Annual Compliance for Foreign-Invested Companies in Nepal

Monthly Compliance

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Quarterly / Periodic Compliance

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Year-end Audit

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Income Tax Return

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OCR Annual Filing / AGM

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DOI Progress Reporting

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Visa / FDI / NRB Updates

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Dividend / Repatriation

Maintain Proper Books of Account

The Companies Act requires company accounts to be kept:

• in Nepali or English;

• using double-entry accounting;

• so they fairly reflect transactions and financial position;

• according to applicable accounting standards.

OCR's current post-incorporation guidance confirms these requirements.

Foreign-invested companies should also separately maintain:

• foreign-investment ledger;

• share-capital records;

• foreign-loan records;

• related-party transactions;

• foreign-currency records.

Annual Statutory Audit

The company must prepare annual financial statements and complete the statutory audit under the Companies Act and applicable accounting/auditing standards.

The auditor should reconcile:

• issued share capital;

• foreign investment;

• shareholder register;

• bank remittances;

• foreign loans;

• related-party balances;

• DOI/OCR records.

Foreign capital appearing in the accounts should not differ from the company's legal/regulatory capital records without explanation.

Private Company — OCR Financial Statements

OCR's current guidance requires a private company to submit audited annual financial statements within: 6 months after the end of the financial year.

For a Nepal financial year ending at Ashadh end, this creates an important post-year-end OCR deadline.

Public Company — AGM

A public company must ordinarily hold its AGM: within 6 months after the end of each financial year

after its first AGM framework.

Separate notice, reporting and public-company requirements also apply.

Public Company — Post-AGM Filing

OCR currently requires a public company to submit specified AGM/annual documents within: 30 days after the AGM including matters such as:

• annual financial statements;

• director report;

• auditor report;

• AGM decisions;

• shareholder-attendance information.

OCR Penalty

Failure to submit required annual information within the prescribed timeframe attracts the penalty framework under:

Section 81 of the Companies Act.

OCR expressly warns companies about Section 81(2) penalties for late annual filings.

Foreign ownership does not exempt the company.

Income Tax Return

Section 96 of the Income Tax Act generally requires the annual Income Tax return to be filed: within 3 months after expiry of the income year.

IRD's current guidance confirms that the self-assessment return is ordinarily due by:

Ashoj end

for a normal Nepal financial year.

A qualifying taxpayer may apply for an extension under the statutory mechanism, but extension of the return deadline does not necessarily eliminate interest consequences on unpaid tax.

Income Tax Payment

Before completing year-end compliance:

• calculate taxable income;

• reconcile accounting profit to taxable income;

• claim allowable depreciation/deductions;

• reconcile advance tax;

• reconcile TDS credits;

• pay balance tax;

• file annual return.

Foreign-invested companies should separately review:

• transfer pricing;

• royalty;

• management fees;

• foreign-loan interest;

• expatriate payroll;

• foreign exchange.

Advance Income Tax

Businesses subject to instalment tax should comply with the applicable Income Tax Act instalment regime during the year.

Year-end tax should not be the first time the company estimates its annual Nepal tax liability.

Use the advance-income-tax instalments guide to prepare the company’s payment calendar.

Tax Clearance

Current tax clearance becomes particularly important for foreign-invested companies because it may be required for:

• Business Visa renewal;

• dividend repatriation;

• royalty repatriation;

• share-sale exit;

• regulatory processes.

The Department of Immigration expressly requires latest tax clearance for Business Visa renewal.

VAT

A VAT-registered company must continue to:

• issue valid VAT invoices;

• maintain VAT records;

• file VAT returns;

• pay VAT;

• reconcile input/output VAT.

Nil activity does not automatically remove return obligations while registration remains active.

TDS / Withholding

Monthly/payment-driven compliance can include tax withholding from:

• salary;

• rent;

• service payments;

• contracts;

• interest;

• royalty;

• dividend;

• non-resident payments.

Foreign-invested businesses commonly carry higher withholding risk because of cross-border payments.

Transfer Pricing

Where the Nepal company transacts with related foreign parties, identify annually:

• goods purchases/sales;

• management charges;

• royalty;

• technical fees;

• loans;

• interest;

• cost allocations;

• shared services.

IRD's Transfer Pricing Directive requires specified taxpayers to submit prescribed information with the income return, and transactions above relevant thresholds can attract additional certification/documentation requirements.

The transfer-pricing file should be prepared during the year rather than reconstructed after an IRD query.

DOI Annual Industry Progress Report

A registered industry has ongoing DOI reporting obligations.

DOI issued a fresh notice in Shrawan 2083 requiring submission of the:

Annual Industry Progress Report.

Include the annual industry progress report in the company’s recurring compliance calendar.

Because DOI announces operational filing requirements through annual notices, the current year's notice/IMIS deadline should be checked every year rather than hard-coded permanently.

Information for DOI Progress Reporting

Maintain information on matters such as:

• actual investment;

• fixed capital;

• working capital;

• foreign investment received;

• production/service capacity;

• actual output;

• sales;

• export;

• employment;

• project implementation;

• other prescribed industrial statistics.

These records should agree with audited financial statements wherever the same financial information is reported.

Capital Commitment vs Actual FDI

At year-end reconcile:

Approved FDI

against

FDI actually received

against

FDI recorded

against

shares actually allotted.

Four different numbers with no reconciliation can create problems during:

• visa renewal;

• capital increase;

• repatriation;

• investor exit.

Foreign Investment Recording

Verify that all foreign investment received during the year has been correctly processed under the current NRB/authorised-bank framework.

NRB currently identifies the Foreign Investment and Foreign Loan Management Regulation, 2078 including Fifth Amendment dated 2082/09/14 as the operative regulation.

