Nepal’s infrastructure sector — hydropower, roads, tunnels, transmission lines, cable cars, waste management, water supply, logistics parks and airports — is one of the most actively promoted areas for foreign direct investment. Registration of an infrastructure company is governed principally by the Companies Act, 2063 (2006), the Foreign Investment and Technology Transfer Act, 2075 (2019) (“FITTA”), the Industrial Enterprises Act, 2076 (2020), the Public Private Partnership and Investment Act, 2075 (2019), and the Income Tax Act, 2058 (2002). CompanyNP assists foreign promoters, contractors and project developers through each statutory stage of this process.
What Is an Infrastructure Company Under Nepali Law?
An infrastructure company is an entity incorporated at the Office of the Company Registrar (OCR) whose objects fall within the “infrastructure” or “energy-based” industry categories listed in the Schedules of the Industrial Enterprises Act, 2076, and, where the project is developed under a public–private partnership modality, within the scope of the Public Private Partnership and Investment Act, 2075.
Nepali law does not create a separate “infrastructure company” form. Instead, a standard private limited or public limited company is incorporated, and its industry is then classified and registered as an infrastructure industry with the Department of Industry (DOI) or the Investment Board Nepal (IBN).
Which Activities Fall Within the Infrastructure Sector?
The Industrial Enterprises Act, 2076 classifies infrastructure industries in its Schedules. Commonly registered activities include:
- Generation, transmission and distribution of electricity, including hydropower, solar and wind projects
- Roads, bridges, tunnels, ropeways, cable cars, railways, monorails and trolley buses
- Airports, dry ports, inland container depots and logistics or warehousing complexes
- Water supply, sewerage, irrigation and river training works
- Industrial estates, special economic zones, industrial villages and business incubation parks
- Solid waste management, waste-to-energy plants and environmental infrastructure
- Sports complexes, convention centres, cold storage facilities and parking infrastructure
- Telecommunication towers, optical fibre networks and satellite infrastructure
Construction contracting is treated separately: it requires a construction business licence under the Construction Business Act, 2055 (1999), issued by the Department of Urban Development and Building Construction.
Who Can Register an Infrastructure Company in Nepal?
The following persons may promote and register an infrastructure company:
- Nepali citizens and Nepali-registered entities
- Foreign individuals, foreign companies, and foreign institutional investors, subject to approval under FITTA, Section 15
- Non-resident Nepali citizens, who are treated as foreign investors under FITTA
- Foreign governments or development institutions investing through recognised vehicles
Under FITTA, Section 15, a foreign investor must obtain foreign investment approval before the company is incorporated or before shares are subscribed. Registration without prior approval is not valid for repatriation purposes.
Are There Restricted Sectors for Foreign Investors?
Schedule 1 of FITTA lists sectors closed to foreign investment. Relevant restrictions for infrastructure promoters include:
- Real estate business (land trading), although construction of buildings and physical infrastructure is permitted
- Retail business, other than international chain retail operating in two or more countries
- Personal service businesses and local courier services
- Consultancy services with foreign holding above 51 per cent, which affects engineering and management consultancy arms
Because most core infrastructure activities are not restricted, up to 100 per cent foreign ownership is generally permissible.
What Ownership Structures and Company Types Are Available?
Foreign investors normally select between a locally incorporated subsidiary and a branch of a foreign company. The choice determines liability, taxation and the ability to hold project licences.
Which Company Types May Be Used?
Under the Companies Act, 2063:
- Private limited company: one to 101 shareholders; shares are not publicly issued; no statutory minimum paid-up capital for most sectors. This is the most common vehicle for infrastructure projects.
- Public limited company: minimum seven promoters and minimum paid-up capital of NPR 10,000,000, unless a higher amount is prescribed. Public companies are used where shares must be issued to the public, as is mandatory for many hydropower projects under their licence conditions.
- Company not distributing profit: used only for non-commercial objectives and not suitable for revenue-earning infrastructure.
Can a Foreign Company Register a Branch Office Instead?
Yes. Section 154 of the Companies Act, 2063 permits a foreign company to register a branch office in Nepal where it has obtained permission to carry on business in Nepal, typically on the strength of an awarded contract or an agreement with a Nepali government body. Branch offices are widely used by international EPC contractors executing a single project. A liaison office may also be registered, but it may not undertake income-generating activity. Further guidance is available through the CompanyNP page on branch office registration in Nepal at companynp.com.
What Ownership Structure Options Exist?
- Wholly foreign-owned subsidiary: permitted in most infrastructure sectors
- Joint venture with Nepali partners: often adopted for public procurement, where tender documents require local participation
- Consortium or special purpose vehicle: standard for PPP projects, incorporated to hold the project agreement and licence
- Holding and subsidiary structures: permitted, subject to disclosure of the ultimate beneficial owner during approval
What Is the Minimum Investment and Capital Requirement?
