tax filings.
VAT registration — mandatory when turnover crosses statutory thresholds or if the activity is VAT-applicable. The standard VAT rate has been 13% in recent years, but confirm current Finance Act numbers before pricing.
Corporate Income Tax — standard corporate rates are context dependent; many sources indicate a general corporate rate around 25%, with particular rates for banks/financial institutions and specified sectors. Always reconcile with the latest Finance Act and IRD notices.

Practical tax checklist: register PAN immediately, determine if and when VAT registration is triggered, set up an accounting system that supports quarterly advance tax and monthly payroll withholding.

6. Labour & social security obligations

When you hire employees, comply with the Labour Act (2017 / 2074):

Draft written employment agreements specifying terms, probation, termination and benefits.
Employer obligations: contribute to Provident Fund, Gratuity, Social Security Fund (SSF) and arrange required insurance where applicable. Recent guidance notes that employers must deposit the statutory percentages into designated funds; check updated SSF implementation rules for rates.
Maintain statutory registers, working hours, overtime computation and statutory leaves as per the Labour Act.

Note as counsel: a poorly drafted termination clause or non-compliant benefits handling is the most common and expensive litigation trigger.

7. Banking, accounting & finance set-up

Operational must-haves:

Corporate bank account (requires incorporation certificate, PAN, and board resolution).
Accounting system with GAAP/IAS-aligned ledgers for audit readiness. For audit thresholds, verify the Companies Act and OCR guidance.
Loan & collateral documentation: if you plan to borrow, prepare board approvals and security documents. For foreign loans and inward foreign investment, liaise with Nepal Rastra Bank and the DOI/IBN procedures.

8. Intellectual property & contracts

Protect business-critical assets:

Trademark registration for brand protection in Nepal, and consider international classes if exporting.
Copyright for software, content and creative works.
Key contracts: landlord lease, employment agreements, supplier agreements, NDAs and standard client terms. Draft them to allocate liability, IP ownership and dispute resolution (mediation/arbitration clauses).

9. Foreign investment (FDI) & foreign shareholding

If foreign capital or technology is part of your plan:

The primary law is the Foreign Investment and Technology Transfer Act (FITTA) and its implementing rules; Foreign Investment approvals are processed by the DOI/IBN and may require Nepal Rastra Bank clearance for repatriation and foreign loans.
Pre-approval: Some investment structures need pre-approval (especially in restricted sectors). Time lines for approvals can be quick if documentation is complete; the DOI publishes processing timelines for FDI approvals.
Repatriation of profits: follow NRB rules and ensure share purchase agreements and transfer restrictions are negotiated early.

10. Post-incorporation compliance calendar

Your compliance calendar should include:

Annual return & financials to OCR (as per Companies Act).
Corporate tax filings and advance tax schedules to the IRD.
VAT returns (monthly/quarterly as applicable).
Audit (statutory audit if threshold reached).
Board minutes and statutory registers are updated after each major event (share issuance, board changes).

Pro tip: keep a rolling calendar with deadlines and assign responsibility to a compliance officer or external counsel/accountant.

11. Practical checklist

Use this short checklist to verify readiness before launch:

Company name reserved & MOA/AOA drafted.
Incorporation certificate received from OCR.
PAN obtained & VAT considered.
Corporate bank account opened.
Trade license (business operating license) from the local municipality.
Sectoral permits (if required) — secured.
Employment contracts & social security registration — done.
Accounting & bookkeeping in place.
IP protection initiated (trademark application if needed).
Shareholder & investor agreements executed (if applicable).
Data protection and basic compliance policies adopted (privacy notice, website T&C).
Insurance (employer liability, property, business interruption) is considered.

12. Common pitfalls, counsel and counterpoints

Pitfall: Incorporating before validating sectoral permissions. You risk wasting capital and forced shutdowns. Verify sectoral pre-conditions early.
Pitfall: Informal founder agreements. Without a shareholder agreement, founders’ conflicts become shareholder litigation. Draft governance early.
Pitfall: Underestimating labour costs — gratuity, provident fund, and SSF contributions add a material overhead. Budget for them.
Counterpoint: Don’t over-engineer documents at day one (avoid lawyer-crafted 50-page shareholder agreements) — but do include essential governance: vesting, drag/tag, transfer restrictions, decision thresholds.

13. FAQs

Q1: How long does company registration in Nepal take?
A: If documents are complete and name reservation goes smoothly, OCR incorporation can be processed in days to a few weeks; sectoral permits add time. Use OCR’s online services for speed.

Q2: Do I need VAT from day one?
A: VAT depends on the turnover threshold or whether your activity is VAT-compulsory. Register PAN immediately, and consult with an accountant about whether to register VAT at the outset.

Q3: Can foreign investors fully own a Nepalese company?
A: It depends on the sector. FITTA and other sector rules restrict or allow foreign ownership differently by industry. Pre-approval processes exist for many foreign investments.

Q4: What taxes will a company pay?
A: Corporate tax, VAT (if applicable), withholding taxes on payments, and payroll taxes — corporate rate commonly around 25% for many sectors, but confirm by sector andthe latest Finance Act.

Q5: When must I appoint an auditor?
A: Check the Companies Act thresholds; many private companies still appoint auditors annually. OCR/Audit rules govern the thresholds; consult your auditor early.

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