Regulation 5(1) requires the supported FDI-recording application within six months of inflow. Put each inflow and its deadline in the compliance calendar and reconcile the recorded investment to bank evidence and the company's share records. A later annual audit or dividend application does not replace that recording step.

Foreign Loan Compliance

For foreign borrowing, reconcile annually:

• approved principal;

• amount received;

• repayments;

• interest accrued;

• interest paid;

• withholding tax;

• foreign-exchange difference;

• closing principal;

• NRB/bank records.

Loan balance confirmation from the foreign lender should agree with the Nepal company books.

Business Visa Renewal

For foreign investors/businesspersons, renewal preparation can require:

• DOI recommendation;

• company registration;

• PAN/VAT;

• industry registration;

• share certificate;

• tax clearance;

• industry monitoring report;

• annual progress report;

• passport/current visa.

Accordingly, DOI and tax non-compliance can become an immigration issue.

Foreign Employee Working Visa

For foreign employees, monitor:

• labour permit;

• employment agreement;

• line-agency recommendation;

• Working Visa;

• passport;

• PAN;

• salary tax;

• tax clearance.

The current Immigration requirements expressly include labour/work documentation and employer/applicant tax documentation.

SSF and Payroll

Monthly employer compliance should include, where applicable:

• payroll;

• minimum remuneration;

• employee SSF;

• employer SSF;

• salary TDS;

• overtime;

• leave;

• festival expense.

SSF contributions are ordinarily due within the statutory contribution timeline.

Labour Audit

Every establishment subject to the Labour Act should complete the annual:

Labour Audit by Poush end

under Rule 56.

This should review:

• employment contracts;

• salary;

• leave;

• overtime;

• SSF;

• foreign labour;

• occupational safety;

• termination;

• labour suppliers.

Beneficial Ownership

Review beneficial ownership annually and whenever ownership/control changes.

Foreign corporate shareholders are particularly important because ultimate ownership can change offshore without the immediate Nepal shareholder name changing.

CAMIS/company AML records should therefore be reviewed against the latest ownership chart.

Shareholder and Director Changes

If there has been a change during the year in:

• shareholder;

• director;

• beneficial owner;

• registered office;

• capital;

• company objective;

verify that all applicable:

• OCR;

• DOI;

• bank;

• tax;

• sector-regulator

records were updated.

Do not leave annual audit records inconsistent with CAMIS.

Foreign Parent / Related-party Reconciliation

Obtain annual confirmations for:

• shareholder balance;

• intercompany receivables;

• intercompany payables;

• foreign loan;

• royalty payable;

• management fee;

• dividend payable.

Material unexplained related-party balances should not roll forward indefinitely.

Dividend Planning

Before declaring a dividend:

• finalise audit;

• calculate distributable profit;

• clear accumulated losses;

• calculate dividend tax;

• confirm foreign-investment recording;

• obtain tax clearance;

• plan repatriation documentation.

Dividend planning should start at year-end rather than after AGM approval.

Sector-regulator Compliance

Additional annual filings may be required for regulated businesses such as:

• banking;

• insurance;

• securities;

• energy;

• telecom;

• tourism;

• health;

• education;

• mining;

• alcohol.

Add the applicable sector filings to the company’s compliance calendar.

Suggested Annual Calendar

Monthly

• payroll

• salary TDS

• SSF

• VAT/TDS as applicable

• foreign-currency reconciliation

• related-party ledger reconciliation

Quarterly / Periodic

• advance tax

• regulator reports

• foreign-loan covenant review

• investment implementation review

Ashadh / Year End

• close books

• inventory/fixed assets

• related-party confirmations

• FDI reconciliation

• foreign-loan confirmation

Shrawan onward

• statutory audit

• DOI annual progress reporting

• financial-statement preparation

By Ashoj End — ordinarily

• annual Income Tax self-assessment return/payment.

Within Six Months of FY End

• private-company audited financial-statement filing with OCR;

• public-company AGM according to statutory requirements.

By Poush End

• Labour Audit.

Event-driven

• visa renewal

• FDI inflow

• foreign-loan drawdown

• capital increase

• share transfer

• beneficial-owner change

• dividend

• royalty payment

• repatriation.

Foreign-invested Company Annual Checklist

• Close accounting books

• Complete statutory audit

• Reconcile shareholder register

• Reconcile foreign investment

• Reconcile foreign loans

• Reconcile related parties

• Complete Income Tax computation

• Complete transfer-pricing review

• File annual tax return

• Pay balance tax

• Obtain tax clearance

• Complete OCR filing

• Hold AGM where required

• File DOI annual progress report

• Update FDI records

• Review beneficial ownership

• Review VAT/TDS

• Review payroll/SSF

• Complete Labour Audit

• Renew Business Visa

• Renew Working Visa/labour permits

• Review industry-operation conditions

• Review sector licences

• Prepare dividend/repatriation file

Common Errors

Treating FDI approval as a one-time compliance event

Audited share capital not matching OCR/DOI/NRB records

Missing DOI annual progress reporting

Preparing transfer-pricing evidence only after an IRD audit starts

Waiting until Business Visa expiry to obtain tax clearance

Paying foreign-related-party balances without reviewing TDS/transfer pricing

Leaving historical foreign investment unrecorded until repatriation

Assuming domestic annual compliance is enough for a foreign-invested company

Further guidance and practical checks

Foreign-invested company compliance works best as a single annual control calendar integrating OCR, IRD, DOI, NRB, Labour/SSF, Immigration and sector regulators. Separate teams should not maintain contradictory versions of the same capital, ownership or investment data.