Employing in
Nepal

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Expanding into
Nepal

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all the registration procedures that need to be done and the documentation required.

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International companies expanding into the Federal Republic of Nepal will enter an economy with an under-performing industrial sector and inadequate infrastructure, where Foreign Direct Investment can play a leading role in reducing the nation’s dependence on imports.

Landlocked between India and China – its leading trading partners – and against the breath-taking backdrop of the towering Himalayan mountain range, Nepal offers potential for foreign funding, with encouragement from a government eager to attract investment into the economy.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of a Professional Employer Organisation (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework.

This can be best utilised when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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Country EOR Guide - Bradford Jacobs

Download our Guide to Nepal

Learn all about expanding into Nepal and see what we can do to make your expansion easier.

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Download our Guide to Nepal

Learn all about expanding into Nepal and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs
DOWNLOAD GUIDE

Hiring Staff
in Nepal

International companies expanding into the Federal Republic of Nepal will enter an economy with an under-performing industrial sector and inadequate infrastructure, where Foreign Direct Investment can play a leading role in reducing the nation’s dependence on imports.

Landlocked between India and China – its leading trading partners – and against the breath-taking backdrop of the towering Himalayan mountain range, Nepal offers potential for foreign funding, with encouragement from a government eager to attract investment into the economy.

Nepal is heavily dependent on the import of commodities, including refined petroleum, semi-finished iron, clothing, pharmaceuticals, foodstuffs, electronic goods and equipment and vehicles. Imports, however, boost federal revenues, as around half of taxes come from applying sales tax and customs and excise duties.

The Ministry of Foreign Affairs emphasises Nepal’s welcoming outlook for foreign investment. It has identified sectors such as organic agriculture, improving tourism links with neighbouring China and India, hydropower and medical tourism as investment opportunities. Establishing Nepal as an outsourcing hub for companies from Europe, the US and Australia is another priority.

Country:
Federal Democratic Republic of Nepal
Local Currency:
Nepalese Rupee (NPR)
Time Zone:
UTC+5 hours 45 minutes
Country Dial Code:
+977
Tax Year:
July 16 to July 15
VAT:
13%
National Minimum Wage:
NPR 15,000 €104, US$114
Taxpayer Identification Numbers:
Permanent Account Number (PAN) is the tax identification number applying to individuals and entities.
Main trading partners:
India, China, UAE, Indonesia, Argentina, US, Turkey, UK and Germany.

Hiring Staff
in Nepal

The Federal Republic of Nepal is a relatively under-developed country with an economy to match, but one with considerable scope for growth and investment from international companies with an eye on expansion into the region.

Nepal is sandwiched between the formidable economies of India and China and has a small exports’ profile based on soybean and palm oil, rice, jute, timber and textiles. With the Himalayas – and Mount Everest – to the north and 75% of the country covered by mountainous terrain, Nepal is also a magnet for tourism, which is a crucial element of the economy.

Nepal is heavily dependent on the import of commodities, including refined petroleum, semi-finished iron, clothing, pharmaceuticals, foodstuffs, electronic goods and equipment and vehicles. Imports, however, boost federal revenues, as around half of taxes come from applying sales tax and customs and excise duties.

The Ministry of Foreign Affairs emphasises Nepal’s welcoming outlook for foreign investment. It has identified sectors such as organic agriculture, improving tourism links with neighbouring China and India, hydropower and medical tourism as investment opportunities. Establishing Nepal as an outsourcing hub for companies from Europe, the US and Australia is another priority.

Country:
Federal Democratic Republic of Nepal
Local Currency:
Nepalese Rupee (NPR)
Time Zone:
UTC+5 hours 45 minutes
Country Dial Code:
+977
Tax Year:
July 16 to July 15
VAT:
13%
National Minimum Wage:
NPR 15,000 €104, US$114
Taxpayer Identification Numbers:
Permanent Account Number (PAN) is the tax identification number applying to individuals and entities.
Main trading partners:
India, China, UAE, Indonesia, Argentina, US, Turkey, UK and Germany.

The Main Sectors of the Nepalese Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Services

The World Bank expects this sector to drive the economy’s growth, particularly in digital services that accelerated post-pandemic. Travel and tourism are the largest components in services sector exports, followed by business services, computer and information services, transportation, government agencies and insurance.

Manufacturing is the minor component of Nepal’s economy behind services and agriculture, but is growing as it attracts foreign investment into areas targeted by the government. Traditionally, industries are almost exclusively small or medium enterprises centred on such as processing jute, sugarcane, timber and meat. Other manufacturing areas include cement, brick and tile production and construction materials.

The main areas of operation are Biratnagar, the Birgunj-Hitaura Corridor and the Kathmandu Valley. Local and foreign investment has produced an increase in manufacturing companies moving in, such as Berger Paints and Unilever. Combating low productivity is one of the challenges, as Nepal’s rate is the lowest in South and East Asia. The government is attempting to attract investment into upgrading technology and production processes and developing the potential of hydropower, built on Nepal’s network of powerful and fast-flowing rivers.

