Doing business in Nepal requires foreign companies to first register a liaison office, which cannot conduct income generating activities. To set up a branch office, foreign companies must obtain permission and register with documentation including company documents and details of directors. Branch offices are taxed at 25% on net income and must file annual tax returns. VAT registration is optional if annual transactions are below thresholds. Repatriating profits from a branch office is subject to a 5% tax and requires central bank permission.

1. Doing business
in Nepal

2. Foreword
 This document is aimed at highlighting the procedures required for
registration of branch office in Nepal and operation of such office in
Nepal.
 It shall also discuss the tax consequences of operation of branch office
and other permanent establishment in Nepal.
 While we hope the information contained herein is found to be useful it is
intended only as a general guide. It does not highlight the detailed and
on field procedures that may require compliance at the time of set up
and operation of branch office. We advise seeking local professional
assistance to ensure complete legal compliance.

3. Country profile and key indicator
Area 1,47,181 sq. km (56,136 sq. mi.)
Population 2,89,51,852 (July 2010 estimate)
Governance Representative multi-party democracy
GDP USD 6.68 billion (Economic survey FY 2013-14)
Annual growth rate 5.5% (Economic survey FY 2013-14)
Per capita income USD 703
Minimum wages NPR 8,000
Fiscal year 16 July to 15 July

4. Investment vehicle – Foreign Company
Branch office
CompanyLiaison office
 A foreign company is not permitted to carry out any business transaction in Nepal
without setting up a branch office in Nepal.
For the purpose of setting up a branch office in Nepal, a foreign company is first
required to set up a liaison office in Nepal.
 A liaison office is not permitted to carry any income generating activity in Nepal.
However, the foreign company can convert the liaison office into a branch office
for conducting its activities.

5. Procedure for setting up a liaison / branch
office
 For the purpose of setting up a liaison / branch office, a foreign company
is required to file a registration application with the Office of Company
Registrar along with permission from competent authority and other
prescribed documents.
 Permission from competent authority for this purpose shall constitute
permission obtained by the foreign company from the Department of
Industries except in cases of regulated industries wherein permission shall
be required to be obtained from respective regulatory bodies.
 However, where a foreign company has been awarded a contract by a
competent body for any business in Nepal, such awarding of contract
shall constitute permission required to set up a liaison / branch office in
Nepal.

6. Prescribed documents for registration
The following documents are required to be submitted by the foreign
company along with registration application for the purpose of registering a
liaison / branch office in Nepal:
 Permission from competent authority to set up a liaison / branch office n
Nepal;
 Copies of the charter, CoI, MoA, AoA of the foriegn company, and
Nepalese translation thereof;
 Full name, address of the registered office and principal place of business
of the foreign company, date of incorporation of the company,
description of the paid up capital and major objectives of such
company;
 Names, addresses of directors, manage, company secretaries or main
officers of the company and description of their citizenship;
 Name and address of the person residing or staying in the Nepal ,who is
authorized by the company to receive, on its behalf, any summons,
notice etc. issued in the name of the company;
Cont’d

7. Prescribed documents for registration
 Full address of the principal place where the foreign company carries on
its transaction or business in Nepal and of the office of such company
situated in that place;
 Where the foreign company is to carry on any transaction or business in
the State of Nepal, details of the proposed investment and transaction;
 Where the foreign company is to commence its transaction in Nepal, the
proposed date thereof;
 A declaration made by a director of the foreign company or his/her
representative, on behalf of the company, that the matters contained in
the returns submitted by the company are true and correct;
 Power of attorney in accordance with the legal requirements of the
jurisdiction where the foreign company is incorporated appointing a
person residing in Nepal as its authorized representative.
Note:
1. For the purpose of conversion of liaison office into a branch office, only such documents which were
not submitted at the time of registering a liaison office or documents / information updated post the
date of registration of liaison office are required to be submitted along with a declaration by the
director of the foreign company or his authorized representative stating the information / documents
submitted are updated, true and correct.

