Foreign Direct Investment (FDI) has become one of the most discussed topics in Nepal's economic policy. As the government continues to liberalise the investment climate, foreign companies are exploring entry into sectors ranging from hydropower and tourism to manufacturing and information technology.
Legal framework for foreign investment
The principal legislation governing foreign investment is the Foreign Investment and Technology Transfer Act (FITTA), 2075, read together with the Companies Act, 2063. FITTA establishes the framework for foreign investment approval, repatriation rights, and sectoral limits, while the Companies Act governs how a foreign-owned entity is formed and administered.
Choosing the right corporate structure
Most foreign investors incorporate either a private limited company or a public limited company under the Companies Act, 2063. The private limited structure remains the most common for wholly owned subsidiaries because it offers flexibility in governance and simpler reporting obligations.
Step-by-step incorporation process
The typical process of establishing a company in Nepal involves the following steps:
- Name clearance from the Office of the Company Registrar
- Drafting and notarising the memorandum and articles of association
- Filing incorporation documents and obtaining the certificate of incorporation
- Registering with the tax authority and obtaining a Permanent Account Number (PAN)
- Opening a corporate bank account and, where applicable, registering for VAT
Approvals and clearances
Depending on the sector and investment size, investors may require approval from the Investment Board Nepal (IBN), the Department of Industry, or the Nepal Rastra Bank for capital inflow and repatriation. Sector regulators such as the Nepal Electricity Authority or the Nepal Rastra Bank may impose additional licensing conditions.
Key considerations for 2025
Foreign investors should plan for rising compliance expectations around beneficial ownership disclosure, anti-money-laundering rules, and sector-specific licensing. Companies incorporated with a minimum foreign shareholding often face additional audit and reporting duties, so engaging local counsel early reduces delay significantly.
Pluto Associates advises foreign investors at every stage, from entity formation to regulatory approvals and ongoing compliance. Contact our FDI team to discuss your project, or explore our practice areas for more detail on sector-specific regulation.