Setting Up a Company in Nepal
Nepal's hydropower potential, strategic position between India and China, and improving investment framework make it an emerging destination for energy, tourism and manufacturing investors.
Nepal is a landlocked South Asian economy of 30 million people with enormous untapped hydropower capacity (estimated 83 GW) and proximity to two of the world's largest consumer markets — India and China. The Foreign Investment and Technology Transfer Act (FITTA) 2019 consolidated and liberalised Nepal's FDI framework, and the Investment Board Nepal (IBN) facilitates large investments through an expedited one-stop service.
Key facts for 2026
| Parameter | Detail |
|---|---|
| Corporate income tax | 25% (standard); 20% for manufacturing; 20% for hydropower (15% in priority areas) |
| VAT | 13% (standard rate) |
| Foreign ownership | 100% permissible for most sectors (minimum USD 100,000 investment) |
| Hydropower tax holiday | Up to 10 years for new hydropower projects |
| Profit repatriation | Permitted after tax; requires NRB approval |
FITTA 2019 — FDI framework
The Foreign Investment and Technology Transfer Act (FITTA) 2019 set a minimum FDI threshold of NPR 20 million (approximately USD 150,000) for foreign investment registration. Foreign investors can own up to 100% in most sectors. A Negative List restricts foreign investment in cottage industries, personal service industries, arms, atomic energy and certain professional services. For investments above NPR 6 billion, the Investment Board Nepal provides a dedicated fast-track approval process.
Hydropower — Nepal's flagship sector
Nepal's water resources represent a unique investment opportunity — the country has developed less than 3% of its estimated 83 GW hydropower potential. The government actively seeks foreign investment in hydropower through competitive licensing and Power Purchase Agreements (PPAs) with the Nepal Electricity Authority (NEA). New hydropower projects benefit from a 10-year income tax holiday, extended to 15 years in remote areas. Nepal has executed power export agreements with India and is developing transmission capacity to Bangladesh.
The incorporation process
- Register a Private Limited Company with the Office of the Company Registrar (OCR).
- Obtain FDI approval from the Department of Industry (DOI) or Investment Board Nepal (for large projects).
- Obtain a permanent account number (PAN) from the Inland Revenue Department.
- Register for VAT if annual turnover exceeds NPR 5 million.
- Open a corporate bank account; obtain Nepal Rastra Bank (NRB) approval for the foreign investment account.
Frequently asked questions
Can a foreigner own 100% of a Nepal company?
Yes, for most sectors under FITTA 2019, with a minimum investment of NPR 20 million (≈ USD 150,000). A Negative List restricts cottage industries, personal services and certain professional activities.
What is the corporate tax rate in Nepal?
25% standard; 20% for manufacturing; 20% for hydropower (15% in priority areas). New hydropower projects receive a 10–15 year income tax holiday.
What is the VAT rate in Nepal?
13% standard rate. Mandatory registration above NPR 5 million annual turnover. Exports are zero-rated.
Official sources
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal advice. Confirm with IBN or a Nepal-qualified advisor before investing.