Foreign Direct Investment (FDI) in IT Company in Nepal: IT Business 2025

FDI Lawyer in Nepal

Table of Contents

    Introduction

    Nepal is positioning itself as an attractive destination for foreign direct investment (FDI) in the information technology (IT) sector. With a rapidly growing digital economy, increasing internet penetration, and a tech-savvy young workforce, the country offers tremendous opportunities for foreign investors interested in launching IT startups, outsourcing firms, or software development companies.

    This article serves as a detailed guide for foreign investors looking to establish IT companies in Nepal. From regulatory processes and visa facilities to tax benefits and company setup, we’ve covered everything you need to know in 2025.

    Why Nepal for IT Investment?

    Nepal’s IT sector has undergone significant transformation over the past decade. Here’s why it makes sense for foreign entrepreneurs to consider Nepal for tech investments:

    a. Skilled Human Resource

    Each year, Nepal produces thousands of IT graduates from universities and colleges. The talent pool is well-versed in:

    • Web and mobile app development
    • Software engineering
    • Digital marketing
    • Cloud services
    • AI and machine learning

    b. Low Operational Costs

    Operating costs in Nepal are significantly lower than in many Asian tech hubs. Startups benefit from:

    • Affordable office space
    • Low wages compared to India or the Philippines
    • Reduced utility and overhead expenses

    c. Export-Oriented IT Services

    Nepal encourages export-based IT services. Foreign clients (USA, UK, Australia, Canada, etc.) regularly outsource to Nepali companies for BPO, software development, and customer service.

    d. Government Support

    The Government of Nepal offers:

    • Full foreign ownership in IT businesses
    • Tax rebates and repatriation benefits
    • Simplified visa procedures for investors and staff

    Legal Framework Governing FDI in IT Sector

    Foreign investment in Nepal is governed primarily by:

    • Foreign Investment and Technology Transfer Act (FITTA), 2019
    • Industrial Enterprises Act, 2020
    • Companies Act, 2006
    • Nepal Rastra Bank Directives

    These laws ensure the protection of foreign investments, enable profit repatriation, and regulate investor rights.

    Under FITTA, 100% foreign ownership is allowed in most IT service sectors, including:

    • Software development
    • Website/app development
    • IT consulting
    • Cloud and hosting services
    • Data analytics
    • Cybersecurity
    • IT-enabled services (ITES)
    • Business Process Outsourcing (BPO)
    • Knowledge Process Outsourcing (KPO)

    Types of IT Companies Eligible for FDI

    Foreign investors can set up various forms of IT entities in Nepal, such as:

    • Private Limited Company – Ideal for small to medium IT firms; allows up to 50 shareholders.
    • Public Limited Company – Suitable for large-scale IT projects intending to raise capital from the public.
    • Joint Venture (JV) Company – A partnership between a foreign investor and a Nepali individual/entity.
    • Branch Office/Project Office – For foreign companies executing a specific IT project or service.

    Step-by-Step Guide to Investing in an IT Company in Nepal

    Here’s a detailed process for registering an IT company in Nepal with foreign investment:

    Step 1: Project Proposal Submission to Department of Industry (DOI)

    Submit the following:

    • Application for foreign investment
    • Detailed business plan
    • Passport of foreign investor(s)
    • Shareholding structure and capital investment
    • Joint venture agreement (if applicable)
    • Power of attorney

    DOI will issue a Letter of Approval for FDI in the IT sector.

    Step 2: Company Registration at the Office of Company Registrar (OCR)

    Register a company by submitting:

    • Memorandum of Association (MOA)
    • Articles of Association (AOA)
    • Passport copies of shareholders
    • Company name reservation
    • Paid-up capital commitment

    A Private Limited Company is the most common choice.

    Step 3: Open a Foreign Investment Account

    • Open a foreign currency account in a commercial bank in Nepal.
    • Transfer investment amount from the investor’s home country through official banking channels.
    • Bank issues a Remittance Confirmation Letter.

    Step 4: Share Allotment and Reporting

    • Allot shares to foreign investor.
    • Submit evidence of share allotment to DOI along with remittance proof.

    Step 5: Industry Registration

    For export-based IT companies or those requiring special incentives, register with DOI as an industry entity.

