Nepal permits both domestic and foreign promoters to establish manufacturing industries, subject to the Companies Act, 2063 (2006), the Industrial Enterprises Act, 2076 (2020), and — where non-Nepali capital is involved — the Foreign Investment and Technology Transfer Act, 2075 (2019) (FITTA). A manufacturing company in Nepal is not created by a single filing; it is created by a sequence of statutory approvals issued by the Department of Industry, the Office of the Company Registrar, the Inland Revenue Department, Nepal Rastra Bank, and the concerned local level.
This guide, prepared by CompanyNP, sets out the legal basis, the procedure, and the post-registration obligations in plain language, with references to the governing statutes and the responsible authorities.
What Laws Govern Manufacturing Company Registration in Nepal?
A manufacturing enterprise is regulated by several statutes at the same time. Investors should treat the following as the core legal framework.
Which Law Creates the Company Itself?
The Companies Act, 2063 (2006) is the parent law for incorporation. Section 3 of the Act provides that any person desiring to undertake an enterprise with limited liability may incorporate a company. Registration is carried out by the Office of the Company Registrar (OCR) under the Ministry of Industry, Commerce and Supplies. Full statutory texts are published by the Nepal Law Commission at lawcommission.gov.np, and incorporation services are delivered through ocr.gov.np.
Key points under the Companies Act:
- A private limited company may be formed by one to one hundred and one shareholders.
- Liability of shareholders is limited to the unpaid amount on their shares.
- The Memorandum of Association and Articles of Association must state the objectives, capital structure, and internal rules.
- There is no statutory minimum paid-up capital for a private company; a public company requires at least NPR 10,000,000.
Which Law Governs the Industry Licence?
The Industrial Enterprises Act, 2076 (2020) requires industries to be registered with the Department of Industry (DOI) or the concerned provincial or local body before commencing operations. Manufacturing industries — defined broadly as industries producing goods by processing raw materials, semi-processed materials, or waste — fall squarely within this Act. Registration details, forms, and sectoral guidance are published at doind.gov.np.
An industry registration certificate is separate from the company registration certificate. A manufacturing company that incorporates at OCR but fails to register the industry at DOI is not lawfully permitted to operate the plant.
How Does FITTA 2019 Apply to Foreign Promoters?
Where any share is held by a foreign national, foreign entity, or non-resident Nepali, prior approval for foreign direct investment is mandatory under FITTA. Investment made without approval cannot be recorded, and profit repatriation will not be permitted later.
What Is the Minimum Foreign Investment Threshold?
The Government of Nepal, by notice published in the Nepal Gazette, has fixed a minimum foreign investment threshold of NPR 20,000,000 per foreign investor. Manufacturing projects must therefore be capitalised at or above this figure in respect of foreign shareholding. Thresholds are revised from time to time by Gazette notification, so the current figure should be confirmed before filing.
Which Sectors Are Restricted for Foreign Investors?
Schedule 1 of FITTA contains the negative list. Foreign investment is not allowed in, among others:
- Cottage and small industries as classified by law
- Personal service businesses such as hairdressing, tailoring, and driving training
- Arms and ammunition industries, gunpowder, and explosives
- Real estate business (excluding construction industries)
- Retail business, internal courier service, and money changing
- Poultry, fisheries, and bee-keeping
- Consultancy services above the prescribed foreign equity ceiling
Most manufacturing activities are open to one hundred percent foreign ownership provided the industry is not micro, cottage, or otherwise scheduled.
Who Approves a Manufacturing Industry and Which Structure Should Be Selected?
What Is the Role of the Department of Industry?
The DOI is the principal approving authority for foreign investment in industries with a fixed capital below the ceiling reserved for the Investment Board. It reviews the project report, verifies investor credibility, issues the foreign investment approval letter, registers the industry, and later recommends visas and repatriation.
When Does the Investment Board Nepal Have Jurisdiction?
Under the Investment Board Act, 2068 (2011), projects with investment above NPR 6,000,000,000 and certain specified projects — including large hydropower, cement plants above a prescribed capacity, and infrastructure of national importance — are approved by the Investment Board Nepal rather than the DOI.
Which Company Structure Suits a Manufacturing Plant?
