Table of Contents
IT company registration in Nepal provides the legal framework for establishing information technology businesses under the Companies Act 2063 (2006) and related regulations. Nepal has emerged as an attractive destination for IT businesses due to its cost-effective workforce, skilled developers, untapped growth potential, and favorable regulatory environment for technology enterprises. The registration process creates a separate legal identity for technology businesses engaged in software development, IT consulting, digital services, business process outsourcing, and other technology-related activities. This guide provides comprehensive coverage of the legal framework, registration procedures, foreign direct investment requirements, tax incentives, and compliance obligations for IT companies in Nepal.
Why Establish an IT Business in Nepal
Nepal offers compelling advantages for establishing information technology businesses:
- Cost-Effective Workforce: Operations cost 60-70% lower than Western markets
- Skilled Talent Pool: Growing pool of developers and engineers familiar with global tools and frameworks
- Bilingual Workforce: Fluent in English and Nepali, facilitating international service delivery
- Outsourcing Hub: Strategic position for BPO/KPO services serving global clients
- Regional Market Access: Favorable trade links with India, Bangladesh, and Bhutan
- Improved Infrastructure: Enhanced digital connectivity, data infrastructure, and online payment systems
- Government Support: Digital Nepal Framework 2030 and IT Policy 2072 support technology sector growth
Market Statistics: Over 6,000 ICT firms are registered in Nepal, with approximately 35% focusing on international software services.
Legal Framework Governing IT Company Registration
IT company registration in Nepal is governed by multiple legal frameworks regulating business incorporation, technology operations, taxation, and digital commerce:
| Legislation | Year | Scope |
|---|---|---|
| Companies Act | 2063 (2006) | Primary law for company registration and corporate governance |
| Company Regulations | 2064 (2007) | Implementation rules for Companies Act |
| Foreign Investment and Technology Transfer Act (FITTA) | 2075 (2019) | Foreign investment approval and technology transfer |
| Industrial Enterprises Act | 2076 (2020) | Industrial classification and registration as industry |
| Information Technology Act | 2063 (2006) | IT sector regulation |
| Electronic Transactions Act | 2063 (2008) | Digital transactions and cybersecurity |
| Income Tax Act | 2058 (2002) | Taxation including IT sector incentives |
| Value Added Tax Act | 2052 (1996) | VAT registration and compliance |
| Labor Act | 2074 (2017) | Employment regulations |
| Copyright Act | 2059 (2002) | Software and digital content protection |
| Telecommunications Act | 2053 (1997) | IT infrastructure and telecom services |
Regulatory Authorities
| Authority | Location | Function |
|---|---|---|
| Office of Company Registrar (OCR) | Tripureshwor, Kathmandu | Company registration, name reservation, certificate issuance |
| Department of Industry (DOIT) | Tripureshwor, Kathmandu | Foreign investment approval, industrial registration |
| Nepal Rastra Bank (NRB) | Baluwatar, Kathmandu | Foreign capital inflow clearance, repatriation approval |
| Inland Revenue Office (IRO) | Lazimpat, Kathmandu (main) | PAN/VAT registration, tax compliance |
| Ministry of Communication and Information Technology | Singhadurbar, Kathmandu | IT sector policy, branch office approval |
| Nepal Telecommunications Authority (NTA) | Bluestar Complex, Tripureshwor | Telecom and ISP licensing |
Options for IT Business Establishment
Foreign investors have two primary options for establishing IT business in Nepal:
Option 1: Local Subsidiary Company through Foreign Direct Investment
This is the recommended option for foreign investors seeking long-term operations in Nepal. A subsidiary company is a separate legal entity with limited liability.
Key Features
- 100% foreign ownership permitted for IT businesses
- Separate legal personality with limited liability
- Full operational scope for business activities
- Repatriation facility for profits, sale proceeds, and liquidation amounts
- Business and residential visa facility for investors
Option 2: Branch Office Registration
A branch office is suitable for foreign companies not invoicing Nepalese clients or engaged in short-term contracts/projects.
