Nepal has positioned information and communication technology (ICT) as a priority sector for both domestic entrepreneurship and foreign direct investment. Software development, business process outsourcing (BPO), data processing, cloud services, digital platforms and IT-enabled services are all permitted areas of business, subject to the Companies Act, 2063 (2006), the Foreign Investment and Technology Transfer Act, 2075 (2019) (FITTA), the Industrial Enterprises Act, 2076 (2020), and the Income Tax Act, 2058 (2002).
This guide, prepared by CompanyNP, answers the questions that domestic promoters and foreign investors most frequently raise regarding ICT company registration in Nepal.
Which Activities Commonly Fall Within the ICT Category?
- Software development, maintenance and licensing
- Data processing, data mining, data centres and cloud hosting
- Business process outsourcing and knowledge process outsourcing
- Digital animation, graphics and multimedia production
- Web portals, e-commerce platforms and mobile applications
- Cyber security, digital mapping and system integration services
Who Can Register an ICT Company in Nepal and Under What Ownership Structure?
Can a Foreign National Hold One Hundred Percent Equity?
Section 3 of FITTA permits foreign investment in any industry that is not listed in the Schedule to the Act, commonly called the negative list. Software development and IT-enabled services do not appear on that list, and therefore up to one hundred percent foreign ownership is legally permissible.
Two limitations in the negative list must nevertheless be observed:
- Computer training, language training and music training institutions are closed to foreign investment.
- Consultancy services, including management, accounting, engineering and legal consultancy, are restricted; foreign investment exceeding fifty one percent in a consultancy service is not permitted.
Accordingly, an entity that presents itself as an IT consultancy rather than a software or service producer may face a fifty one percent ceiling. Careful drafting of the objectives clause of the memorandum of association is therefore essential.
What Is the Minimum Foreign Investment Threshold?
Section 9 of FITTA empowers the Government of Nepal to prescribe a minimum amount of foreign investment by notification in the Nepal Gazette. The general threshold has been fixed at NPR 20 million per foreign investor. The Government has, by subsequent Gazette notification, removed the minimum threshold for specified information technology services in order to attract smaller technology ventures. Because these notifications are periodically amended, the prevailing threshold should be confirmed with the Department of Industry before capital is committed. CompanyNP verifies the current position for every client at the outset of the engagement.
What Company Types Are Available?
| Structure | Governing provision | Practical note |
|---|---|---|
| Private limited company | Companies Act, 2063 | Most common; one to one hundred one shareholders |
| Public limited company | Companies Act, 2063 | Minimum seven promoters and higher paid-up capital |
| Branch office | Companies Act, 2063, Chapter 14 | Requires a contract or licence in Nepal |
| Liaison office | Companies Act, 2063 | No income-generating activity permitted |
For most ICT ventures, the private limited company is the appropriate vehicle. Further comparison is available on the company registration in Nepal service page maintained by CompanyNP.
What Is the Step-by-Step Process for Registering an ICT Company in Nepal?
The sequence differs materially depending on whether the shareholders are Nepali citizens or foreign persons.
How Does a Wholly Domestic ICT Company Register?
- Reserve the proposed company name through the online system of the Office of the Company Registrar.
- Prepare the memorandum of association, articles of association and, where there are two or more shareholders, a consensus agreement.
- Submit the application with citizenship certificates of promoters and pay the registration fee, which is calculated on authorised capital.
- Obtain the certificate of incorporation.
- Register for a Permanent Account Number with the Inland Revenue Department and register for VAT where applicable.
- Register the industry with the concerned industry office and obtain the local ward business registration.
How Does a Foreign-Invested ICT Company Register?
Foreign investors must obtain approval before incorporation. The recognised sequence is as follows.
Step One: Foreign Investment Approval
Applications for foreign investment approval are filed with the Department of Industry, which is the approving authority for projects with a total fixed capital of up to NPR 6 billion. Projects exceeding that amount fall within the jurisdiction of the Investment Board Nepal under the Public Private Partnership and Investment Act, 2075. Nepal also operates an automatic approval route for qualifying investments in specified sectors up to a prescribed ceiling, which shortens the approval period considerably.
Documents ordinarily required include:
- Application in the prescribed format with project report or business plan
- Passport copies and biodata of individual investors
- Incorporation documents, board resolution and audited financials of a corporate investor
- Financial credibility certificate issued by the investor’s bank
- Joint venture agreement, where there is a Nepali partner
- Power of attorney in favour of the local representative
Step Two: Company Incorporation
Once approval is granted, the company is incorporated at the Office of the Company Registrar. The authorised and issued capital must be consistent with the approved investment amount, and the shareholding pattern must match the approval letter.
Step Three: Industry and Tax Registration
The incorporated company registers as an industry with the Department of Industry and obtains a Permanent Account Number from the Inland Revenue Department. VAT registration follows where the turnover threshold is crossed or where the nature of the transaction requires it.
Step Four: Nepal Rastra Bank Record and Capital Injection
Foreign equity must be remitted through the banking channel and recorded with Nepal Rastra Bank in accordance with the Foreign Investment and Foreign Loan Management Bylaws. Failure to record the inflow will obstruct future repatriation of dividends or sale proceeds under Section 20 of FITTA.
Step Five: Sector-Specific Licences
An ICT company that provides internet service, network service or any other licensed telecommunication service must additionally obtain a licence from the Nepal Telecommunications Authority under the Telecommunications Act, 2053. Companies operating online news portals require registration with the Department of Information and Broadcasting. Policy direction for the sector is issued by the Ministry of Communication and Information Technology.
What Are the Tax, Compliance and Reporting Obligations of an ICT Company?