Private Limited Company
The private limited company is the standard vehicle. It offers limited liability, perpetual succession, a simple share transfer mechanism, and eligibility for industrial incentives. Nearly all foreign-invested manufacturing units in Nepal adopt this form.
Branch Office and Other Options
A foreign company may register a branch office under Section 154 of the Companies Act, but a branch is generally permitted only to perform a contract awarded in Nepal and is not an appropriate vehicle for owning and operating a factory. Liaison offices are prohibited from income-generating activity. Public limited companies are used only where wide share distribution or listing is planned.
How Are Manufacturing Industries Classified by Size?
The Industrial Enterprises Act classifies industries by fixed capital:
- Micro enterprise: capital within the prescribed micro limit, with the entrepreneur involved in management
- Cottage industry: traditional skill and technology based, with limited electric energy use
- Small industry: fixed capital up to NPR 150,000,000
- Medium industry: fixed capital between NPR 150,000,000 and NPR 500,000,000
- Large industry: fixed capital above NPR 500,000,000
Classification affects registering authority, incentives, and eligibility for foreign investment.
What Is the Step-by-Step Procedure to Register a Manufacturing Company in Nepal?
Step One: Reserve the Company Name
An online name reservation application is filed with OCR. The proposed name must not be identical or misleading, must not injure public morality, and should reflect the manufacturing objective.
Step Two: Obtain Foreign Investment Approval
For foreign-invested projects, an application is submitted to the DOI with the following, duly notarised and, for documents executed abroad, authenticated:
- Project report showing capacity, technology, raw materials, employment, and financial projections
- Board resolution of the investing company, or personal declaration of the individual investor
- Certificate of incorporation, charter documents, and audited financials of the corporate investor
- Passport copy and bio-data of individual investors
- Financial credibility certificate from a recognised bank
- Joint venture agreement, where a Nepali partner participates
- Power of attorney in favour of the local representative
The DOI issues a foreign investment approval letter specifying the approved amount and shareholding.
Step Three: Incorporate the Company at the Office of the Company Registrar
The incorporation file includes the application, Memorandum of Association, Articles of Association, shareholder consent, identity documents, and the DOI approval letter where applicable. Government registration fees are prescribed in the Companies Regulation and increase with authorised capital. Upon approval, OCR issues the certificate of incorporation. Practical assistance on this stage is available through the company registration service offered by CompanyNP.
Step Four: Register the Industry with the Department of Industry
The industry registration application is filed with the project report, incorporation certificate, charter documents, and land or lease evidence. The DOI issues the industry registration certificate stating the industry category, capacity, and location.
Step Five: Complete Tax Registration
Permanent Account Number registration is mandatory under the Income Tax Act, 2058 (2002). Value Added Tax registration is compulsory for manufacturers as prescribed by the Value Added Tax Act, 2052 (1996) and its Regulation. Both are handled by the Inland Revenue Department at ird.gov.np. Excise licensing applies to scheduled products.
Step Six: Record the Investment with Nepal Rastra Bank
Under the Foreign Exchange (Regulation) Act and the prevailing bylaws on foreign investment and foreign loan management, the foreign investor must obtain approval or record the investment with Nepal Rastra Bank before or immediately upon inflow. Funds must arrive through formal banking channels in convertible currency. The bank issues a remittance advice, on the basis of which capital verification is completed and share certificates are issued.
Step Seven: Complete Local and Sectoral Registrations
- Business registration at the concerned municipality or rural municipality
- Environmental clearance where required
- Sector-specific licences, for example from the Department of Food Technology and Quality Control for food products, or the Department of Drug Administration for pharmaceuticals
- Nepal Bureau of Standards certification where a mandatory standard applies
What Compliance, Tax, and Environmental Duties Follow Registration?
How Is a Manufacturing Company Taxed?
Under Schedule 1 of the Income Tax Act, 2058, the general corporate rate is 25 percent, while a special industry — which includes production-oriented manufacturing other than those producing tobacco or alcohol — is taxed at 20 percent. Section 11 provides further rebates linked to employment of Nepali citizens, location in remote or underdeveloped areas, and operation within a special economic zone. Dividend distribution attracts a five percent final withholding tax.