Key Features
- Extension of foreign company (not separate legal entity)
- No minimum capital requirement
- Limited to activities carried out by parent company
- Liability directly attributable to foreign registered company
- Repatriation requires NRB approval with evidence and justification
- No business or residential visa facility for foreign employees
Comparison: Subsidiary Company vs Branch Office
| Feature | Subsidiary Company | Branch Office |
|---|---|---|
| Legal Status | Separate legal entity | Extension of foreign company |
| Liability | Limited liability | Directly attributable to parent company |
| Ownership | Fully foreign or joint venture | Foreign company extension |
| Minimum Capital | No minimum for IT (as of October 2023) | No minimum requirement |
| Operational Scope | Full business operation | Limited to parent activities |
| Repatriation | Allowed under FITTA Section 20 | Requires NRB approval |
| Visa Facility | Business/residential visa available | Not available |
| Timeline | 3-5 months | 30-45 days |
| Best For | Long-term investment, scaling operations | Short-term contracts, non-invoicing operations |
Permissibility of Foreign Investment in IT Sector
Foreign investment in IT business is permitted subject to two criteria:
Positive List (Industrial Enterprise Act)
The sector must be classified as an "industry" under the Industrial Enterprise Act. IT business is listed under Schedule-7 as a permitted sector.
Negative List (FITTA)
The sector must not fall under the "Negative List of Industries for Foreign Investment" in FITTA Schedule. IT business is not included in the negative list.
Result: Foreign investors can establish IT companies with 100% foreign ownership or in joint venture with Nepalese/foreign investors.
Important Restriction: IT companies through foreign investment can undertake software solutions and development activities but cannot engage directly in retail business without developing or providing value addition to imported software. Foreign-invested companies cannot engage in trading activities in Nepal.
Capital Requirements
Domestic IT Companies
| Company Type | Minimum Authorized Capital | Minimum Paid-up Capital |
|---|---|---|
| Private Limited Company | NPR 100,000 | NPR 25,000 (25% of authorized) |
| Public Limited Company | NPR 10,000,000 | NPR 2,500,000 (25% of authorized) |
Foreign Investment in IT Companies
Important Update (October 2023): Through Nepal Gazette published on 2 October 2023, the minimum capital requirement for IT Companies has been removed. Previously, each foreign investor had to invest minimum NPR 20 million (approximately USD 150,000).
However, for practical purposes and DOIT approval, foreign investors typically need to demonstrate adequate capital for proposed operations.
Capital Injection Timeline for FDI
| FDI Approval Amount | % Within 1 Year |
|---|---|
| NPR 20 million (approx. USD 150,000) | 25% |
| NPR 20 million to NPR 250 million | 15% |
| NPR 250 million to NPR 1 billion | 10% |
| Above NPR 1 billion | 5% |
Additionally, FITTA Regulation requires investors to bring in 70% of total FDI amount before commercial operation, and remaining 30% within 2 years thereafter.