What Corporate Tax Rate Applies?
Under the Income Tax Act, 2058, the standard corporate income tax rate for an entity is twenty five percent. Certain incentives may apply to ICT undertakings:
- Industries established within a technology park, information technology park or biotech park declared by the Government in the Nepal Gazette and engaged in software development, data processing or similar activities are entitled to a rebate on income tax as specified in Section 11 of the Act.
- Special industries and exporters may claim concessional treatment on export income under the conditions set out in Section 11.
- Annual Finance Acts periodically introduce additional exemptions for income derived from the export of information technology services. The current year’s Finance Act should always be consulted.
What Indirect Tax Obligations Arise?
Value added tax is charged at thirteen percent. The export of services from Nepal is zero-rated, which is significant for outsourcing and offshore development companies. Registration for VAT is compulsory once the prescribed turnover threshold is exceeded, and voluntary registration is available earlier. Non-resident suppliers of digital services to Nepali consumers are separately subject to the digital service tax introduced by the Finance Act.
What Recurring Filings Are Mandatory?
- Annual return, audited financial statements and details of directors to the Office of the Company Registrar under the Companies Act
- Annual income tax return and estimated tax instalments to the Inland Revenue Department
- Monthly or four-monthly VAT returns, where registered
- Monthly withholding tax statements for salaries, rent, service fees and dividends
- Annual progress report to the Department of Industry
- Social security fund contributions and labour records under the Labour Act, 2074
Can Foreign Staff Be Employed?
Section 23 of the Labour Act, 2074 permits the employment of foreign nationals where skilled Nepali manpower is unavailable, subject to a work permit issued by the Department of Labour and Occupational Safety. Foreign investors and their authorised representatives may obtain a business visa under Section 32 of FITTA, and an investor who invests at least one million United States dollars may apply for a residential visa under Section 33.
How Long Does Registration Take?
A wholly domestic ICT company can generally be incorporated and registered for tax within two to three weeks. A foreign-invested company should allow a longer period, as investment approval, incorporation, industry registration and central bank recording occur sequentially. Incomplete documentation is the single most common cause of delay.
What Are the Recurring Practical Risks?
- Drafting objectives that inadvertently classify the business as a restricted consultancy
- Remitting capital outside the banking channel, which prevents lawful repatriation
- Missing the deadline for injecting the approved capital
- Neglecting annual compliance, which attracts fines under the Companies Act
Why Engage a Professional Adviser?
Nepali corporate practice requires coordination among at least four regulators. CompanyNP assists with name reservation, document drafting, Department of Industry submissions, incorporation, tax registration and post-registration compliance. Details of the firm’s foreign investment advisory services and direct contact options are available on its website.
What Legal Framework Governs ICT Company Registration in Nepal?
An ICT company in Nepal is regulated by several statutes operating together. No single law covers the entire lifecycle of the entity.
Which Statutes Apply to an ICT Company?
- Companies Act, 2063 (2006): governs incorporation, share capital, directors, annual returns and winding up of private and public limited companies.
- Foreign Investment and Technology Transfer Act, 2075 (2019): governs equity investment by foreign nationals and foreign entities, technology transfer agreements, repatriation of earnings and investor visas.
- Industrial Enterprises Act, 2076 (2020): classifies ICT undertakings as industries and prescribes registration, incentives and facilities.
- Income Tax Act, 2058 (2002): prescribes corporate income tax, withholding obligations and available concessions.
- Value Added Tax Act, 2052 (1996): prescribes VAT registration, the thirteen percent rate and zero-rating of exported services.
- Foreign Exchange (Regulation) Act, 2019 (1962) and Nepal Rastra Bank directives: govern inward remittance of capital and outward repatriation.
- Labour Act, 2074 (2017): governs employment contracts, social security and work permits for foreign employees.
- Telecommunications Act, 2053 (1997): applies where the business involves licensed telecommunication or internet service provision.
Is ICT Treated as an Industry Under Nepali Law?
Yes. The Industrial Enterprises Act, 2076 categorises information technology, information transmission technology and communication technology based undertakings as a distinct class of industry. Consequently, an ICT company that qualifies must also obtain industry registration from the Department of Industry, or from the concerned provincial industry office in the case of micro, cottage and small industries with wholly domestic investment.
Frequently Asked Questions
Is one hundred percent foreign ownership allowed in a Nepali software company?
Yes. Software development is not on the FITTA negative list, so full foreign ownership is permitted. However, businesses characterised as consultancy services are limited to fifty one percent foreign shareholding under the Schedule to FITTA.
Which authority approves foreign investment in ICT?
The Department of Industry approves foreign investment where total fixed capital does not exceed NPR 6 billion. Larger projects require approval from the Investment Board Nepal under the Public Private Partnership and Investment Act, 2075.
Must an ICT company register for VAT immediately?
Not always. Registration becomes compulsory once the prescribed turnover threshold under the Value Added Tax Act is crossed. Many exporters register voluntarily because exported services are zero-rated, allowing input tax credit claims.
Can profits be transferred abroad lawfully?
Yes. Section 20 of FITTA permits repatriation of dividends, sale proceeds and approved royalties, provided the original investment was recorded with Nepal Rastra Bank and all tax obligations have been settled and evidenced by tax clearance.
Is physical presence in Nepal required during registration?
No. A foreign investor may appoint a local representative through a duly notarised and consularised power of attorney. That representative may sign applications, submit documents and attend regulatory offices on the investor’s behalf.
What happens if annual filings are not submitted?
The Companies Act imposes escalating monetary fines based on paid-up capital, and persistent default may result in the company being struck off. Tax defaults attract separate interest and penalties under the Income Tax Act.