The Industrial Enterprises Act, 2076 (2020) is Nepal's principal legislation governing the establishment, registration, classification, operation, and regulation of all industrial enterprises in the country. Enacted on February 11, 2020, it replaced the Industrial Enterprises Act, 2073 (2016) with a more comprehensive framework designed to promote industrialization, attract investment, simplify registration processes, and align Nepal's industrial policies with global business practices. Under this Act, no person or entity can establish or operate any industry in Nepal without first registering under its provisions — including companies already registered at the Office of Company Registrar.
The Act was enacted with several strategic objectives: promoting industrialization and enhancing the industrial sector's contribution to the national economy, creating employment opportunities, increasing productivity through efficient resource utilization, encouraging export-oriented and import-substituting industries, protecting intellectual property rights, attracting domestic and foreign investment, and facilitating technology transfer. The Act establishes a liberal and competitive policy framework designed to make Nepal more attractive for industrial investment.
The Act classifies industries based on the nature of goods and services produced and the amount of capital investment:
| Category | Fixed Capital | Additional Criteria |
|---|---|---|
| Micro | Up to NPR 2 million | Max 9 workers (including entrepreneur), annual transaction under NPR 10 million, energy up to 20 KW |
| Cottage | No fixed limit | Traditional skills/technology, labour-oriented, local raw materials, energy up to 50 KW (Schedule-2 industries) |
| Small | Up to NPR 150 million | Other than micro and cottage |
| Medium | NPR 150M – 500M | — |
| Large | Above NPR 500 million | — |
The classification determines which registration authority handles the industry, what incentives apply, and what compliance obligations must be met. The Act also broadened the scope to include IT, infrastructure, and service-based industries.
All industries must be registered before operation. Industries already operating before the Act's commencement had one year to register. Industries previously registered under the old Act (2073) did not need to re-register. The Act allows online submission of applications with digital signatures, modernizing the registration process.
| Industry Type | Registration Authority |
|---|---|
| Schedule-1 industries (requiring permission) | Department of Industry (DOI) — with Board approval |
| Foreign-invested industries | Department of Industry (DOI) |
| Multi-province industries | Department of Industry (DOI) |
| Micro, cottage, small industries | DCSI (district/province level) or provincial authority |
| Medium and large industries | Department of Industry (DOI) |
For a detailed guide on small business and cottage industry registration, including ward office processes and required documents, see our separate guide.
Certain sensitive industries listed in Schedule-1 require prior permission from the Industry and Investment Promotion Board before registration. These include defence-related industries, arms and ammunition manufacturing, security printing and currency, tobacco and alcohol production, stone and mineral excavation, radio communication equipment, petroleum products, LPG refilling, drone manufacturing, and other sectors designated by the government. For the most sensitive industries, permission from the Council of Ministers is required.
The Act established the One-Stop Service Centre to provide all industrial administration services — registration, permits, clearances, incentives, and compliance — from a single location. The OSSC represents multiple government agencies under one roof, significantly reducing bureaucratic delays. It operates within the Department of Industry premises and is staffed by representatives from all relevant government bodies. Until the OSSC is fully operational, services are provided through the One-Stop Service Centre Board.
| Incentive | Details |
|---|---|
| Tax exemptions | Tax holidays and exemptions for eligible industries and sectors |
| Customs duty concessions | Reduced duty on machinery (10+ KW capacity), raw materials, and industrial equipment |
| Export duty refund | Refund of customs duty paid on raw materials for exported goods |
| Underdeveloped regions | Special benefits for industries established in underdeveloped areas |
| Micro enterprise exemptions | Zero registration fees; 100% income tax exemption for existing micro industries |
| Female entrepreneur benefits | 35% exemption on registration fees; 20% on industrial property registration |
| IP protection | Statutory protection for intellectual property used in industries |
| Stabilization clause | Benefits and exemptions under the Act cannot be reduced by future legislation |
| Foreign investor protections | Profit repatriation, investment security, dispute resolution mechanisms |
The Act actively encourages foreign investment with provisions for technology transfer facilitation, profit repatriation guarantees, investment protection under domestic and international law, and legal certainty for foreign-invested enterprises. Foreign companies operating through registered branch offices or joint ventures can establish industries under this Act, subject to compliance with the Foreign Investment and Technology Transfer Act.
The Act mandates CSR obligations for larger industries. Medium and large industries, plus cottage and small industries with annual turnover exceeding NPR 150 million, must allocate at least 1% of annual net profit for CSR activities. The fund must be used in sectors specified by the Industrial Enterprises Regulation, 2076 through formulated annual plans. Non-fulfillment of CSR requirements is a punishable offence under the Act.
The Act introduced the concept of unit industry, replacing the earlier "branch industry" model. If an industry wants to operate production facilities at a different location from its main premises, it must register the new location as a unit industry — following the same process as registering a new industry. Production, transaction, and accounting records for unit industries must be maintained in a unified form with the main industry. All existing branch industries had to re-register as separate industries within one year of the Act's commencement.
Industries must adhere to environmental protection standards as prescribed by prevailing environmental laws. Industries in environmentally sensitive sectors — mining, large-scale manufacturing, hazardous materials — must conduct Environmental Impact Assessments (EIA) before registration. Ongoing environmental monitoring and reporting is mandatory for applicable industries.