8. Tax profile – Income tax
Particular Branch office Company
Organizational status PE of a foreign
company
Company
Residential status Resident
Scope of income tax Global income
Tax rate 25 percent on net taxable income
Method of accounting Accrual
PAN Mandatory
Depreciation Prescribed rates on the WDV of block of assets
WHT on service income 15 percent (not registered under VAT)
1.5 percent (registered under VAT)
Note:
1. Tax on disposal of capital assets is levied on the net incomings from such assets as business income.

9. Statutory tax filings – Income tax
Particular
Deposit of installment
tax
(corresponding to
advance tax under
the Indian income tax
regime)
End of Paush
(corresponds to mid of January)
40 percent of estimated
tax liability
End of Chaitra
(corresponds to mid of April)
70 percent of estimated
tax liability
End of Ashad
(corresponds to mid of July)
100 percent of estimated
tax liability
Return of Income 3 months from the end of income year (corresponds to mid of
October)
However an extension of further 3 months can be applied for
Deposit of income tax Before filing of return of income
Deposit of WHT
collected
Within 25 days from the end of month of deduction
Note:
1. Installment tax is required to be deposited by persons having an estimated tax liability of more than
NPR 5,000.
2. Nepal follows a self-assessment tax regime. The return once filed is deemed as final unless reassessed
by tax authorities. Reassessment, if any from tax authorities can be done within 4 years after the due
date of filing return of income for an income year.

10. Tax profile – VAT
Particular Branch office Company
Registration under
VAT
Registration is optional for enterprise having taxable
transactions not exceeding:
• NPR 10 lacs in case of services;
• NPR 20 lacs in case of goods; and
• NPR 10 lacs in case of goods and services combined
In all other cases, registration is mandatory
Applicable
transactions
• Taxable goods or services transacted in Nepal
• Taxable goods or services imported in Nepal
• Taxable goods or services exported from Nepal
VAT rate 13 percent
Note:
1. VAT on taxable goods or services exported from Nepal is levied at zero percent.
2. VAT on services imported by a taxpayer is payable under reverse charge system, i.e. by the taxpayer
receiving such services.
3. Credit of VAT on input purchases / import of taxable goods or services can be claimed.

11. Statutory tax filings – VAT
Particular
VAT return
(See note 1)
Transaction limit (during immediately
preceding 12 months)
Tax period
Voluntary registration 4 months
Less than NPR 20 lacs 4 months
NPR 20 lacs to NPR 1 crore 2 months
Exceeding NPR 1 crore 1 month
Deposit of VAT Before filing of return
Note:
1. VAT return is required to be filed within 25 days from the end of the tax period.
2. VAT amount payable at the end of a tax period comprises of total VAT collected less credit of input VAT

12. Corporate compliance – Branch office
 Audited Financials of the branch office no later than six months after
expiration of a financial year;
 Audited statement of expense and tax deduction no later than 3 months
after expiration of a financial year;
 Annual financial statements, audit report and report of BOD of the foreign
company within 3 months of being finalized in accordance with the legal
requirements of the jurisdiction of the foreign company;
 Statements prepared in a manner classifying the particulars of the fixed,
running and other properties held in the name of the foreign company
within Nepal;
 Clear details of cash held in the name of the foreign company with a bank
and financial institution situated in Nepal;
 Total amount of loans and liabilities, if any, due and payable by the foreign
company to any person who is a resident of Nepal or a Nepalese
company registered under this Act;

13. Repatriation of funds
 Funds repatriated by a PE of a foreign company (branch office) is
taxable at the rate of 5 percent under the Income Tax Act;
 For the purpose of repatriation of funds, branch office is required to
obtain permission from the central bank (Nepal Rastra Bank) along with a
recommendation of the Department of Industries;

14. The End
For further details, please contact:
Gaurav Raj Shrestha
M.no: +977-9841509481
E-mail: gauravrajshr@outlook.com