IT Company Registration Process (Domestic)
Step 1: Reserve Company Name at OCR
- Visit OCR website (https://www.ocr.gov.np) to check name availability
- Create Username/Password and submit name reservation application
- Submit three proposed names following naming guidelines
- Name must end with "Private Limited" or "Public Limited"
- Pay prescribed fee and obtain name reservation approval
- Name reservation valid for 35 days
Step 2: Prepare Memorandum and Articles of Association
- Draft MOA defining company objectives, capital, share structure, and IT business activities
- For IT company, objectives must clearly relate to information technology services
- Prepare AOA outlining internal management rules, director powers, shareholder rights
- Both documents must comply with Companies Act 2063 requirements
Step 3: Submit Registration Application with Documents
Upload necessary documents through OCR's online system:
- Completed company registration application form
- Memorandum and Articles of Association
- Citizenship certificates of all promoters and directors (notarized copies)
- Recent passport-size photographs
- Registered office rental agreement or ownership certificate
- Consent letters from all directors
- Share subscription agreement among promoters
- Bank voucher showing minimum paid-up capital deposit
Step 4: OCR Review and Certificate Issuance
- OCR conducts thorough review for legal compliance
- Verifies documents, shareholders' signatures, and company objectives
- If errors found, applicant notified for corrections
- Upon satisfactory verification, OCR issues company registration certificate
- Certificate establishes IT company as legal entity in Nepal
Step 5: Tax Registration at Inland Revenue Office
- Apply for Permanent Account Number (PAN) with company registration certificate
- PAN certificate issued immediately (same day)
- If annual turnover exceeds NPR 5 million, register for VAT
- VAT registration takes 1-2 days
Step 6: Municipal Business Registration
- Register at local municipal office where registered office is located
- Submit business registration application with company documents
- Obtain municipal business operation license
- License must be renewed annually
IT Company Registration Process (Foreign Investment)
Step 1: Prepare Foreign Investment Proposal
Foreign investors prepare investment proposal specifying:
- Nature of IT services (software, outsourcing, SaaS, development, data analytics)
- Proposed capital investment
- Shareholding ratio (foreign vs local)
- Business objectives and estimated employment creation
- Office location and technology infrastructure
- Project report and investment schedule
Step 2: Obtain DOIT Approval
Submit proposal to Department of Industry for foreign investment approval. Required documents include:
| S.N. | Document |
|---|---|
| 1 | Company incorporation certificate (if company is investor) |
| 2 | Memorandum of Association of investor company |
| 3 | Article of Association of investor company |
| 4 | Copy of passports of all directors and shareholders |
| 5 | Copy of passport or citizenship of authorized representative |
| 6 | Project Report and schedule for investment |
| 7 | Financial Credibility Certificate (FCC) |
| 8 | Latest financial statement |
| 9 | Board Resolution of investor company |
| 10 | Profile of company or biodata of individual investor |
| 11 | Power of attorney |
All foreign documents must be translated into Nepali and notarized.
Step 3: Reserve Company Name at OCR
After DOIT approval, reserve company name through OCR portal following standard procedure.
Step 4: Submit Incorporation Documents to OCR
Upload all forms and notarized documents through OCR online portal including MOA, AOA, and application for incorporation.
Step 5: Obtain Company Registration Certificate
OCR issues Certificate of Incorporation establishing the IT company as registered entity in Nepal.
Step 6: NRB Registration for Foreign Capital
Record foreign investment with Nepal Rastra Bank for repatriation eligibility. Obtain clearance for foreign capital inflow.
Step 7: Tax and Local Registrations
- Obtain PAN and VAT registration from Inland Revenue Department
- Open corporate bank accounts in NPR and foreign currency
- Register business at ward or municipal office
- If hiring employees, register with Social Security Fund (SSF)
Branch Office Registration Process
Step 1: Obtain Approval from Ministry
For IT company branch office, approval required from Ministry of Communication and Information Technology.
Step 2: Submit Application to OCR
Required documents for branch office registration:
| S.N. | Document |
|---|---|
| 1 | Certificate of Registration, MOA, AOA of Foreign Company (with Nepalese translation) |
| 2 | Application for Branch Office Registration |
| 3 | Board Resolution to set up branch office |
| 4 | Signed Company Profile |
| 5 | Copy of passport of all directors |
| 6 | Citizenship certificate of Nepal Representative |
| 7 | Letter of appointment of Authorized Representative |
| 8 | Proposed Plan of Branch Office |
| 9 | Power of Attorney |
| 10 | Declaration that information submitted is correct |
| 11 | Approval letter from Ministry of Communication and IT |
Step 3: OCR Issues Branch Office Registration
Timeline for branch office registration is usually 30-45 days.
