Nepal permits both Nepali citizens and foreign investors to establish service-oriented businesses, subject to the Companies Act, 2063 (2006), the Industrial Enterprises Act, 2076 (2020), the Foreign Investment and Technology Transfer Act, 2075 (2019) (FITTA), and the Income Tax Act, 2058 (2002). Service company registration in Nepal is the formal process of incorporating a legal entity at the Office of the Company Registrar (OCR) and, where applicable, registering the service industry with the Department of Industry (DOI) or the concerned local level. This article, prepared by CompanyNP, explains the requirements, permitted activities, ownership structure, minimum investment, procedure, documents, timeline, and costs in plain language, based strictly on Nepali statutes and official government sources.
What Is a Service Company in Nepal and Who Can Register One?
A service company is a business entity whose principal object is the supply of services rather than the manufacture or trading of goods. The Industrial Enterprises Act, 2076 classifies industries by nature, and “service industry” is one of the recognised categories under its Schedules.
What Counts as a Service Industry Under Nepali Law?
The Industrial Enterprises Act, 2076 and its Schedules list service industries. Commonly registered service activities include:
- Information technology, software development, data processing, and business process outsourcing (BPO)
- Management, engineering, accounting, and legal consultancy services
- Advertising, marketing, and market research services
- Hospitals, nursing homes, diagnostic centres, and educational consultancies
- Hotels, resorts, restaurants, and tourism-related services (subject to sectoral licences)
- Transportation, logistics, courier, cold storage, and warehousing services
- Repair, maintenance, cleaning, security, and technical support services
- Film production, broadcasting, printing, and publication services (subject to sectoral caps)
Certain services additionally require a sectoral licence or approval before or after incorporation, for example from the Nepal Tourism Board or Ministry of Culture, Tourism and Civil Aviation for travel and trekking services, the Ministry of Health and Population for health services, and the Nepal Telecommunications Authority for telecom-related services.
Who Is Eligible to Register a Service Company?
Under Section 3 of the Companies Act, 2063, any person desiring to undertake an enterprise with a view to making profit may, either singly or jointly, incorporate a company. Eligible promoters include:
- Nepali citizens who have attained the age of majority and are not disqualified by law
- Foreign natural persons and foreign body corporates, subject to FITTA approval
- Non-Resident Nepalis (NRNs), under the Non-Resident Nepali Act, 2064
- Existing Nepali or foreign companies acting as corporate shareholders
Persons declared insolvent, of unsound mind, or barred by a court order are not eligible to act as promoters or directors.
Can a 100% Foreign-Owned Service Company Be Registered?
Yes. FITTA, 2075 permits up to 100 percent foreign direct investment in most service sectors, provided the activity is not listed in the Schedule (negative list) of the Act and the prescribed minimum foreign investment threshold is met. Approval must be obtained from the Department of Industry, or from the Investment Board Nepal where the investment exceeds the threshold specified in the Investment Board Act, 2068.
Which Service Activities Are Restricted for Foreign Investors?
The Schedule to FITTA, 2075 restricts foreign investment in certain service activities, including:
- Personal service businesses such as hair cutting, tailoring, driving, and beauty parlours
- Travel agencies, trekking agencies, tour guiding, rural tourism, and homestay operations
- Retail businesses, except international chain retail operating in at least two countries
- Real estate business (excluding construction industries)
- Consultancy services such as management, engineering, accounting, and legal consultancy, where foreign ownership is capped at 51 percent
- Local newspapers, magazines, radio, television, and online news media, subject to a 49 percent cap
Investors should confirm the current Schedule and any Nepal Gazette amendments before committing capital.
What Company Types, Ownership Structures, and Capital Requirements Apply?
Which Legal Structures Can Be Chosen?
- Private limited company: The most common structure. Under Section 9 of the Companies Act, 2063, a private company may have between one and one hundred one shareholders and cannot offer shares to the public.
- Public limited company: Requires a minimum of seven promoters and a minimum paid-up capital of NPR 10,000,000 under Section 11, unless otherwise prescribed.
- Branch office of a foreign company: Registrable under Chapter 15 (Sections 154 to 158) of the Companies Act, 2063, where a foreign company obtains a contract or licence to carry on business in Nepal.
- Liaison office: Permitted for non-income-generating representative activities only, and prohibited from carrying out commercial transactions.
- Sole proprietorship or partnership firm: Available to Nepali citizens under the Private Firm Registration Act, 2014 and the Partnership Act, 2020, but not available to foreign investors.
How Is the Ownership Structure Organised?
Ownership is evidenced by shares recorded in the shareholder register maintained under Section 46 of the Companies Act, 2063. Key points include:
- Shareholding may be held by natural persons, corporate bodies, or a combination of both.