Although part of the services sector, tourism stands alone because of the uniqueness of Nepal’s attractions. Also, this is a prime sector for foreign investment as the government seeks to build Nepal’s tourism portfolio. The Nepal Tourism Board (NTB) recorded 660,000 tourist visits in 2022, compared with 230,000 the previous year as the sector rebounded from a two-year slump after the pandemic.

The World Bank assessed that tourism contributed US$2.2 billion, 6.7%, to GDP. Pre-pandemic, in 2019, the sector supported one million workers mainly in remote and under-resourced regions. The government’s ’Tourism Decade 2023-2032’ project aims to build up to 3.5 million tourists annually by the end of that period, by attracting investment into upgrading infrastructure. Tourists mainly aim for the Kathmandu Valley as it has sufficient hotels, ready food supplies, infrastructure and an international airport. Potential areas for expansion include Pokhara – already acknowledged as the ‘tourist centre’ of Nepal – and the big game area of Narayani. Nepal’s legendary Himalayas feature the world’s highest peak, Mount Everest, revered by the population as Chomolungma, ‘Goddess Mother of the World’.

Agriculture

The Ministry of Agriculture and Livestock Development assesses that around 60% of the workforce work in the sector, which accounts for a quarter of GDP and more than 50% of export revenue.

This is another sector requiring investment to address inefficient techniques, upgrade production technology and improve the quality and supply of fertilisers. Only a small percentage of land is under irrigation, leaving crops and farming vulnerable to weather conditions. Agriculture mainly features rice, maize, wheat, potatoes, sugarcane and millet. Farmers also raise cattle, buffalo, goats and sheep.

The central bank is the Nepal Rastra Bank (NRB), established in 1956. The bank is responsible for licensing banks and financial institutions, regulating mergers and acquisitions, mediating in grievances and issuing monthly and quarterly reports of banks and financial institutions. In 2010 the NRB and Nepal’s Financial Information Unit (FIU) formed a partnership with the International Monetary Fund to improve financial integrity regarding money laundering and to combat financing terrorism. As a result, Nepal’s laws now mainly follow international standards to help the country attract international investment while boosting economic stability.

In March 2022, the World Bank approved a US$150 million ‘Finance for Growth’ policy to further ‘strengthen financial sector stability, diversify financial solutions and increase access to financial services’ in support of Nepal’s development. Also, in January 2022 the International Monetary Fund approved an Extended Credit Facility (ECF) of US$395.5 million to mitigate the effect of the pandemic on economic activity and to preserve financial stability.

Nepal’s small and undeveloped mining industry is a sector ripe for investment and expansion. There are limited, but varied natural mineral resources. These include coal (lignite), iron ore, magnesite, copper, cobalt, pyrite, limestone and mica, white marble and possibly uranium. Nepal’s Department of Mines and Geology (DoMG) believes there are sufficient resources for the country to become self-sustainable without having to import minerals.

The DoMG is responsible for identifying sites, drilling to assess whether potential yield is sufficient to justify mining operations and then attracting foreign investment before issuing licences. Prior to mining operations, investment and foreign expertise is needed to accelerate the assessment process. The DoMG identifies around 30 potential sites a year, but completed surveys are in the low single figures due to lack of manpower and research facilities.

The Main Sectors of the Nepalese Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Services

The World Bank expects this sector to drive the economy’s growth, particularly in digital services that accelerated post-pandemic. Travel and tourism are the largest components in services sector exports, followed by business services, computer and information services, transportation, government agencies and insurance.

Manufacturing is the minor component of Nepal’s economy behind services and agriculture, but is growing as it attracts foreign investment into areas targeted by the government. Traditionally, industries are almost exclusively small or medium enterprises centred on such as processing jute, sugarcane, timber and meat. Other manufacturing areas include cement, brick and tile production and construction materials.

The main areas of operation are Biratnagar, the Birgunj-Hitaura Corridor and the Kathmandu Valley. Local and foreign investment has produced an increase in manufacturing companies moving in, such as Berger Paints and Unilever. Combating low productivity is one of the challenges, as Nepal’s rate is the lowest in South and East Asia. The government is attempting to attract investment into upgrading technology and production processes and developing the potential of hydropower, built on Nepal’s network of powerful and fast-flowing rivers.

Although part of the services sector, tourism stands alone because of the uniqueness of Nepal’s attractions. Also, this is a prime sector for foreign investment as the government seeks to build Nepal’s tourism portfolio. The Nepal Tourism Board (NTB) recorded 660,000 tourist visits in 2022, compared with 230,000 the previous year as the sector rebounded from a two-year slump after the pandemic.

