If you are planning business registration in Nepal, you must also plan your tax setup from day one. The Inland Revenue Department requires almost every entity to obtain a Permanent Account Number and many to register for Value Added Tax. Getting PAN and VAT right protects your compliance, cash flow, and credibility. This guide explains what to register, when to do it, and how to stay compliant without stress.
Image alt text suggestion: “Business registration in Nepal PAN and VAT registration checklist on a desk”
PAN (Permanent Account Number).
PAN is your unique taxpayer identity. It is mandatory for companies, partnerships, branch offices, and most business activities. PAN links your income tax, withholding tax, and other filings under the Income Tax Act, 2058 (2002) and the Income Tax Rules, 2059.
VAT (Value Added Tax).
VAT is an indirect tax on the supply of goods and services under the VAT Act, 2052 (1996) and the VAT Rules, 2053. Most businesses register when they meet thresholds or operate in sectors with compulsory VAT. The standard VAT rate is 13 percent. Confirm the current rate against the latest Finance Act before pricing.
Inland Revenue Department (IRD).
The IRD administers PAN, VAT, TDS, and income tax returns. Registration and e-filing now happen primarily through IRD systems with in-person verification where required.
You will complete legal incorporation with the Office of the Company Registrar (OCR) or open a branch or liaison office per the Companies Act, 2063. You must then secure your PAN from the IRD. If your turnover or business activity meets VAT rules, you also register for VAT. Without PAN, you cannot open a business bank account, issue compliant invoices, or withhold taxes on vendor and payroll payments. Without VAT, you may face penalties for charging tax incorrectly or missing input credit.
PAN is required if you:
Register a company, partnership, or branch in Nepal.
Employ staff or pay vendors subject to withholding tax.
Open a bank account for business operations.
Plan to invoice customers or sign service contracts.
VAT is required if you:
Cross the annual turnover threshold set by the Finance Act.
Operate in categories where VAT is compulsory regardless of turnover.
Intend to claim input tax credit on purchases.
Export goods or services that are zero-rated under the VAT system.
Special cases:
Liaison offices usually cannot earn revenue in Nepal. They often need PAN for payroll withholding and office expenses but do not register for VAT.
Branch offices carrying on business must obtain PAN and VAT if they make taxable supplies.
Non-residents providing digital services to Nepalese consumers should assess VAT nexus and compliance based on current IRD guidance.
Certificate of incorporation or branch registration from OCR.
Memorandum and Articles of Association or charter documents.
Tax registration application form signed by an authorized signatory.
Board resolution authorizing signatory and responsible person.
Lease agreement or ownership proof for the registered office.
Latest utility bill or municipal address proof.
Identification of directors and authorized person
(citizenship for Nepalese, passport for foreigners).
Contact details and company stamp.
PAN certificate.
Same corporate documents as PAN, plus:
Proposed billing method (pre-printed tax invoice or IRD-approved software).
Warehouse or site details if you trade in goods.
Details of bank account for tax payments and refunds.
Additional sector-specific approvals if your industry requires them.
Foreign-owned companies and FDI projects:
Where your investment has FITTA 2019 approval, keep the Investment Approval Letter and share capital evidence handy. Branch offices should keep the parent company license and Nepal branch approval ready.
Prepare documents. Ensure OCR registration, office lease, IDs, and board resolution are ready.
Apply to IRD. Complete the PAN application with accurate legal name in English and Nepali where required.
Verify contact details. Use an active email and phone for IRD communications.
Site verification. Be prepared for an IRD officer visit or virtual verification. Keep signboard and documents visible.
Receive PAN certificate. Verify entity name, address, and PAN number. Correct errors at once.
Create e-filing profile. Set your IRD user credentials, security Q&A, and recovery contacts.
Update bank and stakeholders. Provide your PAN to banks, key customers, and vendors.
Practical tip: Keep a compliance binder with your PAN certificate, company stamp, standard invoice template, and withholding tax forms.
Confirm eligibility. Check if you have crossed the threshold or fall into compulsory categories.
Get PAN first. You need an active PAN to register for VAT.
Select billing system. Decide between pre-printed tax invoices or IRD-approved billing software.
File VAT application. Provide business activities, expected turnover, and place of supply details.
Office check. IRD may verify premises and invoicing readiness.
Receive VAT certificate. Your VAT number often mirrors PAN but confirm the format.
Display certificate. Place PAN and VAT certificates at the office and on your website or invoices.
Practical tip: Keep a serial-controlled invoice book or secure billing software. Never backdate or overwrite invoice numbers.
Nepal’s VAT system relies on proper tax invoices. Include at minimum:
Supplier legal name, address, PAN and VAT numbers.
Unique invoice number and date.
Buyer name and buyer PAN for B2B sales where available.
Description of goods or services.
Quantity, unit price, taxable value.
VAT amount and total payable.
Authorized signature or secure system reference.
Add payment terms, delivery terms, and credit note rules. For exports, keep documentary proof to support zero-rating where applicable.
Set a realistic calendar from day one.
VAT returns. File VAT returns as per IRD schedule, usually monthly. Pay any VAT due by the same deadline.
Withholding tax (TDS). Deduct TDS on salary and certain vendor payments. Deposit TDS and file statements within IRD timelines.