- Foreign shareholding must match the amount approved by the Department of Industry and recorded by Nepal Rastra Bank.
- Share transfers in a private company are governed by the Articles of Association and require OCR filing; transfers involving foreign shareholders also require DOI and NRB consent.
- A private company must have at least one director; a public company must have at least three, as provided in Section 86.
What Are the Capital Requirements for a Service Company?
The Companies Act, 2063 does not prescribe a statutory minimum paid-up capital for private companies. In practice, OCR accepts an authorised and paid-up capital declared by the promoters, commonly starting from NPR 100,000 for wholly Nepali-owned service companies. Registration fees are calculated on the authorised capital.
What Is the Minimum Foreign Investment Amount?
Section 9 of FITTA, 2075 empowers the Government of Nepal to prescribe a minimum threshold for foreign investment by notification in the Nepal Gazette. The threshold was fixed at NPR 50,000,000 in 2019 and subsequently reduced to NPR 20,000,000. The Government has since granted relaxations for specified information technology services. Because these thresholds are amended by Gazette notification, investors should verify the prevailing figure with the Department of Industry at doind.gov.np before applying.
How Is a Service Company Registered, and What Documents, Timeline, and Costs Are Involved?
What Is the Procedure for a Nepali-Owned Service Company?
- Reserve the proposed company name through the OCR online portal at ocr.gov.np.
- Prepare and upload the Memorandum of Association and Articles of Association, together with the consensus agreement if applicable.
- Pay the prescribed registration fee based on authorised capital and obtain the Certificate of Incorporation under Section 5.
- Register the company for a Permanent Account Number (PAN) with the Inland Revenue Department, and for VAT where required.
- Register the service industry with the Department of Industry or the concerned local level, depending on scale and sector, under the Industrial Enterprises Act, 2076.
- Obtain the business operation licence from the ward or municipality and any sectoral licence required.
What Is the Additional Procedure for a Foreign-Invested Service Company?
- Obtain foreign investment approval from the Department of Industry under Section 15 of FITTA, or through the Automatic Route where the sector and amount qualify.
- Incorporate the company at the OCR, disclosing the foreign shareholding in the Memorandum of Association.
- Register the industry with the Department of Industry.
- Obtain approval from Nepal Rastra Bank under the Foreign Exchange (Regulation) Act, 2019 for bringing investment into Nepal, and remit the capital through banking channels.
- Record the inward remittance with Nepal Rastra Bank to preserve repatriation rights under Section 20 of FITTA.
- Complete PAN or VAT registration, Social Security Fund enrolment, and local level registration.
What Documents Must Be Submitted?
For all applicants:
- Memorandum of Association and Articles of Association
- Application for name reservation and incorporation
- Citizenship certificates of Nepali promoters and directors
- Consensus agreement, where the company is incorporated by two or more persons
Additional documents for foreign investors:
- Notarised copies of passports of individual foreign investors
- Certificate of incorporation, charter documents, and board resolution of the foreign corporate investor
- Bio-data or company profile of the investor
- Financial credibility certificate issued by a bank in the investor’s home country
- Project report or business plan with proposed investment and employment details
- Joint venture agreement, where a Nepali partner is involved
- Power of attorney authorising a local representative, such as CompanyNP
Documents executed abroad should be notarised and, where required, authenticated by the Nepali diplomatic mission or apostilled in accordance with the practice accepted by the Department of Industry.
How Long Does Registration Take?
- Name reservation: one to three working days
- OCR incorporation: three to seven working days after complete filing
- Department of Industry foreign investment approval: approximately seven to twenty working days, depending on completeness and sector
- Nepal Rastra Bank approval and remittance recording: approximately seven to fifteen working days
- PAN, VAT, and local registrations: one to five working days
A wholly Nepali-owned service company can generally be operational within two weeks. A foreign-invested service company typically requires four to eight weeks from submission to full operational status.
What Are the Registration Costs?
Government registration fees at the OCR are graduated according to authorised capital under the Companies Regulation, 2064. Indicative fees for private companies are:
- Up to NPR 100,000: NPR 1,000
- NPR 100,001 to 500,000: NPR 4,500
- NPR 500,001 to 2,500,000: NPR 9,500
- NPR 2,500,001 to 10,000,000: NPR 16,000
- NPR 10,000,001 to 100,000,000: NPR 19,000 and above, increasing in slabs
Additional costs include notarisation, translation, document authentication, local level business licence fees, and professional service fees. Applicants should confirm current rates on the official OCR portal, as fee schedules are periodically revised.
What Tax and Ongoing Compliance Obligations Apply After Registration?
Which Taxes Apply to a Service Company?
Under the Income Tax Act, 2058:
- The standard corporate income tax rate for companies is 25 percent of taxable income.
