Registration of Business in Nepal

Introduction to Business Registration Process in Nepal

The business registration process in Nepal is a structured procedure governed by various laws and regulations. It involves several steps, from choosing a business structure to obtaining necessary licenses and permits. The Department of Industry (DOI) and the Office of Company Registrar (OCR) are the primary authorities overseeing this process. Entrepreneurs must comply with the Companies Act 2063 (2006), Industrial Enterprises Act 2076 (2020), and Foreign Investment and Technology Transfer Act 2075 (2019) when registering their businesses. The process aims to ensure legal compliance, facilitate taxation, and promote a formal business environment in Nepal.

Requirements for Registering a Business in Nepal

To register a business in Nepal, entrepreneurs must fulfill several requirements:

• Valid identification documents (citizenship certificate for Nepali nationals or passport for foreigners)
• Proof of address (utility bills or rental agreement)
• Proposed company name and business objectives
• Memorandum of Association and Articles of Association
• Minimum capital requirement (varies based on business type)
• Tax clearance certificate (for existing businesses)
• No Objection Letter from relevant authorities (for specific industries)
• Passport-sized photographs of promoters/directors
• Signature specimens of promoters/directors
• Power of Attorney (if applicable)

Foreign investors must also obtain approval from the Department of Industry and comply with the Foreign Investment and Technology Transfer Act 2075 (2019).

Process of Business Registration for Different Entities

Step 1: Choosing a Business Structure and Name

The first step in registering a business in Nepal is selecting an appropriate business structure. Options include:

• Sole Proprietorship
• Partnership
• Private Limited Company
• Public Limited Company
• Foreign Company (Branch Office)
• Liaison Office

After deciding on the structure, entrepreneurs must choose a unique business name. The Office of Company Registrar (OCR) provides a name reservation service to ensure the chosen name is available and complies with naming regulations.

Step 2: Preparing and Submitting Registration Documents

Once the business structure and name are finalized, the following documents must be prepared and submitted:

• Application form for company registration
• Memorandum of Association
• Articles of Association
• Copy of citizenship certificate or passport of promoters/directors
• Passport-sized photographs of promoters/directors
• Signature specimens of promoters/directors
• No Objection Letter from relevant authorities (if applicable)
• Proof of office address
• Bank deposit slip for registration fees

These documents are submitted to the Office of Company Registrar for processing and approval.

Step 3: Obtaining PAN and VAT Registration

After company registration, businesses must obtain a Permanent Account Number (PAN) from the Inland Revenue Department. This is essential for tax purposes and financial transactions. Businesses with an annual turnover exceeding NPR 5 million must also register for Value Added Tax (VAT). The PAN and VAT registration process involves submitting an application form, company registration certificate, and other supporting documents to the Inland Revenue Office.

Step 4: Acquiring Necessary Licenses and Permits

Depending on the nature of the business, additional licenses and permits may be required. These can include:

• Industry registration certificate from the Department of Industry
• Tourism license from the Department of Tourism
• Export-Import Code from the Department of Customs
• Environmental clearance from the Ministry of Forests and Environment
• Food and drug licenses from the Department of Food Technology and Quality Control

Entrepreneurs must identify and obtain all relevant licenses and permits specific to their business sector.

Step 5: Opening a Business Bank Account

The final step in the business registration process is opening a corporate bank account. This requires:

• Company registration certificate
• PAN certificate
• Memorandum and Articles of Association
• Board resolution for opening a bank account
• Specimen signatures of authorized signatories
• Proof of address of the company and directors

A corporate bank account is essential for managing business finances and conducting transactions.

