Business registration in Nepal is only complete when your new entity secures tax credentials from the Inland Revenue Department (IRD). That means Permanent Account Number (PAN) for all entities and Value Added Tax (VAT) if your activities or turnover require it. In this guide, we give a step-by-step path for foreign companies and investors. We map documents, forms, timelines, and compliance actions from incorporation to your first tax return. You will find plain language. You will also find the legal basis and practical checklists.
PAN and VAT are the backbone of day-to-day operations. Without PAN, you cannot open a fully functional bank account, issue compliant invoices, or hire staff on payroll. Without VAT (where applicable), you cannot charge VAT, claim input tax credits, or satisfy many B2B customers’ vendor onboarding rules. Getting this right early prevents penalties, cash-flow leakage, and banking delays.
Key outcomes you unlock with PAN and VAT:
Bank onboarding and payments that pass compliance checks
E-invoicing and tax invoice numbering that customers accept
Payroll registration and withholding (TDS) remittance
Vendor qualification for public and corporate procurement
Input VAT credit on eligible purchases
Company incorporation at Office of the Company Registrar (OCR).
FDI approvals if applicable (FITTA route via Department of Industry or Investment Board Nepal).
Bank account opening (capital deposit and operational account).
PAN registration with IRD.
VAT registration with IRD (mandatory or voluntary, as applicable).
Device/invoicing setup (E-billing, invoice series, software mapping).
Monthly or bi-monthly returns and withholding tax compliance.
Tip: Start document collation for PAN and VAT the day you receive your Certificate of Incorporation. You will finish faster and avoid re-visits.
What is PAN?
Permanent Account Number is your unique tax ID issued by IRD. Every business must have it.
Who needs it?
Private limited companies (local and FDI)
Branch or liaison offices of foreign companies (with applicable scope)
Partnerships and sole proprietors
NGOs/INGOs and special entities (with distinct compliance)
When to apply?
Immediately after incorporation and bank activation. Do not wait until your first invoice or payroll cycle.
Where to use PAN?
On all invoices, receipts, quotations, contracts, purchase orders, payroll records, and tax returns.
Certificate of Incorporation, PAN for promoters (if local individuals), and MOA/AoA
FDI approval documents (if foreign shareholding)
Lease agreement or proof of registered office
Board resolution authorizing the application and signatory
Bank account details (letter or first statement)
Authorized signatory’s ID (passport for foreigners; citizenship for locals)
Photograph of signatory (as per IRD spec)
Make sure the registered office in your company file matches the lease. Mismatches trigger queries.
Create or verify tax portal account. Use the company’s official email.
Complete the PAN application form. Fill legal name, short name, address, nature of business, and signatory details.
Upload documents. Keep PDFs under the size cap. Use clear scans.
Appoint a tax representative. Many foreign-invested entities authorize a local manager or consultant.
Submit and track. Note the application reference number.
Respond to queries. IRD may request clarifications on address, activity code, or FDI papers.
Receive PAN certificate. Download and store in the statutory register. Print a copy for the office wall if requested by local officers.
Processing time: Often a few working days if documents are clean.
Government fee: PAN issuance itself is typically nominal; budget for incidental costs (stamps, attestations, printing).
Professional support: Varies by scope (document preparation, portal filing, liaison).
Legal name and trade name
Registered office address and ward details
Ownership pattern (local/foreign)
Principal business activity code
Authorized signatory and contact
Businesses that cross the statutory turnover threshold for taxable supplies
Traders, manufacturers, and service providers in taxable categories
Importers that require VAT credit chains
Entities that must issue VAT invoices to B2B or institutional customers
Many B2B customers insist on VAT invoices to claim input credit. Even below the threshold, voluntary VAT can be commercial common sense.
Input tax credit on eligible purchases
B2B readiness for tenders and enterprise customers
Formal invoice trail that simplifies audits and financing
Brand credibility in regulated supply chains
Assess applicability. Map your services and projected turnover.
Collate documents. Company papers, PAN, office lease, and invoicing plan.
Apply in the IRD VAT module. Declare business activities and proposed invoice series.
Provide premises proof. Upload utility bill or municipality letter if requested.
Nominate accounting software. Declare how you will issue VAT invoices.
Verification. Some cases require desk or field verification.
VAT certificate issuance. You receive a VAT number tied to your PAN.
Activate e-billing or approved billing software.
Create VAT invoice templates. Include VAT number, buyer details, supply date, line items, rate, and taxable value.
Set up invoice numbering. Use a logical prefix for years and branches.
Map chart of accounts. Separate input VAT, output VAT, and non-creditable expenses.