What Indirect Taxes Apply?
Value Added Tax is levied at 13 percent on taxable supplies, with input credit available on purchases used in production. Excise duty applies to specified goods. Customs duty concessions on plant, machinery, and equipment are available to industries under the Industrial Enterprises Act and the annual Finance Act.
When Is an Environmental Study Required?
The Environment Protection Act, 2076 (2019) and the Environment Protection Regulation, 2077 (2020) require a Brief Environmental Study, an Initial Environmental Examination, or an Environmental Impact Assessment depending on the industry type and capacity listed in the schedules. Construction of the plant must not begin before approval of the applicable study.
What Labour Obligations Arise?
The Labour Act, 2074 (2017) requires written employment contracts, minimum wage compliance, appointment letters, social security enrolment under the Contribution Based Social Security Act, 2074, and occupational safety measures. Foreign nationals employed in the industry require a work permit from the Department of Labour, and prior approval of the labour permit is normally granted only where Nepali skills are unavailable.
What Are the Annual Filing Requirements?
- Annual general meeting and annual return filing with OCR
- Appointment of an auditor and submission of audited financial statements
- Income tax return within three months of the end of the fiscal year, extendable on application
- Periodic VAT returns as prescribed
- Annual progress statement to the DOI for registered industries
What Benefits, Costs, and Risks Should Investors Weigh?
What Incentives Are Available to Manufacturers?
The Industrial Enterprises Act and the Income Tax Act together provide income tax rebates, customs and VAT facilities on machinery, additional concessions for industries established in special economic zones under the Special Economic Zone Act, 2073, and protection against nationalisation.
How Can Profits Be Repatriated?
Section 20 of FITTA guarantees repatriation of dividends, proceeds from the sale of shares or the entire investment, royalty and technical fees under an approved technology transfer agreement, and lease rentals. Repatriation requires DOI recommendation, tax clearance, and Nepal Rastra Bank facilitation in the currency in which the investment was made.
What Visa Facilities Exist for Investors?
FITTA provides a non-tourist visa for investigation and preparatory work, a business visa for the investor and authorised representative together with dependent family members, and a residential visa where a single investment of at least one million United States dollars or equivalent is maintained.
What Are the Common Errors to Avoid?
- Remitting capital before obtaining DOI approval and Nepal Rastra Bank recording
- Selecting an industry that falls within the FITTA negative list
- Beginning construction before environmental clearance
- Failing to complete capital verification and share issuance within the approved timeline
- Overlooking annual returns, which can lead to fines under the Companies Act
Investors seeking structured assistance may review the foreign investment advisory services provided by CompanyNP.
Frequently Asked Questions
How long does manufacturing company registration in Nepal normally take?
With complete and properly authenticated documents, foreign investment approval, incorporation, and industry registration are generally completed within six to ten weeks. Environmental clearance, land acquisition, and sectoral licences may extend the overall timeline considerably.
Can a foreign investor own one hundred percent of a manufacturing company?
Yes. Unless the proposed activity appears in Schedule 1 of FITTA or is classified as a micro or cottage industry, full foreign ownership is permitted, subject to satisfying the prescribed minimum foreign investment threshold and obtaining Department of Industry approval.
Is a local Nepali partner legally required?
No general requirement exists. A Nepali partner is necessary only where a sectoral law imposes an equity ceiling on foreign participation. Many manufacturing investors nevertheless appoint a resident director or representative for practical administrative convenience.
Must the entire approved investment be brought in immediately?
No. Capital may be injected in instalments within the schedule approved by the Department of Industry. However, at least the prescribed portion must be remitted through banking channels and verified before commercial production commences under the industry registration.
Does a manufacturing company require value added tax registration?
Yes. Manufacturers of taxable goods must register for Value Added Tax with the Inland Revenue Department irrespective of turnover, in addition to obtaining a Permanent Account Number, and must thereafter file returns within the periods prescribed by law.
Can land be purchased in the company’s name for a factory?
Yes. A registered industry may acquire land in the company name, and the Department of Industry may recommend exemption from statutory land ceiling limits where the land is genuinely required for the approved industrial project and its infrastructure.