A foreign liaison office registration in Nepal is required to incorporate a representative entity for an overseas company in Nepal without engaging in direct commercial activities. It acts as a communication channel between the foreign parent company and local businesses or government agencies. They are not separate legal entities and cannot generate income in Nepal. Foreign companies establish liaison offices to explore business opportunities and maintain a local presence before fully entering the Nepalese market through other structures like branch offices or subsidiaries.
This Article provides has covered the legal and regulatory aspects of registering a Foreign Liaison Office in Nepal. Prime Law Associates is the leading Law Firm in Nepal that specializes in Foreign Direct Investment, International Law & obtaining regulatory approvals in Nepal. The Firm has experienced lawyers for assisting international companies. The Firm can be contacted through the following:
Requirements for Liaison Office Registration
Parent company eligibility
The foreign parent company must be duly registered and in good standing in its home country. It should have a minimum of 2-3 years of operational history. The company’s objectives and proposed activities in Nepal should align with Nepalese laws and regulations. There are no specific minimum capital requirements for the parent company to establish a liaison office.
Scope of activities
The liaison office’s activities must be clearly defined and limited to non-commercial functions. Permitted activities typically include market research, promotional work, and coordination with local entities. The scope should not include any direct business operations, sales, or revenue generation within Nepal.
Local representative appointment
A local representative must be appointed to manage the liaison office’s day-to-day operations in Nepal. This representative should be a Nepali citizen or a foreign national with a valid work permit. The representative acts as the point of contact for regulatory authorities and is responsible for ensuring compliance with local laws. A power of attorney from the parent company, clearly outlining the representative’s authority, is required.
Procedure of Foreign Liaison Office Registration in Nepal
Step 1: Preparation of Documents
Step 2: Submission of Application to Department of Industry
Step 3: Review and Approval Process
Step 4: Issuance of Registration Certificate
Step 5: Post-Registration Compliance
Step 1: Preparation of Documents
The foreign company must compile all required documents, including certificate of incorporation, memorandum and articles of association, board resolution to establish a liaison office, and appointment letter for the local representative. These documents should be notarized and authenticated by the relevant authorities in the home country. Nepali translations of key documents must be prepared by a certified translator. A comprehensive proposal outlining the liaison office’s objectives and planned activities in Nepal should be drafted.
Step 2: Submission of Application to Department of Industry
The application for liaison office registration, along with all supporting documents, is submitted to the Department of Industry. The application form should be completed accurately, providing details about the parent company, proposed activities of the liaison office, and information about the local representative. The DOI reviews the application for completeness and compliance with regulatory requirements. Any missing or incorrect information may result in delays or rejection of the application.
Step 3: Review and Approval Process
The Department of Industry evaluates the application, assessing the foreign company’s credentials and the proposed activities of the liaison office. They may request additional information or clarifications if needed. The DOI consults with other relevant government agencies, such as the Ministry of Industry, Commerce and Supplies or sector-specific regulators, depending on the nature of the parent company’s business.
Step 4: Issuance of Registration Certificate
Upon successful review and approval of the application, the Department of Industry issues a registration certificate for the liaison office. This certificate officially authorizes the foreign company to establish and operate a liaison office in Nepal. The certificate specifies the permitted activities and any conditions or restrictions on the liaison office’s operations. The registration is typically valid for a specified period, often 1-3 years, and subject to renewal.
Step 5: Post-Registration Compliance
After obtaining the registration certificate, the liaison office must complete several post-registration formalities. This includes registering with the local municipality where the office will be located. The liaison office must also obtain a Permanent Account Number (PAN) from the Inland Revenue Department for tax purposes. Opening a bank account with a local bank is necessary for managing operational expenses.
Documents for Foreign Liaison Office Registration in Nepal
The following documents are typically required for liaison office registration:
- Application form prescribed by the Department of Industry
- Certificate of incorporation of the parent company
- Memorandum and Articles of Association of the parent company
- Board resolution authorizing the establishment of a liaison office in Nepal
- Audited financial statements of the parent company for the last 2-3 years
- Power of attorney appointing the local representative
- Copy of passport (for foreign representative) or citizenship certificate (for Nepali representative)
- Proposed activities and objectives of the liaison office in Nepal
- Commitment letter from the parent company to bear all expenses of the liaison office
- No objection letter from the building owner for using the premises as a liaison office
- Notarized and authenticated copies of all foreign documents
- Certified Nepali translations of key documents
Additional documents may be required based on the specific nature of the parent company’s business or proposed activities in Nepal.
Timeline for Liaison Office Registration
The process of registering a foreign liaison office in Nepal typically takes 4-6 weeks from the submission of the application to the issuance of the registration certificate. However, this timeline can vary depending on the completeness of the application, the complexity of the proposed activities, and the workload of the regulatory authorities.
Registration Costs and Fees for Registering a Foreign Liaison Office
The costs associated with registering a foreign liaison office in Nepal include government fees and professional service charges. The official registration fee payable to the Department of Industry is approximately NPR 50,000 (about USD 420). Additional costs include document notarization, translation fees, and charges for professional services such as legal consultants or registration agents.
