Some Legal and Accounting Answers that help you while starting & running your business in Nepal

Q. Would it be better to register my own business myself or would it be better to outsource it through legal firms?A. If you have the time and the willingness to register it yourself, it is much better and would be cheaper for you. But, if you are not completely sure of the process and the problem you may face, it is better to take advice from legal firms.Q. Which type of company needs a PAN number?A. All the companies are required to have a PAN number by law.Q. What would be the process for a Nepalese citizen who has taken a foreign resident permit and gave up Nepalese citizenship to invest in Nepal?A. In the current scenario when the NRN act is not implemented, a person with no citizenship of Nepal is considered a foreigner and would be treated as a foreigner in every aspect. There is an act known as Foreign Investment and Technology transfer act 1992 which has defined the industries in which a foreigner can invest. So, a foreigner can only invest in the positive list of industries and will not be allowed to invest in the negative list of industries.What are the legal restrictions (or what does the corporate law say) in starting e- business in Nepal?A. According to the law, if you start any kind of business, you need to register the business in the first place. Since you will be operating in Nepal, employing Nepalese citizens and using Nepalese banking, you will have to comply by the laws of Nepal for e-business or any other kind of business.Q. If I work with an international company and they pay me with my income tax deducted, will I have to pay income tax in Nepal too?A. In this case, the Dual Tax Avoidance Agreement (DTAA) would come into force according to which you can claim the tax paid in the foreign country here in Nepal. So, you have to pay the income tax but the tax paid in the foreign country would be returned by your claim with necessary documents. But, Nepal should have the DTAA (agreement) with the certain country .If there is no such agreement you have to pay income tax in Nepal too.Q. Should a foreigner working in Nepal be taxed if the tax is already cut in some other country?A. According to the law of Nepal, anyone who has lived in Nepal for more than 183 days is considered a resident and has to pay the tax. Hence it becomes compulsory for the foreign national to pay tax in Nepal too.Q. How long does it take to open a NRN or foreign Nepalese venture? What is the minimum capital? How can dividends be repatriated?A. The act for this issue has been made but not implemented yet. Till now the NRNs doing business in Nepal are doing it as a citizen of Nepal. The minimum capital for a foreigner is US $20,000 each.Q. What does the law say about partnership business? How long do the members have to remain partners?A. It depends on the contract between the partners. If the partners are separating willingly, they have the right to do so. However, they do need to inform the registrars office.Q. Is there a cyber law in Nepal?A. There is a separate act for the cyber law in Nepal. Recently the government has promulgated the Electronic Transaction Act which is related to all the electronic transaction happening in Nepal.Q. Do we need to register if there is no transaction through websites?A. If there is no transaction in the website you dont need to register. But, the e- commerce law has defined the services and products of websites and if you come under the law, you need to have registered.Q. If someone wants to export any product by selling it online, is the law similar?A. To promote export, the government has put a 0% tax on export. So if you are gaining profit from export, you need not pay any VAT to the government and the tax rates are also different.Q. What is the legal way of importing livestock from India?A. In order to bring livestock to Nepal from India, the quarantine test in the custom needs to be done according to the quarantine act of Nepal. Secondly, the import tax needs to be paid according to the law. But, recently due to shortage of milk in India, there is a ban in importing livestock from India.Q. Is it possible to register international brand like McDonalds in Nepal? If it is possible, what is the renewal period?A. In the current context, it is possible to register international brands in Nepal. But, since Nepal is a member of WTO and international trade agreement trade and tariff would be applicable from 2014, the government will have the right to amend the law and remove your name from the brand. Even if you go to the court there is a high chance that you will lose the case.Q. You have done Chartered accounting (CA) from both India and UK. What is the reason behind that? Why has the ICAN stopped the use of registered auditor?A. It was just a coincidence that I studied in the UK. I filled up a form and gave the exam and surprisingly I got selected. But, it did not add much value to my education. The registered auditor was only commerce graduate and was not expert in Accounting like the CAs. Hence, with the implementation of a new act regulating the Accounting profession, registered auditors are not in the criteria which only the CAs can fulfill. Q. What type of companies can a registered auditor certify?A. A company having an annual turnover of upto 40 crore rupees can be certified by a registered auditor.Q. How long does it take to open a NRN or foreign Nepalese venture? What