- Special industries and certain qualifying entities may benefit from concessional rates and rebates under Schedule 1 and Section 11.
- Withholding tax applies on service payments, rent, interest, and dividends at rates specified in Chapter 17.
- Dividend distribution is subject to a final withholding tax of 5 percent.
Value Added Tax at 13 percent applies under the Value Added Tax Act, 2052. Registration is compulsory once the prescribed turnover threshold is exceeded, and certain service providers located in specified municipal areas must register for VAT irrespective of turnover, as provided in the Value Added Tax Rules, 2053.
What Annual Compliance Is Required?
- Filing of the annual return and audited financial statements with the OCR under Section 80 of the Companies Act, 2063
- Holding the annual general meeting within the statutory period, for companies required to do so
- Filing the income tax return with the Inland Revenue Department within three months of the end of the fiscal year, extendable by application
- Monthly or trimester VAT returns, where registered
- Reporting of foreign investment status and dividend repatriation to the Department of Industry and Nepal Rastra Bank
- Contribution to the Social Security Fund and compliance with the Labour Act, 2074 and Labour Rules, 2075
What Visa and Repatriation Rights Do Foreign Investors Hold?
FITTA, 2075 provides that a foreign investor, an authorised representative, and their dependent family may obtain a business visa for the period the investment is retained, and a residential visa where the investment reaches the amount prescribed by the Act. Section 20 guarantees repatriation of dividends, sale proceeds of shares, and approved royalties in convertible foreign currency, subject to tax clearance and Nepal Rastra Bank procedures.
Which Laws and Authorities Govern Service Company Registration in Nepal?
What Are the Governing Laws?
- Companies Act, 2063 (2006) and Companies Regulation, 2064
- Foreign Investment and Technology Transfer Act, 2075 (2019) and its Regulation
- Industrial Enterprises Act, 2076 (2020)
- Income Tax Act, 2058 (2002)
- Value Added Tax Act, 2052 (1996) and Rules, 2053
- Foreign Exchange (Regulation) Act, 2019 (1962)
- Labour Act, 2074 (2017) and Social Security Act, 2074
- Investment Board Act, 2068 (2011)
- Public Procurement Act, 2063, where government contracts are involved
Authentic Nepali and English texts are published by the Nepal Law Commission at lawcommission.gov.np.
Which Authorities Are Involved?
- Office of the Company Registrar, ocr.gov.np, for incorporation, records, and annual filings
- Department of Industry, doind.gov.np, for industry registration and foreign investment approval
- Inland Revenue Department, ird.gov.np, for PAN, VAT, and tax administration
- Nepal Rastra Bank, nrb.org.np, for foreign exchange approval and repatriation
- Investment Board Nepal, for large-scale investments above the statutory threshold
- Concerned municipality, rural municipality, or ward office, for local business licensing
How Can CompanyNP Assist?
CompanyNP provides end-to-end support for service company registration in Nepal, including name reservation, drafting of the Memorandum and Articles of Association, Department of Industry applications, Nepal Rastra Bank filings, PAN and VAT registration, and post-incorporation compliance. Related guidance is available at companynp.com, including our resources on company registration in Nepal, foreign direct investment approval, and annual compliance services.
Frequently Asked Questions
Can a single foreign national own an entire service company in Nepal?
Yes. A private limited company may have one shareholder under the Companies Act, 2063, and FITTA permits full foreign ownership in most service sectors, provided the activity is outside the Schedule and the minimum investment threshold is satisfied.
Is physical presence in Nepal necessary during the registration process?
Physical presence is not mandatory. A foreign investor may appoint a local representative through a duly notarised and authenticated power of attorney, enabling that representative to sign applications and complete filings with the Office of the Company Registrar and Department of Industry.
What happens if the approved foreign investment is not brought into Nepal?
The Department of Industry may cancel the approval if the investment is not injected within the timeframe stipulated in the approval letter. Investors should request an extension in writing before the deadline expires to avoid revocation of approval.
Are consultancy service companies treated differently from other service companies?
Yes. Under the Schedule to FITTA, 2075, management, engineering, accounting, and legal consultancy services permit foreign ownership only up to 51 percent, meaning a Nepali partner must hold at least 49 percent of the issued share capital.
Must a newly registered service company register for VAT immediately?
Not always. VAT registration becomes compulsory once the prescribed turnover threshold is crossed. However, specified service providers operating within designated municipal areas must register for VAT from commencement, regardless of turnover, under the Value Added Tax Rules, 2053.
How can profits earned by a foreign-invested service company be repatriated?
Section 20 of FITTA, 2075 permits repatriation of dividends, share sale proceeds, and approved royalties. The company must obtain tax clearance from the Inland Revenue Department and approval from Nepal Rastra Bank before remitting funds in convertible foreign currency.