Foreign Liaison Office Registration Lawyer in Nepal
Prime Law Associates has an effective & efficient practice in obtaining approval for registering a Foreign Liaison Office in Nepal. The Firm has extensive experience in dealing with regulatory authorities and obtaining challenging approvals effectively.
Amit Karna
Amit has regular experience of assisting foreign companies enter into Nepal. He has been engaged in several liaison office registration projects in Nepal.
Deepak Khanal
Deepak is an expert of International Law & engaged with the Firm in Foreign Direct Investment & Branch/Liaison Office Registration.
Legal Framework for Liaison Office Registration
Foreign Investment and Technology Transfer Act
The Foreign Investment and Technology Transfer Act (FITTA) 2019 governs foreign investment in Nepal, including the establishment of liaison offices. While FITTA primarily focuses on foreign direct investment, it provides the legal basis for non-equity modes of foreign company presence like liaison offices. The Act outlines the general framework for foreign entities operating in Nepal.
Industrial Enterprises Act
The Industrial Enterprises Act 2020 complements FITTA in regulating foreign businesses. It defines various forms of business entities and outlines registration procedures.
Regulatory Authorities
Department of Industry
The Department of Industry (DOI) under the Ministry of Industry, Commerce and Supplies is the primary regulatory body overseeing foreign company registrations, including liaison offices. The DOI processes applications, issues registration certificates, and monitors compliance of foreign entities operating in Nepal.
Nepal Rastra Bank
Nepal Rastra Bank (NRB), the central bank, plays a crucial role in regulating foreign exchange transactions related to liaison office operations. It oversees remittances for operational expenses of liaison offices and enforces foreign exchange regulations applicable to their activities.
Differences Between Liaison Office and Branch Office
Liaison offices cannot conduct revenue-generating activities and are limited to coordination, market research and promotional roles. Branch offices, on the other hand, can engage in commercial transactions and generate income in Nepal.
Liaison offices do not require minimum capital investment, whereas branch offices may have capital requirements. Branch offices need approval from sector-specific government authorities, while liaison offices generally do not require such approvals.
Liaison offices face fewer compliance and tax obligations compared to branch offices, which are treated as permanent establishments for tax purposes.
Post-Foreign Liaison Office Registration in Nepal
After successful registration, liaison offices must comply with ongoing regulatory requirements. They must maintain proper books of accounts and financial records, though they are not required to have their accounts audited. Annual returns must be filed with the Department of Industry, detailing the office’s activities and confirming compliance with registration conditions. Any changes in the office address, local representative, or scope of activities must be promptly reported to the authorities.
Liaison offices must adhere to foreign exchange regulations when receiving funds from the parent company for operational expenses. They should maintain clear documentation of all expenses and ensure they do not engage in any commercial activities. Renewal of the registration certificate is typically required every 1-3 years, depending on the initial approval terms. The renewal process involves submitting an application with updated documents and a report on the office’s activities during the previous registration period.
Permitted Activities for Liaison Offices
Market research and information gathering
Liaison offices can conduct market surveys, feasibility studies, and gather business intelligence about the Nepalese market. They can analyze local business trends, consumer behavior, and regulatory environments relevant to the parent company’s interests.
Coordination with local entities
Liaison offices facilitate communication between the parent company and local businesses, suppliers, or government agencies. They can arrange meetings, assist in negotiations, and provide logistical support for visiting executives from the parent company.
Promotional activities
Liaison offices can engage in brand building and promotional activities for the parent company’s products or services. However, they cannot engage in direct sales or revenue-generating activities.
Registering a Foreign Liaison Office in Nepal: FAQs
What are Liaison Offices?
Liaison offices are representative entities of foreign companies in Nepal, focusing on market research, coordination, and promotion without engaging in direct commercial activities or generating revenue.
How to register Foreign Liaison Offices in Nepal?
Foreign liaison offices are registered by submitting an application with required documents to the Department of Industry, followed by a review process and issuance of a registration certificate.
What is the procedure for Foreign Liaison Office Registration?
The procedure involves document preparation, application submission, review by authorities, approval, and issuance of a registration certificate, followed by post-registration compliance steps.
Can liaison offices engage in commercial activities?
No, liaison offices are prohibited from engaging in any direct commercial activities or revenue-generating operations in Nepal. They are limited to non-commercial functions.
What is the validity period for liaison office registration?
The validity period for liaison office registration typically ranges from 1 to 3 years, after which renewal is required by submitting an application to the Department of Industry.
How are liaison offices taxed in Nepal?
Liaison offices are not subject to corporate income tax as they do not generate revenue. However, they may have obligations for employee-related taxes and must obtain a PAN for tax reporting purposes.
Can a liaison office hire local employees?
Yes, liaison offices can hire local employees. They must comply with Nepal’s labor laws, including social security contributions and income tax withholding for employees.
What reporting requirements exist for liaison offices?
Liaison offices must submit annual returns to the Department of Industry, detailing their activities and confirming compliance with registration conditions. They must also report any significant changes in operations or personnel.
Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation, or inducement of any sort from the firm or any of its members. The firm shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.
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