is the minimum capital? How can dividends be repatriated?A. The act for this issue has been made but not implemented yet. Till now the NRNs doing business in Nepal are doing it as a citizen of Nepal. The minimum capital for a foreigner is US $20,000 each. In the case of NRN, the minimum capital is not clear yet. If the money has come through a banking channel, it can be repatriated with the approval from the central bank.Q. Is there an existing rule of patient capital? Is there any tax implication?A. If you are here as a NGO or INGO, the Social Welfare Council doesnt allow you to enter into a profit making business. But if you are not under the SWC banner but you are a not-for-profit company, you can increase your capital through investment by the law. Dividend sharing is not allowed in a not-for-profit company.Q. If there were disputes in a company, would you suggest an entrepreneur to go to court? Is the legal system entrepreneur friendly? A. The suggestion would be to analyze the cost in the first place. If going to court would be more expensive than settling outside, it is better to settle outside the court.Q. Do we need to cut the purchase tax on Agricultural and educational products?A. There is no law that says tax should be cut in purchases. For service, it is necessary but for goods, tax need not be paid.Q. Why are there very few students who practice law after graduating?A. It is mostly because of the lack of patience among the students. The students start going to other jobs without trying much in law field. So it would depend on the students more than anything else.Q. What does the law/act say if a foreign national want to provide a grant to a Nepalese Company?A. If it is a grant, it has to go through the Social Welfare Council and the grant cant be made to a company - it has to be a not-for-profit company.Q. What would be the tax provisions for donated goods from other countries?A. If the goods are for distribution for social cause, you need to apply for tax exemption and the Finance Ministry will look upon the goods and decide if the tax exemption is to be granted. For e.g., there is a tax exemption for education materials.These advices were given by a professional Chartered AccountantJagadish Bhattarai and LawyerPrabin Kharel.Their background is below. They are Entrepreneurs for Nepal members and have agreed to help members as much as they can. Feel free to approach them nicely on our behalf :)Jagadish BhattaraiJagadish Bhattarai is a Chartered Accountant by profession. He studied finance and accounting in India as well as the UK. After his studies, he stayed in the UK for some years. But the thought of coming back and working in Nepal was always strong. As he was contemplating over his next move, he got a call from a Nepali bank offering him a job. With his mothers encouragement, he joined in the bank. The pay, benefit and future was good and the management was treating him very well. But when he had to wake up and go the bank every day, he felt like quitting the job. After 5 months, he finally made a decision to quit. According to Mr. Bhattarai, he made the decision to quit because he felt that the job wasnt for him. So he started his own account consulting firm with a partner. However, finding the clients was not easy. The first two years, he and his partner did not do anything much in the firm. They made about 10% money of what he used to make in his previous job. On the third year, they started hiring other people. The market started to recognize them and gave them work. Currently the firm is employing 25 people including CAs, non-CAs and interns. Mr. Bhattarai says that his company has a target to give employment to at least 50 people. They provide services like auditing, accounting and advisory. Their firm has clients who pay a small sum of money and the ones who pay large sum of money but they treat their clients equally in all the cases. They help in registration, accounting services, tax issues, business advices, legal advices and many other services. They also provide services to international business wanting to set up businesses in Nepal.Prabin KharelPrabin Kharel is a lawyer by profession and specializes in corporate law. He studied law in both India and Nepal. He has been involved in corporate law for the last 10 years. He knows and understands other laws too but he is most comfortable with corporate law. According to Mr. Kharel, people get scared when they hear about legal obligations in Nepal. They do have a tendency to avoid registration and other legal process. It is mostly because of the confusion about the government department for registration and other processes. Recently he worked with Biruwa, a company that provides services for start up businesses, helping them register their company and few other ventures. Since people are not familiar with the law, which is often complicated, his law firm helps people understand law in an easier way and help them in the legal process. The process doesnt complete with registration and hence his firm helps companies to fulfill their legal compliance throughout. The process of renewing the license and other factors are generally forgotten by the companies and his firm also reminds the companies regarding those issues. Mr. Kharel says that people are slowly but gradually understanding the importance of legal firms and hence his firm is being recognized in the market.

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