A Comprehensive Overview of PAN Card Registration in Nepal

Understanding private vs public company in Nepal is one of the first decisions foreign companies face when entering the Nepali market. This choice directly affects PAN card registration, tax exposure, disclosure obligations, and long-term scalability.

Nepal’s PAN (Permanent Account Number) is the backbone of the country’s tax system. Without it, no company local or foreign can legally operate, invoice, hire employees, or open a bank account.

This guide explains how private and public companies differ in Nepal, how PAN registration works for each, and what foreign investors must plan for from day one.

What Is a PAN Card in Nepal?

A PAN card is a unique tax identification number issued by Nepal’s tax authority. It links a company to all income tax, VAT, withholding tax, and payroll filings.

PAN registration is mandatory under the Income Tax Act, 2002 and enforced by the Inland Revenue Department (IRD).

Why PAN Registration Matters for Foreign Companies

A PAN is required to:

• Conduct commercial transactions in Nepal
• File corporate income tax returns
• Register for VAT when applicable
• Deduct and deposit employee taxes
• Repatriate profits through Nepal Rastra Bank channels

Without a PAN, a company is considered non-compliant, regardless of incorporation status.

Private vs Public Company in Nepal: The Legal Foundation

The distinction between private and public companies is governed by the Companies Act 2006.

Private Company in Nepal

A private company is the most common structure for foreign investors.

Key characteristics:

• Limited to 1–101 shareholders
• Shares are not publicly traded
• Simplified governance
• Lower disclosure requirements

Private companies are ideal for:

• Foreign direct investment (FDI)
• Subsidiaries
• Back-office and service centers
• Long-term controlled operations

Public Company in Nepal

A public company is designed for capital raising and large-scale operations.

Key characteristics:

• Minimum 7 shareholders
• Can issue shares to the public
• Higher compliance burden
• Mandatory statutory disclosures

Public companies are suitable for:

• Large infrastructure projects
• Banking and insurance
• IPO-driven expansion strategies

How Company Type Affects PAN Card Registration

PAN registration procedures are similar on the surface, but risk, scrutiny, and documentation depth differ significantly between private and public companies.

Core Difference in Practice

Step-by-Step PAN Card Registration Process in Nepal

Regardless of structure, PAN registration follows a defined process.

1. Company Incorporation

The company must first be incorporated with the Office of the Company Registrar (OCR).

Required outputs:

• Certificate of Incorporation
• Memorandum of Association (MOA)
• Articles of Association (AOA)

2. Capital and Bank Account Setup

Foreign companies must:

• Open a local bank account
• Inject share capital
• Obtain bank confirmation letters

3. PAN Application Filing

The PAN application is submitted to IRD, either:

• Online through the IRD portal, or
• Physically at the relevant tax office

4. Verification and Issuance

IRD verifies:

• Ownership structure
• Nature of business
• Capital source

Once approved, the PAN certificate is issued.

Documents Required for PAN Registration

Mandatory Documents

• Certificate of Incorporation
• MOA and AOA
• Board resolution for PAN registration
• Lease agreement or registered office proof
• Passport copies of foreign directors/shareholders

Additional Documents for Foreign Companies

• FDI approval from Department of Industry
• Capital inflow evidence
• Authorized signatory details

Private vs Public Company in Nepal: Tax Implications

Tax treatment is broadly similar, but compliance expectations differ.

Corporate Income Tax

• Standard corporate tax rate: 25%
• Special sectors may attract different rates

Withholding Tax Obligations

Companies must deduct tax on:

• Salaries
• Service payments
• Rent
• Interest and dividends

Failure to deduct correctly exposes directors to penalties.

VAT Registration and PAN: How They Connect

PAN registration is a prerequisite for VAT.

Companies must register for VAT if:

• Annual turnover exceeds NPR 5 million, or
• Engaged in VAT-liable activities

Public companies are more likely to face early VAT audits.

Compliance Burden: Private vs Public Company in Nepal

Private Company Compliance

• Annual tax return
• Annual audit (threshold-based)
• Withholding tax filings

Public Company Compliance

• Mandatory annual audit
• Quarterly disclosures
• Public reporting obligations
• Higher regulatory oversight

Common Mistakes Foreign Companies Make

Foreign investors often underestimate Nepal’s compliance environment.

Typical errors include:

• Delaying PAN registration after incorporation
• Misclassifying company type
• Ignoring withholding tax obligations
• Using nominee directors without substance

These mistakes lead to penalties and repatriation delays.

Strategic Insight: Choosing the Right Structure

For most foreign investors, a private company is the optimal starting point.

Why?

• Faster PAN approval
• Lower compliance cost
• Full foreign ownership allowed (subject to sector rules)
• Easier exit or restructuring

Public companies make sense only when:

• Large-scale funding is required
• Regulatory credibility is a priority
• Public capital markets are part of the strategy

EEAT: Legal and Regulatory Basis

This article reflects:

• Companies Act, 2006
• Income Tax Act, 2002
• Foreign Investment and Technology Transfer Act (FITTA)
• Inland Revenue Department guidelines

These laws are publicly available through Nepal government sources and enforced nationwide.

Conclusion

Choosing between private vs public company in Nepal is not just a corporate formality. It directly affects PAN card registration, tax exposure, compliance costs, and long-term flexibility.

For most foreign companies, a private company with early PAN registration provides the fastest, safest, and most controllable entry into Nepal. Public companies demand heavier compliance but unlock larger capital pathways.

Getting this decision right from day one saves years of regulatory friction.

Frequently Asked Questions

Is PAN registration mandatory for foreign companies in Nepal?

Yes. Every company conducting business in Nepal must obtain a PAN, regardless of ownership nationality.

Can a foreigner register a PAN without company incorporation?

No. Company incorporation is required before PAN registration for commercial activities.

Does a public company get PAN faster than a private company?

No. Public companies often face longer verification due to higher scrutiny.

Is PAN registration linked to VAT in Nepal?

Yes. A PAN is required before VAT registration can be completed.

Can one PAN be used for multiple business activities?

Yes, but all activities must be disclosed during PAN registration.