Essential Documents Needed for Business Registration

• Application form for company registration
• Memorandum of Association
• Articles of Association
• Citizenship certificates or passports of promoters/directors
• Passport-sized photographs of promoters/directors
• Signature specimens of promoters/directors
• Proof of office address
• Bank deposit slip for registration fees
• No Objection Letter from relevant authorities (if applicable)
• Power of Attorney (if applicable)
• Tax clearance certificate (for existing businesses)

Timeframe for Completing Business Registration in Nepal

The timeframe for completing business registration in Nepal varies depending on the type of entity and the completeness of submitted documents. Generally:

• Sole Proprietorship: 1-3 days
• Partnership: 3-5 days
• Private Limited Company: 5-7 days
• Public Limited Company: 7-10 days
• Foreign Company (Branch Office): 15-30 days

These timelines are approximate and may be longer if additional approvals or clarifications are required.

Cost and Government Fees for Business Registration

Registration costs and government fees in Nepal vary based on the type of business entity and its authorized capital. As of 2023, approximate fees include:

• Name reservation: NPR 100
• Private Limited Company registration: NPR 9,500 to NPR 45,000 (based on authorized capital)
• Public Limited Company registration: NPR 45,000 to NPR 90,000 (based on authorized capital)
• Foreign Company (Branch Office) registration: NPR 50,000
• PAN registration: NPR 500
• VAT registration: Free

Additional costs may include lawyer fees, notary charges, and fees for specific licenses or permits.

Checklist for Registering a Business in Nepal

• Choose a business structure
• Reserve a unique business name
• Prepare Memorandum and Articles of Association
• Gather required documents (identification, photographs, signatures)
• Submit registration application to OCR
• Pay registration fees
• Obtain company registration certificate
• Apply for PAN and VAT registration
• Acquire necessary industry-specific licenses and permits
• Open a corporate bank account

Laws and Regulations Governing Business Registration

• Companies Act 2063 (2006)
• Industrial Enterprises Act 2076 (2020)
• Foreign Investment and Technology Transfer Act 2075 (2019)
• Income Tax Act 2058 (2002)
• Value Added Tax Act 2052 (1996)
• Labor Act 2074 (2017)
• Social Security Act 2074 (2017)

These laws provide the legal framework for business registration, operation, taxation, and employment in Nepal.

Authorities Involved in Business Registration Process

• Office of Company Registrar (OCR)
• Department of Industry (DOI)
• Inland Revenue Department (IRD)
• Nepal Rastra Bank (for foreign investment approval)
• Department of Immigration (for work permits)
• Ministry of Industry, Commerce and Supplies
• Relevant municipal or local authorities

These authorities play various roles in the registration, approval, and oversight of businesses in Nepal.

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Services Available for Assistance with Business Registration

Several services are available to assist with business registration in Nepal:

• Legal firms specializing in company formation
• Business consultancy services
• Chartered accountants and auditing firms
• Online information portals (e.g., OCR website)
• Chamber of Commerce and Industry offices
• One-Stop Service Center at the Department of Industry
• Investment Board Nepal (for large-scale investments)

These services can provide guidance, document preparation assistance, and representation during the registration process.

FAQs:

1. What types of business structures are available in Nepal? Nepal offers sole proprietorship, partnership, private limited company, public limited company, foreign company (branch office), and liaison office structures for businesses.
2. Can foreigners register a business in Nepal? Yes, foreigners can register businesses in Nepal, subject to Foreign Investment and Technology Transfer Act 2075 (2019) regulations and specific sector restrictions.
3. Is it mandatory to have a local partner for business registration? It’s not mandatory for most sectors, but some industries require a local partner or have foreign investment limitations.
4. How long does it take to register a business in Nepal? Registration time varies from 1-3 days for sole proprietorships to 15-30 days for foreign companies, depending on the entity type.
5. What is the minimum capital requirement for business registration? Minimum capital requirements vary by business type and sector. For example, private limited companies require at least NPR 100,000.
6. Do I need to be physically present to register a business? Physical presence is not mandatory if you appoint a legal representative with Power of Attorney to act on your behalf.
7. Can I register my business online in Nepal? Online registration is available for some processes, but complete online registration is not yet fully implemented for all business types.