All registered industries must comply with ongoing obligations: submit annual financial reports to the Department of Industry, comply with labour laws and employment standards, maintain safety standards, notify the registering authority about commencement of operations within the prescribed period, obtain prior approval for capital increases or changes to objectives, and fulfill tax obligations including VAT and income tax filing.
| Offence | Consequence |
|---|---|
| Operating without registration | Monetary fine + mandatory registration |
| Acting against industry objectives | Fine + potential suspension |
| Failing to notify about operations commencement | Monetary fine |
| Transferring industry without approval | Fine + transfer voided |
| Increasing capital without permission | Monetary fine |
| Misusing incentives or concessions | Recovery of amount + fine |
| Violating CSR provisions | Monetary fine |
| Non-compliance with directives | Fine + operational suspension |
Appeals against penalty decisions can be filed in court within 35 days.
The Act establishes the Industry and Investment Promotion Board at the federal level, comprising government and business representatives. The Board develops industrial policies, promotes investment, grants Schedule-1 permissions, and oversees implementation of the Act. Provincial Industry and Investment Promotion Boards are also established to promote industries at the provincial level. The Board meets at least once every two months.
While Nepal Divorce Services is Nepal's first specialized divorce and family law firm, our legal team also advises on business and corporate law matters. We can assist with industry classification, registration applications, Schedule-1 permission processes, environmental compliance, labour law requirements, tax incentive claims, and dispute resolution with the Department of Industry.
For legal assistance, contact us at +977 9841114443 or on WhatsApp.
| Topic | Guide |
|---|---|
| Small business registration | Small Business Registration in Nepal |
| Company registration | Company Registration in Nepal |
| Foreign investment | Foreign Investment Law in Nepal |
| VAT law | VAT Law in Nepal |
| Labor law | Labor Law in Nepal |
| IP protection | Trademark & IP Law in Nepal |
The Industrial Enterprises Act, 2076 (2020) is Nepal's principal legislation governing the registration, classification, operation, and regulation of all industrial enterprises. It replaced the Industrial Enterprises Act, 2073 (2016) and came into effect on February 11, 2020. No person or entity can establish or operate an industry in Nepal without registration under this Act.
Industries are classified by capital investment:
Registration depends on industry type. Industries in Schedule-1 (requiring permission), those with foreign investment, and those under federal jurisdiction register at the Department of Industry (DOI). Micro, cottage, and small industries register at the district/provincial Department of Cottage and Small Industries (DCSI). The Act also allows online submission of applications with digital signatures.
The One-Stop Service Centre (OSSC) is established under the Act to provide all industrial administration services from a single location — including registration, permits, clearances, incentives, and compliance services. It represents multiple government agencies in one place, reducing bureaucracy and speeding up the setup process. The OSSC operates within the Department of Industry premises.
Industries listed in Schedule-1 require prior permission from the Industry and Investment Promotion Board before registration. These include defence-related industries, arms and ammunition, security printing, tobacco, alcohol production, petroleum products, mineral extraction, and other sensitive sectors. Permission from the Council of Ministers is required for certain high-sensitivity industries.
Key incentives include:
Industries registered under sole ownership of female entrepreneurs receive additional benefits:
These provisions aim to encourage women's participation in Nepal's industrial sector.
Medium and large industries, plus cottage and small industries with annual turnover exceeding NPR 150 million, must allocate at least 1% of annual net profit for Corporate Social Responsibility (CSR). The CSR fund must be used in sectors specified by the Industrial Enterprises Regulation, 2076 through annual plans and programs. Non-compliance is a punishable offence.
Micro enterprises receive significant benefits: zero registration fees, 100% income tax exemption (for micro industries already operating at the Act's commencement), simplified registration process, and reduced compliance requirements. These provisions encourage formalization of Nepal's large informal economy.
Industries must comply with environmental standards as prescribed by prevailing environmental laws. Certain industries must conduct Environmental Impact Assessments (EIA) before registration. Industries dealing with hazardous materials, mining, large-scale manufacturing, and other environmentally sensitive operations face additional compliance requirements including environmental monitoring and reporting.
Yes. The Act encourages foreign investment with provisions for profit repatriation, investment protection, technology transfer facilitation, and legal guarantees. Foreign-invested industries must register at the Department of Industry. The Act works alongside the Foreign Investment and Technology Transfer Act to create a framework for international investors.
The Act introduced the concept of unit industry, replacing the earlier "branch industry" concept. If an industry wants to operate production at a location different from its main facility, it must register the new location as a unit industry — following the same registration process as a new industry. All branch industries existing before the Act had to re-register as separate industries within one year.
Industries must: submit annual financial reports to the Department of Industry, comply with labour law and employment standards, maintain environmental safeguards, notify the registering authority about commencement of operations or commercial production, obtain prior approval for capital increases or objective changes, and fulfill CSR requirements. Non-compliance can result in fines and operational suspension.
Offences under the Act include: operating without registration, acting against industry objectives, failing to notify about operations commencement, transferring an industry without approval, increasing capital without permission, misusing incentives or concessions, violating CSR provisions, and non-compliance with directives. Penalties include monetary fines and potential operational suspension. Appeals can be filed in court within 35 days of the penalty decision.
A lawyer can assist with: determining the correct industry classification, preparing registration documents, obtaining Schedule-1 permissions, navigating the One-Stop Service Centre, ensuring environmental and labour compliance, claiming tax incentives and customs concessions, and handling disputes with the Department of Industry. Contact Nepal Divorce Services at +977 9841114443 for legal assistance.
At Nepal Divorce Services, Nepal's first specialized divorce law firm, we understand that taking the first step toward divorce can feel overwhelming. Our experienced divorce lawyers are here to guide you through the legal process and help you move forward with confidence and clarity.
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