Branch Office vs. Liaison Office in Nepal: Key Differences & Registration Process (2025)
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Introduction
Foreign companies entering Nepal can choose between a Branch Office (for commercial activities) or a Liaison Office (non-commercial). This guide compares both structures, their registration processes, and compliance requirements under Nepal’s Foreign Investment and Technology Transfer Act (FITTA) 2019.
1. Key Differences at a Glance
| Feature | Branch Office | Liaison Office |
|---|---|---|
| Purpose | Profit-generating activities | Market research, promotion |
| Allowed Activities | Sales, contracts, services | No income generation |
| Tax Liability | 25% corporate tax + VAT | Tax-exempt (if non-commercial) |
| Capital Requirement | NPR 50M (~$380,000) | NPR 5M (~$38,000) |
| Repatriation | Profits allowed after tax | No profit repatriation |
| Duration | Renewable annually | Max 3 years (extendable) |
2. Branch Office Registration Process
Step 1: Approval from Nepal Rastra Bank (NRB)
Submit:
Parent company’s Board Resolution approving Nepal branch
Audited financials (last 3 years)
$50,000 bank guarantee
Step 2: Department of Industry (DOI) Clearance
Documents:
Certified copy of parent company’s Certificate of Incorporation
Memorandum of Understanding (MoU) detailing Nepal operations
Step 3: Company Registration
File with Office of Company Registrar (OCR) within 30 days of DOI approval
Fees: NPR 20,000 (~$150)
⏳ Timeline: 6-8 weeks
3. Liaison Office Registration Process
Step 1: Nepal Rastra Bank (NRB) Approval
Submit:
Non-Commercial Declaration
Parent company’s profile and financials
Step 2: Department of Industry (DOI) NOC
Documents:
Letter of Commitment (no revenue generation)
Office lease agreement
Step 3: Registration
OCR filing with NPR 5,000 fee (~$38)
Validity: 2 years (renewable once)
⏳ Timeline: 4-6 weeks
4. Required Documents for Both Structures
| Branch Office | Liaison Office |
|---|---|
| ✅ Parent company’s MOA/AOA | ✅ Parent company’s MOA/AOA |
| ✅ NRB approval letter | ✅ NRB non-commercial undertaking |
| ✅ Nepalese bank account proof | ✅ Office address proof |
| ✅ Local agent appointment letter | ✅ No-objection certificate (NOC) |
⚠️ All foreign documents require notarization + Nepalese Embassy attestation.
5. Compliance & Operational Rules
Branch Office
Annual audit by Nepal-certified CA
Monthly VAT filings (if turnover > NPR 5M)
NRB reporting for foreign fund transfers
Liaison Office
Annual activity report to DOI
No hiring of sales staff
Bank account monitoring by NRB
6. Tax Implications
| Tax Type | Branch Office | Liaison Office |
|---|---|---|
| Corporate Tax | 25% on Nepal-sourced income | 0% (if compliant) |
| VAT | 13% (if applicable) | Not applicable |
| Permanent Establishment Risk | High | Low |
FAQs
1. Can a Liaison Office covert to a Branch later?
Yes, but requires fresh NRB/DOI approval and additional capital infusion (NPR 50M).
2. Which is faster to establish?
Liaison Office (4-6 weeks vs. 6-8 weeks for Branch).
3. Can a Branch Office import goods?
Yes, but needs separate customs clearance approval.
4. Are local staff required?
Branch Office: Must hire locally for >50% positions.
Liaison Office: No restrictions.
5. Can a Liaison Office rent property?
Yes, but lease agreements must be reported to NRB.
Conclusion: Which to Choose?
Choose Branch Office if you need to:
Generate revenue in Nepal
Sign contracts with local clients
Choose Liaison Office if you need to:
Test the market without tax liability
Coordinate with regional partners
📞 Still unsure? [Consult Sunshine law Firm]for a free structure assessment.