Decide return cycle. File on the schedule assigned by IRD.
| Dimension | PAN | VAT |
|---|---|---|
| Purpose | Universal tax identification for all taxpayers | Indirect tax on taxable supplies, enabling input credit |
| Authority | Inland Revenue Department (IRD) | IRD VAT Division (same authority) |
| Who needs it | Every entity (company, branch, partnership, sole) | Entities crossing threshold or choosing voluntary VAT |
| When to apply | Right after incorporation and bank activation | When threshold is met or business model requires VAT invoices |
| Key documents | Incorporation, MOA/AoA, office proof, signatory ID | PAN, incorporation set, office proof, invoice plan, software details |
| Verification | Mostly desk review | Desk and sometimes field verification |
| Fees | Nominal admin costs | Nominal admin costs; main cost is system setup |
| Compliance cycle | Use PAN on all documents; file applicable TDS/returns | Issue VAT invoices; file returns; maintain credit ledger |
| Business impact | Enables banking, payroll, contracts | Enables B2B sales, input credit, tender eligibility |
| Risk if delayed | Banking and payroll blocked; penalties possible | Customers reject invoices; loss of input credit; penalties |
Day 0–10:
Incorporation done. Start PAN prep. Confirm office proof and bank letter.
Day 10–20:
Apply for PAN. Prepare VAT dossier. Decide on voluntary vs mandatory VAT.
Day 20–40:
Receive PAN. File VAT registration. Configure billing software.
Day 40–60:
Receive VAT number. Test invoices. Train staff on invoice rules.
Day 60–90:
First VAT period closes. File first return if due.
Start withholding tax (TDS) routines for vendors and payroll.
Certificate of Incorporation
PAN of company (post-approval) and, where relevant, PAN/IDs of local directors
MOA and AoA (signed set)
FDI approval pack (LoI, Approval Letter, Share Subscription, Capital Inward plan)
Lease/tenancy agreement and latest utility bill
Bank letter/statement for the company account
Board resolution for PAN and VAT application
Authorized signatory’s passport/citizenship and photo
Accounting software details and sample invoice format
Contact details: email, phone, and emergency contact for IRD
Mandatory fields: Supplier and buyer details, PAN/VAT numbers, invoice number and date, description, quantity, rate, taxable value, VAT rate, VAT amount, and total.
Numbering convention: Use year or branch codes to avoid duplication.
E-archive: Keep PDFs and system logs. Back up monthly.
Credit notes and debit notes: Mirror the original invoice reference.
Zero-rated and exempt supplies: Tag correctly for returns and audits.
Vendors: Apply TDS where the Income Tax Act requires. Issue TDS certificates monthly.
Employees: Register payroll, compute tax slabs, and remit on schedule.
Inter-company charges: Review permanent establishment risk, mark-ups, and arm’s-length pricing.
Foreign director fees: Check withholding and DTAA positions before paying offshore.
Ensure FITTA approvals and share capital inward remittance plan align with tax registrations.
Map import/export VAT and customs implications if you trade goods.
Consider voluntary VAT from day one if your buyers demand VAT invoices.
Scope follows the parent’s authorized activities.
PAN is mandatory. VAT depends on whether supplies in Nepal are taxable.
Watch head office expense allocations and transfer pricing documentation.
Pure liaison offices are not revenue-generating.
PAN may still be needed for compliance interactions.
VAT usually does not apply where there is no taxable supply.
Keep functions narrow to avoid permanent establishment exposure.
Office proof inconsistency. Keep lease and registered address identical.
Unsigned board resolutions. Use proper letterhead and signatures.
Wrong activity code. Choose codes that match your real service lines.
Late VAT setup. Missing input credit and rejected invoices hurt cash flow.
Informal billing. Every sale needs a compliant invoice.
Return gaps. File nil returns on time to avoid penalties.
Staff turnover. Maintain SOPs so compliance survives team changes.
1) Is VAT compulsory for every new company in Nepal?
No. VAT is mandatory only when your taxable turnover crosses the threshold or your activities require it. Many B2B firms choose voluntary VAT for commercial reasons.
2) How long does PAN registration take?
A clean application often completes within a few working days. Timelines vary by office workload and document quality.
3) Can I issue invoices before getting VAT?
You can issue non-VAT invoices using PAN. You can issue VAT invoices only after VAT approval and system setup.
4) Do liaison offices need VAT?
If a liaison office does not make taxable supplies, VAT is usually not required. Keep the scope limited to liaison activities.
5) What happens if I miss a VAT return?
Penalties and interest can apply. File outstanding returns promptly, even if the period is nil.