Classification of IT Business Under Industrial Enterprises Act
Schedule-7 of the Industrial Enterprises Act 2076 classifies IT-related industries into three categories:
Information Technology Industries
- Technology park
- IT park
- Biotech park
- Software development
- Computer and related services
- Data processing
- Cyber café
- Digital mapping
- Business process outsourcing (BPO), knowledge process outsourcing (KPO)
- Data center, data mining, cloud computing
- Digital signature certifying agency
- Web portal, web designing service, web hosting, online classified advertising service
Information Technology-Based Industries
- Internet service provider (ISP)
- Telephone, mobile phone, mobile satellite phone operator service
- Teleport service
- Satellite establishment and operation, satellite broadcasting center, VSAT service
- Broadband infrastructure, telecom tower, optical network, satellite network
- Social networking, online messages, video calls, conferences
Dissemination Technology-Based Industries
- FM radio, digital radio service
- Digital land surface television, satellite television, cable television
- IP television, online service
- Digital cable television network, DTH satellite service, MMDS network, DTTV network
- Recording studio, broadcasting studio
- Print media industries, audio-visual material production, advertisement production
- Production of motion pictures or documentaries
Additional Licensing Requirements
While general software firms don't require extra licenses, specific activities require additional approvals:
| Activity | Additional License Required |
|---|---|
| Data hosting or cloud services | Clearance from Department of Information Technology |
| Internet or telecommunication services | License from Nepal Telecommunications Authority (NTA) |
| Fintech or payment solutions | Approval from Nepal Rastra Bank (NRB) |
| E-learning platforms | Education Ministry coordination for content compliance |
| Export of software or BPO services | Export declaration with Inland Revenue Department |
Tax Incentives for IT Business
The Income Tax Act provides significant tax incentives for IT businesses. The general corporate income tax rate in Nepal is 25%, with rebates based on employment creation:
| Employment Criteria | Effective Tax Rate |
|---|---|
| 100+ Nepali citizens employed throughout year | 22.5% |
| 300+ Nepali citizens employed throughout year | 20% |
| 500+ Nepali citizens employed throughout year | 18.75% |
| 1,000+ Nepali citizens employed throughout year | 17.5% |
| 100+ employees (1/3 women, dalits, or incapacitated) | 20.25% |
| 300+ employees (1/3 women, dalits, or incapacitated) | 18% |
| 500+ employees (1/3 women, dalits, or incapacitated) | 16.875% |
| 1,000+ employees (1/3 women, dalits, or incapacitated) | 15.75% |
Export Income Tax Exemption
Special Incentive: Export income earned in foreign currency from Business Process Outsourcing, Software Programming, Cloud Computing services (including service income based on IT) receives 50% tax exemption on applicable income tax rate up to NFY 2084/85 (2027/28 AD).
Other Applicable Taxes
| Tax Type | Rate | Notes |
|---|---|---|
| VAT | 13% | On goods and services billed within Nepal |
| Withholding Tax | 15% | On remittance or service payments abroad |
| Dividend Tax | 5% | Deducted at source when paying shareholders |
Timeline and Costs
Registration Timeline
| Registration Type | Timeline |
|---|---|
| Domestic IT Company (Standard) | 7-15 working days |
| Foreign Investment IT Company | 3-5 months |
| Branch Office | 30-45 days |
Breakdown of Timeline (Domestic)
- Name reservation: 1-2 days
- Document preparation: 2-3 days
- OCR verification: 3-5 days
- PAN registration: Same day
- VAT registration: 1-2 days
- Municipal licensing: 2-3 days
Registration Costs
| Fee Type | Amount | Payable To |
|---|---|---|
| Name Reservation Fee | NPR 100 per name | OCR |
| Company Registration Fee | 0.1% of authorized capital (min. NPR 1,000) | OCR |
| Stamp Duty on MOA/AOA | NPR 1,000 | Nepal Government |
| PAN Registration | Free | IRO |
| VAT Registration | Free | IRO |
| Municipal Business License | NPR 500-5,000 | Local Municipality |
| Foreign Investment Approval | NPR 2,000-10,000 | DOIT |
| Legal Documentation | NPR 10,000-50,000 | Legal Service Provider |
| Notarization | NPR 500-2,000 | Notary Public |
Repatriation Facility for Foreign Investors
Pursuant to Section 20 of FITTA, foreign investors in subsidiary companies have the right to repatriate:
- Profits from business in Nepal
- Amount received from sale of shares with foreign investment
- In case of liquidation or winding up, amount remaining after paying all liabilities
Visa Facility for Foreign Investors
Pursuant to Section 30 of FITTA, the following visa facilities are provided:
