Startup Support

Legal foundations for founders and growth-stage companies

Starting and scaling a business in Nepal calls for clear legal foundations. Kharel & Pant Law Associates advises founders, SMEs and growth-stage companies on start-up recognition under the Industrial Enterprises Act, registration with the Department of Industries, foreign investment, fiscal incentives and the government's concessional loan scheme for start-up industries.

Services

Choose a category to explore

Open Recognition & Registration, Foreign Investment & Incentives, or the Concessional Loan Scheme below to review the framework, process and practical considerations for that topic on its own.

Recognition & Registration Becoming a recognised start-up Start-up eligibility criteria, choosing between a sole proprietorship, partnership or company, the Department of Industries registration sequence and the documents needed to file.

Framework

A formal legal status, built on four instruments

Nepal formally introduced "start-up" as a legal category through the Investment Facilitation Act, 2024 (2081), which amended the Industrial Enterprises Act, 2020 (2076) (the "IEA") on 8 July 2024, and the first amendment to the Industrial Enterprises Rules, 2022 (2078) (the "IER"), which followed on 10 March 2025. Together with the Procedure regarding Loan Management of Start-up Enterprises, 2025 (2082) (the "Procedure") and the Companies Act, 2006 (2063), these instruments set out who qualifies as a start-up, how a start-up industry is registered, what fiscal incentives apply, and how the concessional loan scheme is administered.

Age limit 10 years

A business must not have exceeded ten years from its date of registration to qualify as a start-up.

Turnover ceiling NPR 150M

Annual turnover after registration must not exceed NPR 150 million; for tax exemption purposes the relevant threshold is NPR 100 million.

Registration time 20 to 30 days

Approximate time for the Department of Industries to register a qualifying business as a start-up industry.

Operating deadline Within 1 year

A registered start-up industry must begin operations within one year of registration and notify the DOI.

Eligibility

What qualifies as a start-up

The Industrial Enterprises Act classifies industries primarily by capital and nature of business. A start-up can fall within any of these categories, but it must also meet a set of additional criteria before the Department of Industries will recognise it as a start-up industry.

Registration and age

The business must be registered as a new company, sole proprietorship firm or partnership firm, and must not have exceeded ten years from the date of that registration.

Innovation and growth potential

The business must use innovative ideas or technology in producing its goods or services, and must be capable of upgrading rapidly as it scales.

Turnover ceiling

Annual turnover in any fiscal year after registration must not exceed NPR 150 million. For tax exemption purposes, the relevant threshold is NPR 100 million.

Because the start-up concept sits within the Industrial Enterprises Act, a start-up is generally expected to be engaged in industrial activity. The Act does not explicitly clarify whether non-industrial activities, such as trading businesses, also fall within the start-up definition, so this should be checked against current guidance for the specific business activity.

Structure

Choosing a business vehicle

A start-up business in Nepal can be set up as a sole proprietorship firm, a partnership firm or a company. The choice affects liability, founder structure, the registering authority and minimum capital.

Sole proprietorship firm

Governed by the Private Firm Registration Act, 1958 (2014). One founder, no separate legal personality and unlimited liability. Registered with the Department of Commerce, Supplies and Consumer Protection, with no specified minimum capital.

Partnership firm

Governed by the Partnership Act, 1964 (2020). Minimum two founders with no specified maximum, no separate legal personality and unlimited liability. Registered with the Department of Commerce, Supplies and Consumer Protection, with no specified minimum capital.

Company

Governed by the Companies Act, 2006 (2063). Separate legal personality and limited liability. A private company needs one to 101 shareholders with no specified minimum capital; a public company needs at least seven shareholders and minimum paid-up capital of NPR 10 million. Registered with the Office of the Company Registrar.

Whichever vehicle is chosen, an additional approval from the relevant regulatory authority may still be required depending on the nature of the business.

Registration Path

A practical registration sequence

Registering a business vehicle does not, by itself, confer start-up status. The steps below cover the underlying business registration and the application for recognition as a start-up industry.

Register the business vehicle

Incorporate as a sole proprietorship, partnership or company, obtaining any regulatory approval the nature of the business requires.
Register at the local ward office

Register the business at the local level office (ward office) covering the business vehicle's location.
Complete tax registration

Obtain a PAN certificate from the relevant Inland Revenue Office. VAT registration is compulsory only where annual turnover reaches NPR 5 million for goods, or NPR 3 million for combined goods and services.
Apply to the Department of Industries

Submit the start-up registration application together with the supporting documents to obtain recognition as a start-up industry.
Open a business bank account

A business account with a commercial bank in Nepal is required before the start-up industry can carry out any transaction.
Address environmental requirements

Depending on the nature of the business, the Environmental Protection Act and Rules may require an environmental study before operations begin.
Register the brand

Trademark registration with the DOI under the Patent, Design and Trademark Act can be filed alongside or after start-up registration.