Income tax advance or installments. Plan cash flow for required advance payments where applicable.
Annual income tax return. File after the fiscal year end with audited financial statements.
Audit. Companies must get an annual audit by a registered auditor under the Companies Act.
Records retention. Keep books, invoices, payroll, and bank records for the statutory period.
Internal controls: Reconcile VAT control accounts every month. Tie VAT returns to your general ledger. Maintain an input VAT register with supplier PANs.
Late registration. Register as soon as you are required. Keep a turnover tracker.
Late filing or payment. Missed VAT or TDS filings lead to penalties and interest. Calendarize deadlines.
Wrong invoice format. Non-compliant invoices block input VAT claims. Use a standard template.
Input VAT errors. Claim input only against tax invoices from VAT-registered suppliers.
TDS lapses. Deduct and deposit TDS for salaries, rent, services, and other specified payments.
Mismatch with e-filing. Cross-check numbers before submission. Keep evidence for audits.
You register with OCR, secure PAN, then VAT if eligible. You can invoice in Nepal, claim input VAT, and repatriate profits per NRB foreign exchange rules once taxes are cleared.
A Nepal branch of a foreign company operates under parent control. It needs PAN and VAT if it supplies taxable goods or services in Nepal. Keep parent approvals and contracts ready in case of IRD queries.
A liaison office conducts coordination and marketing only. It should not earn Nepal-source income. It typically requires PAN for payroll and office compliance but not VAT.
Quote with clarity. State whether your prices are VAT-inclusive or exclusive.
Manage input VAT. Keep supplier VAT invoices to claim input VAT.
Refunds or carry-forward. Plan for refunds if you are export-heavy or capital-expenditure heavy.
Contracts. Include tax clauses on VAT treatment, TDS, and price adjustments.
ERP and billing. Use software that supports IRD formats, serial control, and reconciliation.
Employee PAN. Ensure all employees have personal PAN for payroll reporting.
Payroll withholding. Calculate, deduct, and deposit payroll TDS each month.
Benefits and contributions. Follow Social Security Fund or provident fund rules if enrolled.
Certificates. Issue TDS certificates to employees and vendors for their tax credits.
Services and consulting. Often VAT-applicable above the threshold. Maintain detailed timesheets and contracts.
Importers and traders. Coordinate customs documents, VAT at import, and input claims.
Construction and EPC. Handle progress billing, retention, and advance receipts with correct VAT and TDS.
IT and software. Assess cross-border digital supply and place of supply rules.
NGO projects and donor funding. Review each grant for tax treatment, exemptions, or special reporting.
| Item | Purpose | Law and Authority | When Required | Key Outputs | Typical Filing |
|---|---|---|---|---|---|
| PAN | Taxpayer identity for all taxes | Income Tax Act 2058, IRD | All businesses and branches | PAN certificate, e-filing access | Annual income tax return, TDS statements |
| VAT | Indirect tax on supplies | VAT Act 2052, IRD | Above threshold or compulsory sectors | VAT certificate, tax invoices | VAT returns as per IRD schedule |
| Excise | Tax on specific goods or services | Excise Duty Act 2058 | Regulated sectors only | Excise license | Excise returns per license |
| Payroll TDS | Withholding on salaries | Income Tax Act 2058 | When you have employees | TDS deposits and certificates | Monthly withholding statements |
Always confirm cycles and rates against the current Finance Act and IRD notices.
Test your invoice sequence and tax totals.
Reconcile input VAT and output VAT to the ledger.
Verify supplier PAN and VAT status for large purchases.
Prepare a working paper trail for each return.
Review bank reconciliations and cash collections.
Get a pre-filing check by your accountant or tax advisor.
1) Is VAT mandatory for every new company in Nepal?
No. VAT is mandatory if you cross the annual turnover threshold or operate in sectors where VAT is compulsory. Many startups begin with PAN only, then add VAT as they scale or need input credit.
2) How long does PAN registration take?
It is usually quick once documents and office verification are complete. Delays arise from incomplete leases, wrong legal names, or missing board resolutions. Prepare a clean file and coordinate with the IRD officer.
3) Can a foreign director sign the tax forms?
Yes, if authorized by a board resolution and present for verification as required. Many companies appoint a local authorized representative to handle daily filings and IRD queries.
4) What happens if I miss a VAT filing or payment?
Late filings trigger penalties and interest. Repeated delays can draw audits and input credit issues. File even a nil return on time to stay in good standing with the IRD.
5) Do liaison offices need VAT?
Generally no, since liaison offices should not earn revenue in Nepal. They still need PAN for payroll and office expenses, and must follow withholding and reporting rules.
Income Tax Act, 2058 (2002) and Income Tax Rules, 2059.
Value Added Tax Act, 2052 (1996) and VAT Rules, 2053.
Excise Duty Act, 2058 and sectoral directives.
Companies Act, 2063 for corporate obligations and audits.
Finance Act of the current fiscal year for rates and thresholds.
Inland Revenue Department procedures and public notices.
These laws and guidelines set the legal framework for PAN, VAT, invoicing, withholding, and returns. Always check the latest Finance Act and IRD circulars before you finalize pricing or file returns.