Nepal is a small, services-led economy between India and China, with a legal framework that is gradually opening to foreign capital. It is also a market where the details of approvals, banking and compliance decide whether an investment starts smoothly. This guide summarises what international investors and businesses should understand before entering the Nepali market, and where a figure or rule should be checked against the current text before you rely on it.
The Investment Climate
The government has signalled intent to attract foreign direct investment (FDI) through the 2081 (2024) amendments to the Foreign Investment and Technology Transfer Act (FITTA) and through the automatic route, which was widened in February 2026. Market-access terms with India and China differ by product and treaty, so check them case by case for your goods or services.
Key indicators, from published official estimates:
Population: about 29.2 million at the 2021 census.
Growth: the National Statistics Office (NSO) projects growth of 3.85 percent at purchasers' prices for FY 2025/26. For FY 2024/25, Nepal Rastra Bank (NRB) reported 4.61 percent, while the NSO's later revision is lower at 3.80 percent at basic prices. Figures differ by price basis and revision date.
Size of the economy: nominal GDP of about NPR 6.2 trillion in FY 2024/25 (revised) and a projection of about NPR 6.6 trillion for FY 2025/26.
Sectors investors commonly look at: hydropower, tourism, IT and IT-enabled services, agriculture and financial services.
Types of Business Entities
Foreign investors may establish one of the following structures:
Private limited company. The most common vehicle for foreign-invested enterprises, registered under the Companies Act, 2063 (2006). It can have from one to 101 shareholders.
Public limited company. Required for an enterprise that plans to offer shares to the public. It needs at least seven shareholders.
Branch office. Required where a foreign company carries on business in Nepal continuously for a month or more. It is not a separate legal entity, needs a government approval tied to the business or an agreement with a Nepali government authority, and has no minimum capital requirement.
Liaison office. A contact point only. It cannot earn income or advertise, and it needs no specific government approval to establish.
See our guides to branch and liaison offices and the company registration process.
Company Registration Process
For a foreign-invested company the order matters, because investment approval comes before incorporation:
Foreign investment approval from the Department of Industry (DOI), or Investment Board Nepal for projects within its mandate. For listed industries this may be an online automatic-route application.
Name reservation and company registration at the Office of the Company Registrar (OCR), with the memorandum, articles and incorporation documents.
Local business registration and PAN registration with the Inland Revenue Department (IRD).
Industry registration with DOI where the activity qualifies as an industry.
Bank approval and NRB notification for the foreign capital brought in.
Timing depends on how complete the file is and on the authority's workload, so treat any published timeline as indicative. Our FDI approval guide walks through the documents.
Tax Framework
Nepal operates a self-assessment tax system administered by the Inland Revenue Department. The rates below are the commonly published ones and are set or changed through the Income Tax Act and each year's Finance Act, so confirm the current rate for your activity before you model returns.
Corporate income tax: 25 percent standard rate; 30 percent for banks and financial institutions and for tobacco and liquor; 20 percent for manufacturing and other special industries. Qualifying IT export income and some other activities have separate incentives.
VAT: 13 percent standard rate on goods and services.
TDS: rates depend on the nature of the payment; see our TDS guide, and our note on TDS on foreign vendor payments.
Dividend tax: 5 percent for residents; for non-residents, the withholding rate in the Act or the applicable tax treaty.
Capital gains tax: the rate depends on the asset, the holder and the holding period; listed shares are taxed differently from other assets.
Nepal has double taxation avoidance agreements with a limited number of countries, including India. Published counts differ, so check the list on the IRD website and the treaty text for your investor's country before relying on a reduced rate.
Foreign Investment Regulations
Under FITTA, as amended in 2081:
Minimum investment: NPR 20 million per investor in most sectors. The amount is set by government notification, not written in the Act. Nine IT and digital areas, including software development, data processing and BPO and KPO, are reported to be exempt; see our guide to IT and BPO registration.
Approval: DOI is the main approving authority. After the 2081 amendments it can approve any foreign investment under the Act, including very large ones. Investment Board Nepal handles projects under its own legislation.
Automatic route: a February 2026 notification reportedly covers 102 areas of industry in seven categories and removes the earlier NPR 500 million ceiling for them. Press reports say the certificate is emailed immediately or within seven working days, with the foreign-currency source checked afterwards with NRB. Confirm the current list with DOI.
Ownership: up to 100 percent foreign ownership is permitted in most sectors, with restrictions in the negative-list areas above.
Foreign loans: foreign-invested industries no longer need a Ministry of Industry recommendation to borrow from foreign financial institutions; loans go through agreements approved by NRB.
Technology transfer: the definition was widened in 2081, and technology transfer agreements must be registered with DOI.
Repatriation: dividends and sale proceeds can be repatriated in convertible currency once the company shows it has met its tax and legal obligations, and subject to the NRB process. Keep audited financial statements and tax clearance ready.
For the 2081 changes in detail, see our FITTA amendments article.
Labour & Employment
Nepal's labour framework is governed mainly by the Labour Act 2074 and the Contribution-Based Social Security Act 2074:
Working hours: 8 hours a day and 48 hours a week.
Minimum wage: NPR 19,550 a month from 17 July 2025, made up of a basic wage and a dearness allowance, published in the Nepal Gazette on 21 July 2025. It applies to all sectors except tea plantations. It is reviewed periodically, so check for a newer notice.
Social Security Fund: contributions of 20 percent from the employer and 11 percent from the employee, calculated on basic salary.
Foreign workers: foreign nationals need the appropriate work permit and visa. Confirm the issuing authority and the procedure for your sector before an employee travels; see also our note on the business visa for foreign investors.
How Veritas Helps
We help foreign investors plan market entry: choosing between a subsidiary, branch or liaison office, preparing the FDI application, setting up PAN, VAT and payroll, arranging the banking and NRB steps, and supporting first-year compliance. We tailor the plan to your sector, investment size and timeline. Contact us for a confidential consultation.
Our team of chartered accountants can walk you through the entry options, the approval documents and the first-year compliance calendar. See our FDI services in Nepal or talk to us.
*Prepared from published sources, October 2026. General guidance only; confirm against the current text of the law and with the relevant authority.*
