Foreign Company Branches in Nepal — Registration and Continuing Compliance

Prepare the foreign parent’s incorporation and constitutional records, Nepal translations, decision authorising the operation and Nepal representative’s authority. Section 154(2) ordinarily requires the competent approval for a branch. Its current proviso treats OCR as the relevant authority where the statutory conditions concerning absence of a regulating law or agency are established. This is not a general exemption from sector approval.

Distinguish the branch's operating registration from the parent's investment in a separate Nepal company. They lead to different company records and may have different tax and remittance consequences. Before signing a new contract, compare its activities with the registered scope and any sector approval. Keep additions, extensions and changes in representatives with the original entry documents so the company's history can be followed.

Use the Act's foreign-company chapter and current OCR requirements. Do not assume that a parent company's overseas audit eliminates Nepal accounting or filing obligations. Keep local operations and parent allocations visible in the records.

A registered foreign company submits audited annual financial statements for its Nepal business within six months after year-end under section 156(1). Under section 156(2), it also files the home-country annual financial statements, audit report and directors’ report within three months after those documents are finally prepared.

A registered liaison office instead has the specific section 156(5) statement covering staff/adviser/contact-person payments, expenses and tax deductions, certified by an auditor and submitted within three months after year-end. A liaison office cannot conduct Nepal income-earning activity under section 154.

Reconcile Nepal revenue, expenditure, assets and liabilities to the parent’s allocation records. Keep evidence for head-office funding and costs paid abroad, and retain signed reports with proof of the filing outcome.

Analyse Nepal-source income, costs attributable to the Nepal activity, head-office charges and applicable restrictions. A treaty may affect PE or business-profit treatment, but the exact treaty and conditions must be established. Internal invoices from head office need evidence of services, allocation and pricing; they are not automatically deductible because the entities belong to one legal company.

The current IRD entity-rate schedule separately identifies a 5% category for foreign PE income remitted abroad. The applicable framework includes Schedule 1 section 2(6) and the permanent-establishment remittance computation in section 68. Review that base and its interaction with the branch's ordinary computation before making a remittance. Do not treat the 5% as a substitute for every Nepal tax liability.

A foreign engineering company wins a Nepal project and assigns staff and equipment for an extended period. The review considers project duration and activities under domestic and treaty PE rules, permitted office structure, staff immigration/labour obligations, import treatment and VAT/TDS on project receipts. A foreign invoice or overseas collection account does not itself make the Nepal activity untaxed.

Monitor contract extensions, scope changes, sites, funding and representatives. Section 155(2) requires notice to OCR within 35 days of changes to filed particulars. On exit, establish the section 158 deregistration route, settle liabilities and employees, preserve records and separately complete lawful tax closure and repatriation. An expired contract or nil bank balance does not prove that registration and tax obligations have ended.