Detailed Process of Establishing a Foreign Branch Office
Establishing a foreign branch office in Nepal requires following a structured and legal process as per Nepalese laws. The Companies Act, 2006, Foreign Investment and Technology Transfer Act (FITTA), 2019, and Industrial Enterprises Act, 2020 govern the registration and operation of foreign entities. Foreign companies intending to establish a presence must fulfill regulatory requirements and submit their application to the Department of Industry (DoI). The process includes verifying the parent company’s legitimacy, fulfilling documentation requirements, obtaining licenses, and registering with tax and banking institutions.
Initial Registration with the Department of Industry
The first formal step is submitting an application for registration to the Department of Industry. The DoI evaluates whether the proposed business complies with Nepalese laws, including FITTA 2019. The application must specify the business sector, investment amount, and other relevant details. This step ensures the business activity is allowed and meets eligibility requirements. The Department of Industry issues a foreign investment approval letter if the application is accepted. This approval is necessary before proceeding to further registrations.
Submission of Application and Relevant Documents
Foreign companies must submit an application form with a complete set of required documents. These include the parent company’s registration certificate, board resolution, Memorandum and Articles of Association, and financial reports. All documents must be notarized and translated into Nepali. The Department of Industry verifies these documents. Any missing or inaccurate details may delay the process. The applicant must also appoint a local representative to correspond with authorities in Nepal.
Required Documents:
- Certified copy of Certificate of Incorporation
- Memorandum and Articles of Association
- Board Resolution authorizing branch setup
- Audited financial statements of the parent company
- Power of Attorney and local representative details
- Application form duly filled
- Passport copies of authorized signatories
Verification of Company’s Foreign Status
The Department of Industry verifies the applicant company’s legal standing in its home country. This includes reviewing its registration, financials, and authority to operate internationally. Documents must be certified by the Nepalese embassy or consulate in the parent country. Verification is critical to ensure only legitimate companies are allowed to establish operations in Nepal. In some cases, additional clarification may be requested from the applicant.
Obtaining the Necessary Approvals and Licenses
Once the foreign status is verified, the company must obtain several regulatory approvals. These include the industry-specific operating license, environment clearance (if applicable), and investment approval. If the company engages in restricted or regulated industries, additional sector-specific licenses may be required. The Department of Industry works in coordination with other ministries for issuing these clearances.
The Role of the Nepal Investment Board in Registration
For large-scale foreign investments exceeding NPR 6 billion, the Nepal Investment Board (NIB) is the primary authority. The NIB evaluates investment proposals and grants foreign investment approval for high-value projects. This is outlined in the Investment Board Act, 2011. Projects approved by the NIB receive facilitation services such as fast-track clearance and assistance with land acquisition, utility connection, and more.
Interaction with the Central Bank for Foreign Currency Remittance
Foreign companies must register with Nepal Rastra Bank (NRB) to remit investment funds. This ensures proper channeling of foreign currency into Nepal. The company must open a foreign currency account and submit details of investment inflow. NRB also monitors compliance with foreign exchange regulations and issues a Foreign Investment Certificate. This registration is required for repatriation of profits or closure of the branch office.
Establishment of a Business Address and Office Space
A registered business address is required during the application stage. The company must provide proof of tenancy or ownership of office space in Nepal. This is mandatory for receiving communication and inspections from government departments. The office should comply with local zoning laws and be fit for the intended business activity. The lease agreement or ownership deed must be submitted as part of documentation.
Recruitment and Employment of Local Staff
Hiring local staff is subject to Nepalese labor laws and employment standards. Companies must comply with minimum wage requirements, working conditions, and social security contributions. Labor registration is done at the Labor Office. Employment contracts must clearly define terms of work, benefits, and dispute resolution mechanisms. Foreigners employed in Nepal must obtain a work permit from the Department of Labor and a visa from the Department of Immigration.
Filing for Tax Registration and Compliance
After obtaining the operating license, the company must register with the Inland Revenue Department for tax purposes. This includes obtaining a Permanent Account Number (PAN) and Value Added Tax (VAT) registration, if applicable. Regular tax filings, advance tax payments, and annual returns must be filed. The tax registration is a mandatory requirement to commence commercial operations. Non-compliance may result in penalties and license suspension.
Completing the Required Paperwork with Local Authorities
The company must complete paperwork with various government departments to begin full-fledged operations. This includes registration with the local ward office, municipality, and labor department. Safety inspections, waste disposal approvals, and local industry-specific permits may be required. Each authority has its own timeline and process, which must be followed precisely to avoid delays. A legal representative often facilitates this paperwork.
Opening a Business Bank Account in Nepal
A company must open a business account with a commercial bank in Nepal to manage operations. The account must be in the name of the branch office. Banks require submission of the branch registration certificate, PAN, passport copies of authorized signatories, and proof of address. A foreign currency account is also required to receive investment inflow. This account is subject to oversight by Nepal Rastra Bank.
Registration with the VAT Department
Companies involved in trading or taxable services must register with the VAT Department under the Inland Revenue Department. This allows them to issue VAT invoices and claim input VAT credit. VAT registration requires submission of PAN, business registration certificate, office details, and other financial information. Once registered, the company must file monthly VAT returns and comply with tax audits as per the Value Added Tax Act, 2052 (1996).
Post-Registration Requirements and Ongoing Compliance
Once the branch office is registered and operating, it must fulfill ongoing compliance obligations. These include filing annual returns, renewing business licenses, and submitting audited financial reports. Any changes in business structure, address, or management must be reported to the Department of Industry and relevant authorities. Companies must also ensure compliance with labor laws, tax laws, and foreign exchange regulations continuously.
Final Approval and Business Commencement
After all legal requirements are completed, the company receives final approval to begin operations. This includes acknowledgment from the Department of Industry, tax authorities, and bank confirmations. The business can now operate commercially, hire staff, engage in sales or services, and generate revenue. A commencement certificate may be required in certain sectors before launching full operations.
FAQs
How do I register a branch office in Nepal?
Submit an application to the Department of Industry along with documents and obtain approval. Then register with tax and banking authorities.
What documents are required for registration?
You need incorporation documents, financial statements, board resolution, power of attorney, and identification of authorized persons.
How long does the registration process take?
It typically takes 2 to 3 months depending on the complexity of documentation and approval timelines.
Do I need to get approval from the Nepal Investment Board?
Only if your investment exceeds NPR 6 billion or is in specific high-priority sectors.
Are there any special licenses for foreign companies?
Yes, certain sectors require additional industry-specific licenses before operation.
How do I get my business address registered?
Provide a lease agreement or ownership deed during registration and inform local authorities.
What is the role of the central bank in registration?
Nepal Rastra Bank approves foreign currency inflows and issues the Foreign Investment Certificate.
Is there any paperwork involved in opening a bank account?
Yes, banks require company registration documents, tax numbers, and signatory details.
Are there any post-registration requirements?
Yes, you must file annual returns, renew licenses, and comply with local labor and tax laws.
How do I complete my VAT registration?
Apply through the Inland Revenue Department by submitting your PAN, registration certificate, and office details.