Hotels Registration in Nepal through Foreign Investment

This article provides an overview of the registration process of star hotels through foreign investment in Nepal with detailed information on required standards to be complied with for accreditation. 

 

The table below lists the major laws that govern the registration of Star Hotels in Nepal.

 

S.N	GOVERNING LAW	SUBJECT MATTER OF GOVERNANCE
1	Foreign Investment and Technology Transfer Act, 2019 (2075)	Regulates foreign investment approval and technology transfer for foreign investors including star hotels.
2	Foreign Exchange (Regulation) Act, 2019 (1962)	Governs foreign currency transactions and capital repatriation for foreign investors.
3	Companies Act, 2063 (2006)	Establishes legal procedures for company incorporation and compliance.
4	Tourism Act, 2035 (1978)	Provides guidelines for operation, registration of star hotels.
5	Hotel, Lodge, Restaurant, Bar and Tourist Guide Rules, 2038 (1981)	Specifies operational requirements for star hotels, classifies star hotels in 5 categories and details the registration process of star hotels.
6	Environment Protection Act, 2019 (2076)	Mandates environmental impact assessments for hotel construction and operation.

 

 

The table below provides an overview on the governing authorities that are pivotal to the registration process of star hotels.

 

S.N	GOVERNING AUTHORITY	SUBJECT MATTER OF GOVERNANCE
1	Department of Industry (DOI)	Approves foreign investment of NPR 6 billion or less.
2	Investment Board Nepal (IBN)	Approves all foreign investment above NPR 6 billion and hydropower projects more than 200 MW.
3	Office of Company Registrar (OCR)	Registers new companies.
4	Nepal Rastra Bank (NRB)	Governs foreign exchange matters like capital infusion.

 

 

3.1. Process of registration of star hotels with foreign investment .

 

• Step: 1: Apply for foreign investment approval from DOI or IBN 

• Step: 2: Registration of Company with the Office of Company Registrar.

• Step: 3: Register for PAN at the Inland Revenue Office.

• Step: 4: Register at the local ward office and obtain a recommendation letter.

• Step: 5: Register the industry with the Department of Industry.

• Step: 6: Obtain a non-black certificate from the Credit Information Bureau and open a local bank account.    

• Step: 7: Open Bank Account of the Company 

• Step 8: Notify NRB before injecting investment amount                               

• Step 9: Inject investment amount and receive the shareholder registry from OCR

• Step 10: Register the hotel with the Department of Tourism

 

 

3.2. Documents that are to be submitted before Department of Industry for Foreign Investment

Followings documents needs to be submitted before DOI for the foreign investment approval in Nepal.

 

S.N	APPLICABLE DOCUMENTS
1	Bio-data or company profile of the foreign investor
2	Copy of Passports of all directors and shareholders of the foreign investor (Notarized)
3	Copy of Passport/ Citizenship of the foreign investor’s authorized representative (Notarized)
4	Certificate of incorporation of the foreign investor, Memorandum of Association, and Article of Association of the foreign investor (Notarized)
5	Corporate resolution of the foreign investor approving the investment in Nepal
6	Financial Credibility Certificate (FCC) of the foreign investor issued by a local bank in the investor's home country
7	Latest audited financial report of the foreign investor (Notarized)
8	Documents stating the source of investment and the time schedule of investment
9	Commitment letter by the foreign investor stating that the investment will not be repatriated for at least one year
10	Power of attorney authorizing an individual to complete the approval and registration process at the relevant entities in Nepal
11	Joint venture agreement (if applicable)
12	Project report for the operation of the local subsidiary company (if applicable)
14	Schedule of investment in the industry

 

3.3. Government fee that needs to be paid during Company Incorporation.

Following government fee has to be paid for incorporation of company in Nepal.

 

S.N	Particulars	Rate of Government Fee
1	Amount to be deposited at the Department of Industry while FDI approval	NPR. 20,000 (Approx. USD 150)
2	Government fee to be paid before OCR for company registration	Depends upon the authorized capital of the company.
3	Business Registration at Ward Office	Approx. NPR 10,000 to NPR 20,000 (USD 75 to 150) (Please note that the business registration fees are specific to each local level and subject to change every fiscal year.)
4	House Rent Tax	10% of House Rent Amount per month (During the incorporation need to pay 4 to 6 months house rent tax.)

 

 

4.1 Classification of Star Hotels

 

Section 11 of the Tourism Act, 2035 states that the Government of Nepal may form a Standard Fixation Committee to recommend the classification or registration of hotels, lodges, restaurants, resorts, and bars as tourism standards. 

Rule 5 of the Hotel, lodge, restaurant, bar and tourist guide rules, 2038 (1981) provides that all registered star hotels must adhere to the standards affixed by the committee. As of now there are 6 ratings provided to star hotels. They are :

 

a. One star Hotel

b. Two stars Hotel           

c. Three stars Hotel      

d. Four stars Hotel 

e. Five stars Hotel (General)  

f. Five stars Hotel (Deluxe)

 

Below are some of the recent most criteria classifying star hotels:

S.N	Criteria	One Star	Two Star	Three Star	Four Star	Five Star (General)	Five Star (Deluxe)
1	Parking Space	Able to fit at least 5 four-wheeled vehicles	Able to fit at least 10 four-wheeled vehicles	Able to fit at least 15 four-wheeled vehicles	Able to fit at least 20 four-wheeled vehicles	Able to fit at least 25 four-wheeled vehicles	Able to fit at least 40 four-wheeled vehicles
2	Number of Guest Rooms for Hotels Inside Kathmandu Valley	20 rooms	40 rooms	60 rooms	80 rooms	100 rooms	150 rooms
3	Number of Guest Rooms for Hotels Outside Kathmandu Valley	15 rooms	30 rooms	45 rooms	60 rooms	80 rooms	100 rooms
4	Lobby Capacity	Capable of holding 10 people at once	Capable of holding 15 people at once	Capable of holding 20 people at once	Capable of holding 40 people at once	Capable of holding 60 people at once	Capable of holding 80 people at once
5	Availability of Lifts	Not necessary	Not necessary	Building with more than 3 floors must have lifts that operate 24 hours	Building with more than 3 floors must have lifts that operate 24 hours	Building with more than 3 floors must have lifts that operate 24 hours	Building with more than 3 floors must have lifts that operate 24 hours
6	Area	40% of the land area is expected to be covered by hotel infrastructure	40% of the land area is expected to be covered by hotel infrastructure	40% of the land area is expected to be covered by hotel infrastructure	40% of the land area must be covered by hotel infrastructure	40% of the land area must be covered by hotel infrastructure	40% of the land area must be covered by hotel infrastructure

 

 

Fore detailed information regarding the classification criteria you can visit the Hotel Standard 2077 .

 

4.2 Process of obtaining star accreditation

Section 10 of the Tourism Act, 2035 governs the registration of star hotels in Nepal. As per Rule 3 of the Hotel, Lodge, Restaurant, Bar, and Tourist Guide Rules, 2038, application, along with a ten-rupee fee, must follow the format in Schedule-1 and be submitted to the Department of Tourism by interested hotels. They are then classified into one to five-star categories based on their facilities provided.

 

Following is the process of star hotel registration in Nepal.

• Step: 1: Prepare IEE/EIA Report (based on bed capacity)  and  a site inspection report.

• Step: 2: Submit the application to the Department of Tourism (“DoT”).

• Step: 3: DoT verifies documents, environmental compliance, and site inspection. 

• Step: 4: DoT inspects the hotel and submits the report for evaluation.

• Step: 5: DoT reviews the inspection report for compliance with standards.

• Step: 6: The Hotel Classification committee assesses the hotel and recommends the Appropriate star rating. 

• Step: 7: If approved, receive the star classification, valid for 5 years.

• Step: 8: Pay the applicable fee based on your star rating.

• Step: 9: Regular inspections and report submissions every six months to ensure ongoing compliance. 

 

 

 

Note: 

Facilities with 50-100 beds require an approved Initial Environment Examination (IEE)

Facilities with over 100 beds required an approved Environmental Impact Assessment (EIA)

 

4.3. Government fees to be paid in for the Accreditation

 

Section 8 of the Hotel, Lodge, Restaurant, Bar and Tourist Guide Rules, 2038 (1981) mandates the following fees to be paid in the registration process.

 

S.N	Star Rating	Applicable Fees
1	One Star Hotel	NPR 10,000
2	Two Stars Hotel	NPR 20,000
3	Three Stars Hotel	NPR 30,000
4	Four Stars Hotel	NPR 40,000
5	Five Stars Hotel (General)	NPR 50,000
6	Five Stars Hotel (Deluxe)	NPR 60,000

 

4.4 Additional Documents required for standard classification/determination

 

Along with the documents mentioned above in paragraph, the below mentioned documents are required to obtain standard classification of hotels.

S.N	Required Documents
1	An approved Initial Environment Examination (IEE) (For facilities with 50 to 100 beds)
2	An approved Environmental Impact Assessment (EIA) (For facilities with over 100 beds)
3	Copy of rental agreement, if the property is rented
4	Terms of Reference (TOR) for the IEE, including: An application with a Rs. 10 revenue stamp A copy of the citizenship certificate and personal details (bio-data) of the shareholders A copy of the land ownership document A copy of the memorandum and articles of association (for companies) If rented, a copy of the rental agreement
5	Site inspection report that includes: Business location, land boundaries, building details, physical infrastructure Impact on historical and environmental factors Parking facilities, and rental agreement for parking (if applicable)

 

 

Section 83(1) of the Tourism Industry Service Delivery Directory, 2070 requires star-rated hotels to renew their classification every five years. Section 83(2) mandates submitting an application with required documents before the classification period expires.

 

01. An application with a Rs. 10 revenue stamps affixed,

02. Audit report of the previous fiscal year,

03. Proof of submission of VAT and income details or a tax clearance certificate,

04. For businesses operating prior to Poush 2061 (mid-December 2004) without classification or renewal, proof of payment of the tourist service fee up to Poush 2061 (not required for those classified or renewed after that period),

05. Proof of submission of semi-annual periodic reports within the specified time

06. Certified records of the current shareholder

 

If compliance is confirmed, the classification will be renewed for another five years.

 

Section 47 of the Tourism Act, 2035 states that any person who has registered hotels must submit periodic reports after every six months to the Government of Nepal and the Government may request additional details as needed. 

 

The Government may inspect or examine the income, expenditure, or records of these entities, including their offices or workplaces. Following details have to be mentioned in the periodic report: 

01. Number of days stayed by the tourists in hotels, tourist accommodations, or lodges:

02. Details of domestic and international promotional activities.

03. Details of participation in conferences, seminars, etc.

04. Details of the tourism businesses established abroad for tourism industry development.

05. Whether there are any foreign or domestic employees (name, designation, and remuneration).

06. Details of foreign currency transactions.

07. Details of necessary import permits related to business operations (type of goods and amount).

08. Of the imported permits, how much goods have been received, how much are pending, and how much have been cancelled.

 

Date of publication : 2024/12/30 

 

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