    Step 6: PAN/VAT Registration

    • Obtain Permanent Account Number (PAN) from Inland Revenue Office.
    • VAT registration is optional unless revenue exceeds the threshold or for service exporters.

    Visa Facilities for Foreign IT Investors and Employees

    Nepal offers flexible visa facilities for foreign investors and IT professionals:

    a. Business Visa (For Investors)

    • Available to all foreign investors regardless of the investment amount.
    • Multiple-entry visa for up to one year, renewable annually.
    • Allows you to live, invest, and work on business activities in Nepal.
    • Can be extended indefinitely with proof of ongoing investment and operations.

    b. Non-Tourist Visa (Working Visa)

    • Granted to foreign nationals employed in a registered IT company in Nepal.
    • Requires recommendation from the Department of Labor and DOI.
    • Usually valid for 1 year and renewable.

    c. Dependent Visa

    • Available for family members (spouse and children) of investors and foreign workers.

    d. Residential Visa (For Large-Scale Investors)

    • Granted to individuals investing over NPR 100 million (~USD 750,000).
    • Offers long-term residency rights in Nepal.

    Minimum Investment and Capital Requirements

    a. No Minimum Threshold for IT FDI

    Unlike other industries (which may require a minimum NPR 20 million for certain sectors), IT companies do not require a minimum investment threshold for registration.

    However, to qualify for benefits such as residential visas or industry-level incentives, the investment amount may be relevant.

     Taxation, Repatriation & Incentives

    a. Corporate Taxation

    • Standard corporate income tax for IT companies: 25%
    • Export-based IT services qualify for tax rebates or reduced tax rates up to 75%.
    • Software royalties and fees may attract withholding tax if paid to foreign entities

    b. Repatriation of Profits

    Foreign investors are entitled to repatriate:

    • Dividends
    • Sale proceeds
    • Technology transfer royalties
    • Loan repayments
      Subject to tax clearance and NRB (Nepal Rastra Bank) approval.

    c. Tax Incentives

    • 100% tax exemption for income generated through exports (up to a certain period)
    • Custom duty waivers on import of equipment related to IT services
    • Avoidance of double taxation through DTA agreements with countries like India, China, and the UK

    Challenges and Compliance Considerations

    a. Bureaucracy and Delays

    • Government approvals (DOI, OCR, NRB) can take time due to paperwork and procedural delays.

    b. Currency Exchange Control

    • Repatriation and conversion of profits require NRB permission and documentation.

    c. Labour Permits

    • Hiring foreign employees requires a work permit from the Department of Labour.

    d. Compliance Burden

    • Monthly tax filings, annual audits, and regulatory reporting are mandatory.

    e. Intellectual Property Protection

    • While IP laws exist, enforcement mechanisms are still developing.

    FAQs on FDI for IT in Nepal

    Q1. Can I own 100% of an IT company in Nepal as a foreign national?
    Yes. Nepal allows 100% foreign ownership in IT companies.

    Q2. Do I need a Nepali partner?
    No, a local partner is optional, not mandatory.

    Q3. What is the validity of a business visa?
    One year, with multiple renewals as long as investment continues.

    Q4. Can profits be sent back to my home country?
    Yes, after paying applicable taxes and getting approval from Nepal Rastra Bank.

    Q5. How long does it take to register a company with foreign investment?
    Typically 4–6 weeks if documents are complete.

    How Onesphere Law Associates Can Assist

    As a leading corporate law firm in Nepal, Onesphere Law Associates specializes in helping foreign investors:

    • Draft investment proposals and business plans
    • Register IT companies and joint ventures
    • Process foreign investment approvals
    • Handle visa applications for investors and staff
    • Provide ongoing legal and tax compliance support
    • Repatriate profits legally and smoothly

    Contact us today for a free consultation on your IT business venture in Nepal.

    Conclusion

    Foreign direct investment in Nepal’s IT sector is an exciting and viable opportunity for global entrepreneurs, startups, and technology firms. With minimal entry barriers, supportive government policies, and a growing talent pool, Nepal is an ideal launchpad for IT services targeting South Asia and beyond.

    Whether you want to establish a software development center, set up a BPO, or launch an AI startup, the environment is favorable and the time is now.