- Business Visa: Granted to foreign investor, one authorized representative, and family members to stay in Nepal while foreign investment is maintained
- Non-Tourist Visa: Up to 6 months for preliminary study of investment
- Residential Visa: For investors making foreign investment exceeding USD 1 million at one time
Post-Registration Compliance
After registration, IT companies must fulfill ongoing compliance obligations:
- Annual General Meeting (AGM) within six months of fiscal year end
- Annual return filing with OCR within one month of AGM
- Audited financial statements submission to OCR and IRO annually
- Income tax return filing by mid-January (Poush end) each year
- VAT return filing monthly or quarterly based on turnover
- Social Security Fund contributions for all employees
- Renewal of municipal business license annually
- Maintenance of statutory registers (members, directors, charges, meetings)
- Compliance with labor laws including employment contracts and benefits
- Copyright registration for proprietary software and digital products
Intellectual Property Protection
IT companies should protect intellectual property by:
- Registering trademarks and logos at Department of Industry
- Copyrighting software and digital products
- Including non-disclosure and IP assignment clauses in employee contracts
- Following data protection requirements under Electronic Transactions Act
Need Legal Assistance?
Our legal team provides comprehensive services for IT company registration including company incorporation, foreign investment approval, licensing, compliance setup, and ongoing regulatory support. Contact us for professional consultation on IT business establishment in Nepal.
Frequently Asked Questions
IT company registration in Nepal refers to the legal process of establishing a technology-based business entity under the Companies Act 2063. This registration creates a separate legal identity for information technology enterprises engaged in software development, IT consulting, digital services, web development, mobile application creation, system integration, data management, cybersecurity services, and other technology-related commercial activities. The registration is completed at the Office of Company Registrar (OCR) and provides legal recognition, limited liability protection, access to formal banking channels, and eligibility for government IT contracts.
Yes, foreigners can register IT companies in Nepal with 100% foreign ownership. IT business is listed in the "Positive List" under the Industrial Enterprises Act and is not included in the "Negative List" under FITTA. Foreign investors must:
- Obtain prior approval from Department of Industry (DOIT)
- Comply with capital injection timelines
- Record foreign investment with Nepal Rastra Bank
- Follow repatriation procedures for profits
The minimum capital requirement for IT companies has been removed as of October 2023, though adequate capital must be demonstrated for DOIT approval.
Capital requirements vary by company type:
| Company Type | Authorized Capital | Paid-up Capital |
|---|---|---|
| Domestic Private Limited | NPR 100,000 | NPR 25,000 (25%) |
| Public Limited | NPR 10,000,000 | NPR 2,500,000 (25%) |
| Foreign Investment | No minimum (as of Oct 2023) | As per DOIT approval |
For foreign investment, 70% of total FDI must be brought before commercial operation, with remaining 30% within 2 years thereafter.
Step-by-step process:
- Reserve company name at OCR website
- Prepare Memorandum and Articles of Association with IT objectives
- Submit registration application with required documents through OCR online portal
- Obtain company registration certificate from OCR
- Register for PAN and VAT at Inland Revenue Office
- Complete municipal business registration and licensing
The entire process takes 7-15 working days for domestic companies.
Required documents include:
- Company registration application form
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Citizenship certificates of all promoters and directors (notarized)
- Passport-size photographs
- Registered office rental agreement or ownership certificate
- Consent letters from directors
- Share subscription agreement
- Bank voucher showing minimum paid-up capital
- For foreign investors: DOIT approval, passport copies, Financial Credibility Certificate, Board Resolution, investor company documents
Registration timelines:
| Type | Duration |
|---|---|
| Domestic IT Company | 7-15 working days |
| Foreign Investment IT Company | 3-5 months |
| Branch Office | 30-45 days |
Breakdown for domestic registration: Name reservation (1-2 days), document preparation (2-3 days), OCR verification (3-5 days), PAN registration (same day), VAT registration (1-2 days), municipal licensing (2-3 days).
