DOING BUSINESS IN NEPAL IN 2021
For over a decade, Healy Consultants Group PLC has assisted our Clients with business registration in Nepal. Our services include i) company incorporation ii) government license registration iii) business bank account opening iv) employee recruitment v) visa strategies and vi) office rental solutions.
|Compare different Nepal entities||LLC||Turnkey company||SEZ company||Tourism company||Representative Office|
|Also known as||सिमित दायित्वको सँस्था||टर्नकी कम्पनी||विशेष आर्थिक क्षेत्र कम्पनी||पर्यटन कम्पनी||प्रतिनिधि कार्यालय|
|Best use of company?||All products and services||All products and services||Manufacturing and trading||Tourism and culture||Marketing and research|
|How soon can you invoice Clients/sign sales contracts?||4 weeks||2 weeks||6 weeks||4 weeks||Cannot invoice|
|How soon can you hire staff?||4 weeks||2 weeks||6 weeks||4 weeks||6 weeks|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week||6 weeks|
|How long to supply corporate bank account numbers?||2 months||1 week||2 months||2 months||2 months|
|How long to supply company registration/tax numbers?||4 weeks||2 weeks||6 weeks||4 weeks||6 weeks|
|Corporate tax rate on annual net profits?||25%||25%||0% 1-5 yrs, 12.5% 5+ yrs||30%||No profits|
|Limited liability entity?||Yes||Yes||Yes||Yes||No|
|Government grants/incentives available?||Yes||Yes||Yes||Yes||Yes|
|Government approval required for foreign owners?||No||No||No||No||No|
|Resident director/partner/manager/legal representative required?||No||No||No||No||No|
|Minimum paid up share capital?||US$43,520||US$43,520||US$43,520||US$43,520||US$1|
|Can bid for Government contracts?||Yes||Yes||Yes||Yes||Yes|
|Corporate bank account location?||SCB Nepal||Nepal Bank Limited||RBB Nepal||Himalayan Bank Limited||Nepal SBI|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes|
|VAT payable on sales to local customers?||13%||13%||0% / 13%||13%||N/A|
|Average total business set up engagement costs?||US$14,500||Request a proposal||Request a proposal||Request a proposal||US$17,200|
|Average total engagement period?||2 months||3 weeks||3 months||2 months||3 months|
Nepal company registration summary
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Advantages and disadvantages
Advantages of Nepal company registration
- A limited liability company in Nepal can be registered with a minimum of one shareholder and one director of any nationality. The minimum paid-up capital required for incorporation is US$1 and, contrary to most foreigners’ expectations, the process can be completed within 1 month and does not require our Client to travel;
- While Nepal is landlocked, the country’s close proximity to the large markets of China and India makes Nepal a good platform to engage in trade with these two countries;
- English is widely spoken by the people of Nepal and is the primary business language. Business documents are mainly available in English therefore translation costs and time can be saved when conducting business. Books of accounts can be maintained in English at the company’s registered office in Nepal and foreign investors will easily communicate with employees, customers and suppliers;
- Business operation costs are low in Nepal because i) the average monthly salary of the staff in Nepal is US$119.6 according to the World Bank, ii) office space annual rent is approximately US$12 per square foot and iii) business between Nepal and neighboring countries is easy as the country is connected both by road and cheap flights;
- The Nepal government is in the process of establishing Special Economic Zones which will offer a number of investment incentives such as i) exemption from corporate tax and VAT ii) no duties on imports iii) no capital controls and iv) easier visa requirements for expat staff;
- In Nepal tourism comprises about 4% of the gross national product. The country is home to 8 of the world’s highest mountains, including the highest mountain in the world, Mount Everest and is also the country where Gautama Buddha was born. Tourism has grown by 8% between January – October 2019 compared to same period in 2018 and therefore there is lots of growth potential which foreign investors can tap into;
- All trading and manufacturing companies in Nepal are most likely to benefit from the country’s ease of access to the world market through its various bilateral and trading partnerships such as in the WTO. Additionally, it is also a member of the BIMSTEC and SAARC which enables the Nepalese companies to diversify their exports and reach a dynamic consumers market of the South-East Asia. Moreover, Nepal has 17 bilateral trade agreements with India and China.
Disadvantages of Nepal company registration
- Our Clients should anticipate low sales in Nepal as this is one of the world’s poorest and least developed countries and suffers from very little foreign direct investment. The main industry here is agriculture which accounts for one-third of the country’s GDP which is US$2.3 billion. Other factors that contribute to low sales in Nepal include i) around 15% of the population earn less than US$2 per day and ii) about 80.26% of Nepal’s population live in rural areas;
- Bureaucracy and lack of transparency make company registration in Nepal burdensome and costly. Obtaining necessary licenses to do business is time-consuming. Healy Consultants will be happy to help you handle your administrative requirements. Nepal is ranked negatively as 135th out of 190 by World Bank in the ease of doing business;
- Doing business in Nepal will be very challenging for our Client because i) corruption is endemic and local bureaucrats will expect gifts to speed up procedures and cut through red tape ii) our Clients will have to rely on their own funds to finance their business projects, as Nepal’s ease of access to loans score is just 3.9 out of 7 iii) any business dispute is likely to turn into a nightmare, as it will take the courts more than three years to enforce a business contract and over 50% of potential business partners and competitors will be unregistered;
- In Nepal, local workers often do not meet international standards of competence and productivity. Entrepreneurs should anticipate low-skilled labor and low output;
- Nepal is a landlocked country with very poor roads, no railroads and Kolkata docks which is the closest harbor, is 221 kilometers away in India therefore making it quite difficult to transport products within as well as out of the country. According to World Bank’s Doing Business in Nepal the cost of exporting a container from Nepal is US$2,545 which is quite high in comparison to other South Asia countries where it costs US$1,923. Furthermore, it takes almost two months for products shipped from abroad to clear customs;
- Electricity blackouts in Nepal constantly disrupt business operations and to counter this, our Client may have to invest in a backup generator. World Bank data shows that the percentage of sales lost due to electrical power outages in Nepal is 17%;
- Political instability is rife in Nepal. Protection for property rights are not enforced properly and consequently Nepal is negatively ranked as the 124th least corrupt country on the 2018 Corruption Perceptions Index by Transparency International;
- All companies incorporated in Nepal suffer from inadequate and poor supply of infrastructural facilities in the country:
- Nepal has been poorly ranked in the 119th position (out of 137 countries) for its poor infrastructural facilities in 2017 Global Competitiveness Index;
- There are major gaps in the facilities provided in the plains, elevated flatland, and hilly region;
- The road network and connectivity in Nepal is poor due to its rugged terrains. This further hinders the market access for businesses in the country.
Best uses for a Nepal company
Businesses in Nepal benefit from low labour costs in the country, making it a good location for carrying out work that requires large amounts of unskilled labour. The country’s population of 30 million can meet most manufacturers’ needs. However, since the country is landlocked and lined with mountains, distribution of manufactured goods is more difficult. Consequently, exports of finished products will need to go via India.
Frequently asked questions
Will I need a resident director when I register a company in Nepal?No. Our Clients do not require a resident director when registering a company in Nepal. The directors and shareholders of a Nepalese LLC can be resident anywhere in the world.
Following Nepal business registration, in which bank should I open a corporate bank account?
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Useful links for Nepal