What Is the Minimum Foreign Investment Threshold?
Section 9 of FITTA empowers the Government of Nepal to fix a minimum foreign investment amount by notification in the Nepal Gazette. The prevailing threshold is NPR 20,000,000 (twenty million) per foreign investor for equity investment. This amount must be brought in as share capital and must be recorded with Nepal Rastra Bank.
Additional points to note:
- The threshold applies per foreign investor, not per company.
- Information technology industries have been granted relief from this threshold by Gazette notification; infrastructure remains subject to the general limit.
- Authorised capital, issued capital and paid-up capital declared in the Memorandum and Articles of Association must be consistent with the approved investment amount.
- Project-specific capital requirements may be higher where a sectoral licence, such as an electricity survey or generation licence under the Electricity Act, 2049, prescribes a capital adequacy condition.
Which Authority Approves the Investment?
Approval jurisdiction is divided by project size and type:
- Department of Industry: foreign investment and industry registration for projects with total investment up to NPR 6,000,000,000 (six billion)
- Investment Board Nepal: projects above NPR 6,000,000,000, hydropower projects above 200 MW, international airports, railways, tunnels, petroleum refineries, cement plants above prescribed capacity, and other projects listed under Section 10 of the Public Private Partnership and Investment Act, 2075
What Is the Automatic Approval Route?
The Government has issued a procedure permitting automatic approval of foreign investment up to a prescribed ceiling in specified sectors through the Department of Industry’s online system. Where the automatic route applies, approval is granted on the basis of a complete online application, subject to subsequent verification. Applicants should confirm current eligibility on doind.gov.np before filing.
What Is the Procedure, Documentation and Timeline?
What Is the Step-by-Step Registration Procedure?
- Sector screening: confirm that the proposed activity is not in Schedule 1 of FITTA and identify the competent approving authority.
- Foreign investment approval: apply to the Department of Industry or Investment Board Nepal with the project report, investor documents and board resolutions.
- Name reservation: reserve the proposed company name through the OCR online portal at ocr.gov.np.
- Incorporation: file the Memorandum of Association, Articles of Association, consent of shareholders and prescribed forms; the OCR issues the certificate of incorporation.
- Tax registration: obtain a Permanent Account Number from the Inland Revenue Department, and register for Value Added Tax where the activity is taxable under the Value Added Tax Act, 2052.
- Local registration: register with the concerned ward office or municipality and pay applicable local business tax.
- Industry registration: register the industry with the Department of Industry under the Industrial Enterprises Act, 2076, and obtain the industry registration certificate.
- Nepal Rastra Bank record: file the investment for record and remit share capital through the banking channel in convertible foreign currency.
- Sectoral licensing: obtain project licences such as an electricity generation licence, road operation agreement, construction business licence or telecommunication licence.
- Environmental clearance: obtain a Brief Environmental Study, Initial Environmental Examination or Environmental Impact Assessment approval as required by the Environment Protection Act, 2076 and its Rules.
Which Documents Are Required?
For the foreign investor:
- Notarised and consularised passport copy (individual) or certificate of incorporation, charter documents and board resolution (corporate investor)
- Audited financial statements of the corporate investor, generally for the most recent fiscal year
- Bio-data of the individual investor and a credit information or bank reference where requested
- Power of attorney appointing a local representative
- Joint venture agreement, where applicable
For the company:
- Project report or feasibility study showing capital structure, employment and technology
- Memorandum and Articles of Association in the Nepali language
- Shareholder details, share subscription schedule and proposed authorised capital
- Board resolution approving investment in Nepal and appointment of directors
- Land ownership or lease documents for the project site, where required by the sectoral regulator
How Long Does Registration Take?
Indicative statutory and practical timelines:
- Name reservation: one to three working days
- Foreign investment approval at the Department of Industry: approximately two to five weeks, depending on completeness of documents
- Investment Board Nepal approval: longer, as project agreements are negotiated
- Incorporation at the OCR: three to seven working days after submission of complete documents
- PAN and VAT registration: one to three working days
- Industry registration: one to two weeks
A wholly foreign-owned infrastructure company under the DOI route is commonly operational within six to ten weeks, excluding sectoral licensing and environmental clearance.
What Are the Costs Involved?
- OCR registration fee: a graduated fee based on authorised capital, prescribed in the Companies Regulation; it commences at approximately NPR 1,000 for capital up to NPR 100,000 and increases progressively for higher capital brackets
- Department of Industry service charges for foreign investment approval and industry registration
- Notarisation, translation, consular authentication and courier costs for foreign documents
- Professional fees for legal drafting, project report preparation and filing
- Local business tax payable annually to the municipality
- Sectoral licence fees and environmental study costs, which vary substantially by project type
What Ongoing Obligations, Taxes and Approvals Apply?
What Taxes Apply to Infrastructure Companies?