Documents

Documents to prepare for DOI registration

The exact set depends on the business vehicle, ownership and the nature of the business, but applications to the Department of Industries generally draw on the following categories.

Identity and incorporation

Citizenship certificate, or passport for any foreign citizen, one set copy
Firm registration certificate, or company registration certificate
Memorandum and Articles of Association
Authorisation letter, if someone has been authorised to submit the application

Ownership and approvals

Approval of foreign investment, if the start-up is operated with foreign investment
Partnership agreement, if the start-up is operated with partners
Board approval, for industries listed in Schedule 1

Financial and declaration

Last year's annual audit report, for an operating firm or company
Information reflecting financial status, for a non-operative firm or company
Self-declaration on the use of innovative ideas and technology in producing the goods or services

This page is a general overview only. We would recommend taking professional legal advice from us before registering, structuring or operating a start-up in Nepal.

Funding & Incentives Foreign investment and fiscal incentives Foreign investment routes into start-ups, the tax holiday and other fiscal incentives, and the compliance needed to keep start-up status.

Funding

Foreign capital and government incentives, side by side

Start-ups can raise foreign direct investment through equity, loans and other routes recognised under the Foreign Investment and Technology Transfer Act, 2019 (2075) ("FITTA") and its Rules of 2021 (2077) ("FITTR"). Alongside private capital, the government also offers tax-based incentives intended to help recognised start-ups reach commercial scale.

Minimum FDI NPR 20M

Minimum foreign investment threshold under FITTA and FITTR, the same as the general minimum applicable to other sectors.

Approving bodies DOI & NRB

The Department of Industries and Nepal Rastra Bank are the principal approving entities for foreign investment in a start-up.

Tax holiday 100% / 5 years

Full income tax exemption for five years from commercial operation, for start-ups specified by the Inland Revenue Department.

Seed deduction NPR 100,000 x 5

Seed funding of up to NPR 100,000 to each of five different start-ups can be deducted as an expense by the funder.

Foreign Investment

Foreign investment in start-ups

The prevailing laws of Nepal do not impose start-up specific restrictions on foreign direct investment. The general FITTA and FITTR framework applies, with the same sector screening that applies to foreign investment generally.

Permissibility

No restriction specific to start-up industries. The proposed business activity must fall within the "industry" categories of the positive list under the Industrial Enterprises Act, and must not fall within FITTA's negative list.

Stage of investment

The law does not specify a particular stage. Foreign investment can be made while registering the business vehicle, or brought in afterwards, subject to the minimum investment threshold and the usual approval steps.

Approving entities

The Department of Industries approves the foreign investment itself, while Nepal Rastra Bank coordinates the foreign exchange inflow, recordal and related banking-channel requirements.

For the detailed equity and loan approval sequence, sector screening and authority map that applies to foreign investment generally, see our Foreign Investment page.

Incentives

Fiscal incentives for start-up industries

The government has introduced several tax-based incentives to encourage recognised start-up industries. The headline measures are summarised below.

Tax holiday

A 100% income tax exemption for five years from the date of commercial operation, available to start-up industries specified by the Inland Revenue Department.

Tax deduction on seed investment

An entity that provides seed funding of up to NPR 100,000 to each of five different start-up industries may deduct the total investment amount as an expense when calculating its own taxable income.

Exemption on change of control

Start-up venture capital firms and private equity funds are exempt from liabilities that would otherwise arise on a change of control when a start-up raises new capital and brings in new shareholders, provided the shareholding and capital of existing shareholders remain unaffected.

Sector-specific incentives

Depending on its activity, a start-up may also qualify for further concessions under the Industrial Enterprises Act or the Income Tax Act, for example a 75% tax exemption for information-technology related industries. An industry cannot benefit from both a sector-specific incentive and the start-up incentives at the same time.

Staying Compliant

Keeping start-up status, and what happens if it ends

Start-up status and its incentives are not permanent. The points below cover when start-up status ends, licensing, and the labour law obligations that apply once a start-up begins hiring.

De-registration triggers

A start-up industry loses its status once ten years have passed since registration, once its annual turnover for any fiscal year exceeds NPR 10 crore (NPR 100 million), or if it is de-registered under the applicable laws.

