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Doing Business is an annual report co-published by The World Bank and The International Finance Corporation. The report sheds light on how easy or difficult it is for an entrepreneur to open and run a small to medium-size business when complying with relevant regulations.

The following information is extracted from Doing Business 2012.

Globally, Nepal stands at 100 in 183 economics on the ease of starting a business. According to the data collected by Doing Business, starting a business here requires 7 procedures, takes 29 days, costs 37.4% of income per capita and requires paid-in minimum capital of 0.0% of income per capita.

Doing Business has used several indicators to measure the ease of Starting a Business in Nepal. These indicators measure:

  1. Procedures to legally start and operate a company(number)
    • Preregistration (for example, name verification or reservation, notarization)
    • Registration in the economy’s largest business city
    • Post registration (for example social security registration, company seal)
  2. The time required to complete each procedure (calendar days)
    • Does not include time spent gathering information
    • Each procedure starts on a separate day
    • Procedure completed once final document is received
    • No prior contact with officials.
  3. Cost required to complete each procedure(% of income per capita)
    • Official costs only, no bribes
    • No professional fees unless services required by law
  4. Paid-in minimum capital(% of income per capita)
    • Deposited in the bank or with a notary before registration(or within 3 months)

To make the data comparable across economies, several assumptions about the business and the procedures are used in the report. It assumes that all the information is readily available to the entrepreneur and that there has been no prior contact with officials. It also assumes, all government and non-government entities involved in the process functioned without corruption. And for business, the report assumes that it:

  • Is a limited liability company, located in the largest business city.
  • Conducts general commercial or industrial activities
  • Has a start-up capital of 10 times income per capita.
  • Has a turnover of at least 100 times income per capita.
  • Does not qualify for any special benefits.
  • Does not own real estate.
  • Is a 100% domestically owned.

Starting a Business

Through collaboration with relevant local professionals and the study of laws, regulations and publicly available information on the associated time and cost, the report identifies a set of specific procedures the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new firm. These procedures are those that apply to a company matching the standard assumptions(the standard company).

STANDARDIZED COMPANY

City: Kathmandu

Legal Form: Private Limited Liability Company

Start-up- capital: 10 times GNI per capita

Paid-in minimum capital (% of income per capita): 0.0

Summary of procedures for starting a business in Nepal – and the time and cost

  1. Procedure: Verify the uniqueness of the proposed company name
    1. To check whether the proposed company name is available and acceptable, the company must
      (depending on the professional charges)

      • Procedure: Buy a stamp attached to the registration form
        Time required to complete: 1 day
        Cost to complete: NPR 5
      • Procedure: File documents with the company Registrar’s office, Department of Industry
        To register a company, the promoter must submit an application as prescribed by the Ministry of Industry, Commerce and Supplies. The registration fee is based on the company’s authorized capital:
        -Up to NPR 100,000(authorized capital): NPR 1,000
        -NPR 100,001 to NPR 500,000: NPR 4,500
        -NPR 500,001 to NPR 2,500,000: NPR 9,500
        -NPR 2,500,001 to NPR 10,000,000: NPR 16,000
        -NPR 10,000,001 to NPR 20,000,000: NPR 19,000
        -NPR 20,000,001 to NPR 30,000,000: NPR 22,000
        -NPR 30,000,001 to NPR 40,000,000: NPR 25,000
        -NPR 40,000,001 to NPR 50,000,000: NPR 28,000
        -NPR 50,000,001 to NPR 60,000,000: NPR 31,000
        -NPR 60,000,001 to NPR 70,000,000: NPR 34,000
        -NPR 70,000,001 to NPR 80,000,000: NPR 37,000
        -NPR 80,000,001 to NPR 90,000,000: NPR 40,000
        -NPR 90,000,001 to NPR 100,000,000: NPR 43,000
        -More than NPR 100,000,000: NPR 43,000 plus NPR 30 for each additional NPR 100,000
        Time required to complete: 5 days
        Cost to complete: NPR 10,000
      • Procedure: Make a company rubber stamp
        Time required to complete: 1 days
        Cost to complete: NPR 275
      • Procedure: Register for VAT and Income Tax with the Inland Revenue Office, The Ministry of Finance The company must discuss the office address and withhold 15% tax of the rent for at least 3 months and deposit it to the tax office. If the company’s objectives include goods or services subject to VAT, both registrations(VAT and income tax) should be obtained simultaneously.
        Time required to complete: 5 days
        Cost to complete: no charge
      • Purpose: Enroll the employees in the Provident fund
        From the basic salary of each employee, 10 percent is deducted each month, and a matching contribution is made by the employer. The contribution is made to the provident fund and released on employee retirement. The employer also has to pay gratuity on the retirement of an employee at the rate prescribed by labor regulation. Both of these rules are applicable only if the company appoints 10 or more employees.
        Time required to complete: 1 days
        Cost to complete: no charge
        (*Takes place simultaneously with another procedure)

       

      Source: Doing Business database,
      Doing Business 2012
      http://www.doingbusiness.org/~/media/fpdkm/doing%20business/documents/profiles/country/NPL.pdf