The World Bank assessed that tourism contributed US$2.2 billion, 6.7%, to GDP. Pre-pandemic, in 2019, the sector supported one million workers mainly in remote and under-resourced regions. The government’s ’Tourism Decade 2023-2032’ project aims to build up to 3.5 million tourists annually by the end of that period, by attracting investment into upgrading infrastructure. Tourists mainly aim for the Kathmandu Valley as it has sufficient hotels, ready food supplies, infrastructure and an international airport. Potential areas for expansion include Pokhara – already acknowledged as the ‘tourist centre’ of Nepal – and the big game area of Narayani. Nepal’s legendary Himalayas feature the world’s highest peak, Mount Everest, revered by the population as Chomolungma, ‘Goddess Mother of the World’.

Agriculture

The Ministry of Agriculture and Livestock Development assesses that around 60% of the workforce work in the sector, which accounts for a quarter of GDP and more than 50% of export revenue.

This is another sector requiring investment to address inefficient techniques, upgrade production technology and improve the quality and supply of fertilisers. Only a small percentage of land is under irrigation, leaving crops and farming vulnerable to weather conditions. Agriculture mainly features rice, maize, wheat, potatoes, sugarcane and millet. Farmers also raise cattle, buffalo, goats and sheep.

The central bank is the Nepal Rastra Bank (NRB), established in 1956. The bank is responsible for licensing banks and financial institutions, regulating mergers and acquisitions, mediating in grievances and issuing monthly and quarterly reports of banks and financial institutions. In 2010 the NRB and Nepal’s Financial Information Unit (FIU) formed a partnership with the International Monetary Fund to improve financial integrity regarding money laundering and to combat financing terrorism. As a result, Nepal’s laws now mainly follow international standards to help the country attract international investment while boosting economic stability.

In March 2022, the World Bank approved a US$150 million ‘Finance for Growth’ policy to further ‘strengthen financial sector stability, diversify financial solutions and increase access to financial services’ in support of Nepal’s development. Also, in January 2022 the International Monetary Fund approved an Extended Credit Facility (ECF) of US$395.5 million to mitigate the effect of the pandemic on economic activity and to preserve financial stability.

Nepal’s small and undeveloped mining industry is a sector ripe for investment and expansion. There are limited, but varied natural mineral resources. These include coal (lignite), iron ore, magnesite, copper, cobalt, pyrite, limestone and mica, white marble and possibly uranium. Nepal’s Department of Mines and Geology (DoMG) believes there are sufficient resources for the country to become self-sustainable without having to import minerals.

The DoMG is responsible for identifying sites, drilling to assess whether potential yield is sufficient to justify mining operations and then attracting foreign investment before issuing licences. Prior to mining operations, investment and foreign expertise is needed to accelerate the assessment process. The DoMG identifies around 30 potential sites a year, but completed surveys are in the low single figures due to lack of manpower and research facilities.

Commercial Laws in
Nepal

Tax and Labour Authorities

The Inland Revenue Department:  Responsible for enforcing tax laws and the collection of personal and corporate taxes, Value Added Tax and customs and excise duties. Headquarters are in Kathmandu and operates under the Ministry of Finance. There are more than 80 regional field offices throughout the country.

The Ministry of Labour, Employment and Social Security:  Develops labour and employment policies. Includes the Department of Labour and the Department of Foreign Employment.

Department of Labour and Occupational Safety: Implements regulations to create a safe and secure working environment; promotes policies to reduce unemployment and create an internationally competitive workforce.

Trade Unions:  All-Nepal Trade Union Federation; General Federation of Nepalese Trade Unions are the leading union organisations.

General requirements

There is no statutory requirement to provide a written contract, but they are strongly advised and the employer must at least issue an appointment letter or employment agreement. Failure to comply risks fines between NPR 10,000 (€70, US$76) up to NPR 500,000 (€3,476, US$3,800). Employees must sign whichever document is provided.

Contracts should include the following: Employee’s salary and any benefits; responsibilities of the role and job location; working hours and breaks; any probation period; procedures for termination resolution and notice periods.

Commercial Laws in
Nepal

Tax and Labour Authorities

The Inland Revenue Department:  Responsible for enforcing tax laws and the collection of personal and corporate taxes, Value Added Tax and customs and excise duties. Headquarters are in Kathmandu and operates under the Ministry of Finance. There are more than 80 regional field offices throughout the country.

The Ministry of Labour, Employment and Social Security:  Develops labour and employment policies. Includes the Department of Labour and the Department of Foreign Employment.

Department of Labour and Occupational Safety: Implements regulations to create a safe and secure working environment; promotes policies to reduce unemployment and create an internationally competitive workforce.

Trade Unions:  All-Nepal Trade Union Federation; General Federation of Nepalese Trade Unions are the leading union organisations.

General requirements

There is no statutory requirement to provide a written contract, but they are strongly advised and the employer must at least issue an appointment letter or employment agreement. Failure to comply risks fines between NPR 10,000 (€70, US$76) up to NPR 500,000 (€3,476, US$3,800). Employees must sign whichever document is provided.

Contracts should include the following: Employee’s salary and any benefits; responsibilities of the role and job location; working hours and breaks; any probation period; procedures for termination resolution and notice periods.

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