Key differences:
| Feature | Subsidiary Company | Branch Office |
|---|---|---|
| Legal Status | Separate legal entity | Extension of foreign company |
| Liability | Limited liability | Directly attributable to parent |
| Minimum Capital | No minimum for IT | No minimum |
| Repatriation | Allowed under FITTA | Requires NRB approval |
| Visa Facility | Available | Not available |
| Best For | Long-term investment | Short-term contracts |
Subsidiary company is recommended for foreign investors seeking long-term operations.
IT businesses permitted under Industrial Enterprises Act Schedule-7 include:
- Software development
- Computer and related services
- Data processing, data center, data mining, cloud computing
- Business process outsourcing (BPO), knowledge process outsourcing (KPO)
- Web portal, web designing, web hosting
- Digital mapping, digital signature certifying agency
- IT park, technology park, biotech park
- Internet service provider (ISP)
- Telecom services, VSAT service
- Social networking, video calls, online services
Tax incentives include reduced corporate tax rates based on employment:
| Employment | Tax Rate |
|---|---|
| 100+ Nepali citizens | 22.5% |
| 300+ Nepali citizens | 20% |
| 500+ Nepali citizens | 18.75% |
| 1,000+ Nepali citizens | 17.5% |
Additional 50% tax exemption on export income earned in foreign currency from BPO, Software Programming, and Cloud Computing services until NFY 2084/85 (2027/28 AD).
Additional licensing requirements:
| Activity | License Required |
|---|---|
| Data hosting/cloud services | Department of Information Technology clearance |
| Internet/telecom services | Nepal Telecommunications Authority (NTA) license |
| Fintech/payment solutions | Nepal Rastra Bank (NRB) approval |
| E-learning platforms | Education Ministry coordination |
| Software export/BPO | Export declaration with IRD |
General software development firms don't require additional licenses beyond company registration.
Process for foreign investors:
- Prepare foreign investment proposal with project report
- Submit to Department of Industry (DOIT) for approval
- Obtain Foreign Investment Approval Letter
- Reserve company name at OCR
- Submit incorporation documents with translated and notarized documents
- Obtain company registration certificate
- Record foreign investment with Nepal Rastra Bank
- Complete PAN/VAT registration
- Open NPR and foreign currency bank accounts
- Register with Social Security Fund (if hiring employees)
Timeline: 3-5 months.
Cost breakdown:
| Fee Type | Amount |
|---|---|
| Name Reservation | NPR 100 per name |
| Registration Fee | 0.1% of authorized capital (min. NPR 1,000) |
| Stamp Duty | NPR 1,000 |
| PAN/VAT Registration | Free |
| Municipal License | NPR 500-5,000 |
| Foreign Investment Approval | NPR 2,000-10,000 |
| Legal Documentation | NPR 10,000-50,000 |
Total costs range from NPR 15,000 to NPR 75,000 depending on complexity.
Ongoing compliance includes:
- Annual General Meeting within 6 months of fiscal year end
- Annual return filing with OCR within 1 month of AGM
- Audited financial statements submission annually
- Income tax return filing by mid-January
- VAT return filing monthly or quarterly
- Social Security Fund contributions for employees
- Municipal license renewal annually
- Statutory register maintenance
- Labor law compliance
- Copyright registration for proprietary software
Yes, foreign investors in subsidiary companies can repatriate under Section 20 of FITTA:
- Profits from business in Nepal
- Amount received from sale of shares with foreign investment
- Amount remaining after paying all liabilities upon liquidation
For branch offices, repatriation requires NRB approval with evidence and justification. The procedure is discretionary based on approving authorities.
Under Section 30 of FITTA, visa facilities include:
- Business Visa: For foreign investor, one authorized representative, and family members while foreign investment is maintained
- Non-Tourist Visa: Up to 6 months for preliminary investment study
- Residential Visa: For investors making foreign investment exceeding USD 1 million at one time
Note: Branch offices do not qualify for business or residential visa facilities for foreign employees.
