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