Under the Income Tax Act, 2058:
- The general corporate rate is 25 per cent.
- A reduced rate of 20 per cent applies to special industries and to entities operating roads, bridges, tunnels, ropeways, flying bridges, trolley buses or trams built under build–own–operate–transfer arrangements, and to hydropower and other prescribed infrastructure.
- Value Added Tax at 13 per cent applies to taxable supplies under the Value Added Tax Act, 2052.
- Withholding tax obligations apply to service payments, rent, dividends and interest.
- Annual income tax returns must be filed within three months of the end of the fiscal year, extendable as permitted by law.
Are Tax Holidays Available?
Section 11 of the Income Tax Act, 2058 and Section 24 of the Industrial Enterprises Act, 2076 provide concessions, including full exemption for a prescribed number of years followed by partial exemption for entities generating, transmitting or distributing electricity that obtain a licence within the statutory deadline, and comparable concessions for specified infrastructure operated under BOOT modality. Concessions are conditional and must be verified against the Finance Act of the relevant fiscal year.
What Licences and Permits Come After Registration?
- Sectoral operating licence from the relevant ministry or regulator
- Construction business licence, where the company undertakes contracting
- Environmental clearance under the Environment Protection Act, 2076
- Registration with the Social Security Fund and compliance with the Labour Act, 2074
- Work permits and non-tourist or business visas for foreign employees and investors, processed through the Department of Industry and the Department of Immigration
How Can Profits and Capital Be Repatriated?
Section 20 of FITTA permits a foreign investor to repatriate dividends, proceeds from the sale of shares, principal and interest on approved foreign loans, and technology transfer fees, in the currency of investment. Repatriation requires:
- Evidence of investment recorded with Nepal Rastra Bank
- Recommendation of the approving authority
- Tax clearance from the Inland Revenue Department
- Approval of the foreign exchange facility by Nepal Rastra Bank under the Foreign Exchange (Regulation) Act, 2019
Which Laws and Authorities Govern the Process?
Principal legislation:
- Companies Act, 2063 (2006)
- Foreign Investment and Technology Transfer Act, 2075 (2019) and Rules, 2077
- Industrial Enterprises Act, 2076 (2020)
- Public Private Partnership and Investment Act, 2075 (2019)
- Income Tax Act, 2058 (2002) and Value Added Tax Act, 2052 (1996)
- Electricity Act, 2049 (1992) and Construction Business Act, 2055 (1999)
- Environment Protection Act, 2076 (2019) and Rules, 2077
- Foreign Exchange (Regulation) Act, 2019 (1962); Labour Act, 2074 (2017)
Which Authorities Are Involved?
- Office of the Company Registrar — incorporation and annual filings: ocr.gov.np
- Department of Industry — foreign investment approval and industry registration: doind.gov.np
- Investment Board Nepal — large infrastructure and PPP projects: ibn.gov.np
- Inland Revenue Department, Nepal Rastra Bank, Department of Immigration, Social Security Fund, and the relevant sectoral ministry
For structuring advice, document preparation and end-to-end filing, CompanyNP provides foreign investment registration and company incorporation services at companynp.com.
Frequently Asked Questions
Can a foreign investor own 100 per cent of a Nepali infrastructure company?
Yes. Most infrastructure activities are outside Schedule 1 of FITTA, so full foreign ownership is permitted. Approval from the Department of Industry or Investment Board Nepal is required before incorporation, and shareholding must be recorded with Nepal Rastra Bank.
Is the NPR 20 million threshold applied to each foreign shareholder separately?
Yes. The Gazette-notified minimum foreign investment applies per foreign investor. Each foreign shareholder must individually commit at least the prescribed amount as equity, remitted through banking channels in convertible currency and recorded with Nepal Rastra Bank.
When must a project be routed through the Investment Board Nepal?
Projects exceeding NPR six billion in total investment, hydropower above 200 MW, railways, tunnels, international airports and other categories listed in the Public Private Partnership and Investment Act, 2075 fall within the Investment Board Nepal’s approval jurisdiction rather than the Department of Industry’s.
Does registering a company automatically permit construction contracting?
No. Contracting requires a separate construction business licence under the Construction Business Act, 2055, issued in prescribed classes by the Department of Urban Development and Building Construction. Company incorporation and industry registration alone do not authorise contracting works.
What environmental approval is needed before construction begins?
Depending on project type and scale, the Environment Protection Act, 2076 and Rules, 2077 require a Brief Environmental Study, Initial Environmental Examination or Environmental Impact Assessment. Approval must be obtained from the prescribed authority before implementation commences.
Can foreign employees be engaged in an infrastructure project in Nepal?
Yes, where Nepali personnel with the required skills are unavailable. The company must obtain approval and work permits under the Labour Act, 2074, followed by non-tourist visas from the Department of Immigration for the approved period.