Licensing

There is no separate licence to operate as a start-up industry. Project-specific licences required by the nature of the business and the relevant regulatory laws still apply.

Labour law and SSF

A start-up industry must comply with the Contribution Based Social Security Act, 2017 (2074), and register all employees with the Social Security Fund within three months of their recruitment.

This page is a general overview only. We would recommend taking professional legal advice from us before relying on a tax incentive, or bringing foreign investment into a start-up in Nepal.

Concessional Loans Government concessional loan scheme Eligibility, loan terms, the application and approval process, and the priority sectors for concessional lending to start-up industries.

Concessional Finance

A government-backed loan scheme for recognised start-ups

The Procedure regarding Loan Management of Start-up Enterprises, 2025 (2082) sets out a concessional loan scheme for registered start-up industries operating in designated priority sectors, administered by the Industrial Enterprise Development Institute (referred to in the Procedure as the "Enterprise").

Loan amount NPR 5-20 lakh

Concessional loans range from a minimum of NPR 5 lakh to a maximum of NPR 20 lakh per recommended proposal.

Interest rate 3% per year

A flat annual interest rate of 3% applies to loans disbursed under the Procedure.

Tenure Up to 5 years

The loan tenure cannot exceed five years from the date of disbursement.

Bank service fee 0.1%

Disbursing banks may levy a service fee of 0.1% of the loan amount.

Eligibility

Who can apply, and on what terms

Eligibility for the concessional loan scheme is narrower than general start-up recognition, and the loan itself comes with security and repayment conditions that should be understood before applying.

Eligibility and exclusions

The applicant must be a registered start-up industry. An industry is ineligible if it, or its entrepreneur, is blacklisted by the Credit Information Bureau, if it was registered after the loan disbursement notice was published, if it only sells or distributes goods or services imported from abroad, or if it is registered as a holding and investment company under the Industrial Enterprises Act.

Security

The financed project or business itself is held as security by the disbursing bank. The entrepreneur must insure the project or business, and the loan is additionally secured at the Deposit and Credit Guarantee Fund under prevailing law.

Repayment

Repayment of principal and interest must begin no later than one year after the first instalment is received. On non-payment, the loan is treated as bad debt, the entrepreneur's movable or immovable property and bank accounts can be frozen, and the bank may recover the amount under prevailing law.

Application Path

How the loan process works

The Procedure sets out a structured, competitive process from the call for proposals through to disbursement of the first instalment.

Invitation of proposals

The Institute notifies eligible start-up applicants through national daily newspapers and electronic media, inviting project proposals within 21 days.
Submission and self-declaration

Eligible applicants submit one proposal each in the prescribed format, self-declaring that they have not taken concessional loans from any other entity. A false declaration leads to immediate rejection, and unpaid concessional loans elsewhere make an applicant ineligible until repaid.
Publication and preliminary listing

The registered proposals and applicants are published, and a preliminary list of eligible applicants is prepared.
Presentation and credit appraisal

The presentation schedule for shortlisted applicants is published, and each proposal is sent to the disbursing bank, which must complete its credit appraisal and submit a score within seven days.
Selection and recommendation

The Proposal Evaluating Committee ranks proposals by score. Among those scoring at least fifty percent, the highest-ranked proposal is recommended to the bank for loan disbursement, with a recommended amount of between NPR 5 lakh and NPR 25 lakh.
Publication and bank contact

Recommended project details are published on the Institute's website, and the applicant must contact the disbursing bank within 45 days or risk immediate rejection of the proposal.
Agreement and first instalment

The bank studies the project site and enters into an agreement covering the disbursement method, loan limit, interest rate, tenure and repayment process, before releasing the first instalment to the entrepreneur.

Priority Sectors

Priority sectors for concessional lending

The Procedure designates priority sectors that are taken into account when granting concessional loans. They span primary production, services and infrastructure, and technology-led activity.

Primary production

Agriculture and poultry based industries
Forest-based industries, including herbs and forestry products
Food production and processing
Mines, and mining research and development
Automobile-related industries

Services and infrastructure

Tourism promotion, entertainment and hospitality
Accessible and safe travel and transportation
Infrastructure construction
Human health services
Education and educational institutions

Technology and sustainability

Science, technology, and information and communication technology
Improving traditional technology, production methods and services
Aiding domestic and daily affairs, their ease, convenience and safety
Waste management and environment

This page is a general overview only. We would recommend taking professional legal advice from us before applying for, or structuring around, the concessional loan scheme for start-up industries in Nepal.

Contact

Request a consultation

Tell us briefly about your matter and our team will get back to you.