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Doing Business in Nepal

The growth of the Nepal economy in recent years has made it a popular new location for global expansion. Read on to find out more about doing business in Nepal. 

Nepal’s strong economic growth, coupled with its improving ease of doing business ranking in international reports, highlights its appeal to global businesses. Additionally, its young and skilled workforce, combined with a growing consumer market, presents promising opportunities for investment and expansion.

Here we look at how to do business in Nepal, and which companies your business should partner with there. 

Nepal and Asia Business Guides

Introduction to the Nepal Economy

Nepal’s economy has a rich historical context deeply rooted in agriculture and trade: For centuries, it relied on subsistence farming and trade routes connecting Tibet and India. In the mid-20th century, Nepal transitioned from a predominantly agrarian economy to a more diverse one, with the growth of sectors like tourism and remittances from Nepali workers abroad. However, political instability and a decade-long civil war hindered economic development.

In recent years, Nepal’s economy has shown signs of growth and modernization. The country has made efforts to improve infrastructure, expand access to education, and promote foreign investment. Additionally, tourism continues to be a significant contributor to the economy, with visitors attracted to Nepal’s stunning natural beauty and cultural heritage. However, challenges remain, including a heavy reliance on remittances, inadequate infrastructure in many areas, and political instability. Nepal’s economic development is a complex and evolving process, with various factors shaping its trajectory.

An Overview of Doing Business in Nepal

Doing business in Nepal means navigating a regulatory environment that has seen improvements, but still presents some difficulties. The government of Nepal has taken steps to simplify and streamline business procedures in recent years, making it easier for both domestic and foreign investors to start and operate businesses. However, some bureaucratic hurdles, such as obtaining permits and licenses, can still be time-consuming and require patience. Additionally, issues related to corruption and inconsistent enforcement of regulations remain concerns in the business environment.

It’s worth noting that Nepal has introduced policies and incentives to attract foreign investment, particularly in sectors like hydropower, tourism, and information technology. The country’s Special Economic Zone (SEZ) program offers tax benefits and infrastructure support to encourage investment. While these initiatives are promising, potential investors should conduct thorough due diligence and seek legal counsel to navigate the regulatory landscape effectively and ensure compliance with local laws and regulations when doing business in Nepal.

Nepal Market Entry Strategies

1. Setting up an Entity in Nepal

Setting up a legal entity in Nepal is a common market entry strategy for businesses looking for a more permanent and direct presence in the country. Here are key steps to consider:

  • Choose a Business Structure: Determine the most suitable legal structure for your business, which can be a private limited company, partnership, or branch office. Each structure has its own requirements and implications for taxation and liability.

  • Register Your Business: Register your company with the Department of Industry (DOI) and obtain the necessary licenses and permits, which can vary depending on your industry.

  • Compliance and Taxation: Ensure compliance with Nepal’s tax regulations, including VAT and income tax. It’s advisable to seek local legal and financial expertise to navigate the tax landscape effectively.

  • Hiring and Employment: Hire and manage local employees, complying with labor laws and regulations. Establish employment contracts, payroll, and benefits packages in accordance with Nepali employment law.

2. Engage an Employer of Record (EOR) in Nepal

Using an Employer of Record (EOR) in Nepal involves outsourcing the employment-related responsibilities for your local workforce. With an EOR, you can quickly establish a presence in Nepal without the need to set up a legal entity. The EOR becomes the legal employer of your local employees, handling payroll, taxes, benefits, and compliance with Nepali labor laws. This approach streamlines market entry, ensures compliance, and mitigates legal and financial risks associated with employment in Nepal.

3. Engage a Professional Employer Organization (PEO) in Nepal

Using a Professional Employer Organization (PEO) in Nepal entails a partnership where the PEO becomes the co-employer of your local workforce. PEOs offer comprehensive HR services, including recruitment, payroll processing, benefits administration, and compliance management. They provide expertise in navigating Nepal’s labor laws and can assist in scaling your workforce as needed. This option offers businesses a broader range of HR support and is suitable for those seeking comprehensive HR solutions in Nepal while sharing certain employer responsibilities with the PEO.

Nepal Market Opportunities and Challenges

Expanding your business into China brings both benefits and challenges. We consider some of the main ones below. 


  • Hydropower and Renewable Energy: Nepal has abundant water resources and potential for hydropower generation. There are numerous opportunities for investment in hydropower projects, both for domestic consumption and export to neighboring countries like India.
  • Tourism: Nepal is known for its breathtaking natural beauty, trekking trails, and cultural heritage. The tourism sector presents significant opportunities for hospitality, adventure tourism, and related services.
  • Agriculture and Agribusiness: Agriculture is a vital sector in Nepal. There are opportunities for agribusiness, including organic farming, food processing, and export of agricultural products.
  • Information Technology (IT) and Outsourcing: Nepal is emerging as an IT outsourcing destination due to its skilled workforce and cost advantages. IT-related services, software development, and outsourcing are growing sectors.
  • Infrastructure Development: Nepal requires substantial infrastructure development, including roads, airports, and urban infrastructure. There are opportunities for construction and engineering firms to participate in these projects.


  • Political Instability: Nepal has experienced political instability and frequent changes in government, which can create uncertainty for businesses.
  • Infrastructure Deficiencies: Inadequate transportation infrastructure and access to electricity can hinder business operations, particularly in rural areas.
  • Regulatory Complexity: Navigating the regulatory environment, including tax laws and labor regulations, can be complex and time-consuming.
  • Limited Access to Finance: Access to financing and capital for businesses can be limited, particularly for small and medium-sized enterprises (SMEs).
  • Geopolitical Constraints: Nepal’s landlocked status and dependency on neighboring countries for trade can expose businesses to geopolitical risks and trade disruptions.

Doing Business in Nepal — How Straightforward Is It?

Doing business in Nepal — are you ready?

Doing business in Nepal offers a range of unique benefits, including access to a young and skilled workforce, strategic proximity to two economic giants, India and China, and opportunities in sectors such as hydropower, tourism, and information technology. While challenges exist, Nepal’s government is actively working to improve its business environment and infrastructure. With the right strategy, businesses can tap into Nepal’s potential, contribute to its economic development, and find success in this dynamic and promising market.


Nepal has made efforts to improve its ease of doing business, but challenges remain. To navigate its regulatory environment, businesses should consider using local experts or legal advisors who are well-versed in Nepal's laws and regulations.

Yes, Nepal offers incentives to attract foreign investment, including tax holidays, reduced customs duties on certain imports, and preferential treatment for certain industries like hydropower and tourism. The Special Economic Zone (SEZ) program provides further benefits, including tax exemptions and infrastructure support.