Company registration in Nepal is only the start. PAN and VAT sit at the heart of compliance. You need them to bank, invoice, import, and pay tax. This guide explains both in plain language. It is written for foreign founders and in-house counsel. It covers documents, steps, deadlines, and mistakes to avoid. It uses current Nepal practice and law. It is practical and action-ready.
Reserve your name at the Office of the Company Registrar (OCR).
Register the company and get the Incorporation Certificate.
Apply for PAN with the Inland Revenue Department (IRD).
Assess VAT needs. Register if mandatory or strategic.
Open a bank account and fund the company as per FDI approvals.
Activate payroll and TDS once staff are hired.
Start invoicing with tax invoices if VAT-registered.
File returns and keep books from day one.
Foreign founders often ask what comes after incorporation. The answer is tax identity. PAN is your tax number. VAT is a transaction tax on supplies. You may need both. PAN is universal. VAT depends on activities and turnover. The two feed into banking, payroll, invoicing, and customs.
Companies Act, 2063 (2006) for company formation and records.
Foreign Investment and Technology Transfer Act, 2019 (FITTA) for FDI approvals.
Income Tax Act, 2058 (2002) for PAN, TDS, and income tax compliance.
Value Added Tax Act, 2052 (1996) for VAT registration, returns, and refunds.
Inland Revenue Department (IRD) for PAN and VAT administration.
Office of the Company Registrar (OCR) for incorporation and filings.
Nepal Rastra Bank (NRB) for repatriation and FDI inflows outflows.
Useful baseline figures:
The standard VAT rate is 13% under the VAT Act.
The general corporate income tax rate is often 25%, with sectoral variations under the Income Tax Act.
Returns and due dates vary by regime and assignment. Always confirm once you receive your registration.
| Item | What it is | Who needs it | When you apply | Authority | Typical processing | Core documents | Ongoing duties |
|---|---|---|---|---|---|---|---|
| PAN (Permanent Account Number) | Your tax ID (TIN) for all taxes | Every registered company, branch, most liaison offices for payroll/TDS | Right after incorporation and before banking | IRD | 1–3 working days, subject to inspection | OCR certificate, MOA/AOA, board resolution, office lease, location map, director IDs, photos, authorization letter | Keep books, file income tax, deduct and remit TDS, respond to IRD notices |
| VAT | Transaction tax on taxable supplies at 13% | Businesses making taxable supplies above the set threshold or by choice | After PAN and once commercial activities start | IRD | 3–10 working days, often with site visit | All PAN docs plus tax invoice sample, utility bill, bank letter, stock/service description | Issue tax invoices, file periodic VAT returns, manage input credits, handle refunds |
| TDS account | Withholding mechanism tied to PAN | Any payer of taxable income (e.g., salaries, contractors) | After PAN, before payroll or vendor payments | IRD | Immediate upon PAN activation | PAN details, payroll setup | Deduct at source, deposit, and report as per schedules |
Notes: Liaison offices usually do not trade. They still need PAN for payroll and TDS. VAT is rare for non-trading liaison work.
PAN is essential. You cannot operate without it. Banks will ask for it. Vendors will ask for it. Government offices use it to track taxes. Apply immediately after incorporation. Do this before opening accounts or hiring staff.
Who must register for PAN:
Private limited companies.
Branch offices of foreign companies.
Liaison offices for payroll and TDS obligations.
Partnerships and other taxable entities.
Why PAN first:
It unlocks banking and payroll.
It anchors VAT, TDS, and income tax.
It reduces KYC friction with large customers.
It supports NRB processes for repatriation and FDI compliance.
Prepare these items to avoid back-and-forth:
OCR Incorporation Certificate and Constitution (MOA/AOA).
Board resolution naming the tax signatory.
Passport copies of foreign directors and shareholders.
Citizenship/ID copies of local directors where relevant.
Recent photos of directors and the tax signatory.
Office lease agreement or ownership proof.
Simple location map and office photos.
Mobile number and email for IRD OTPs.
Authorization letter for the tax representative.
Basic bank reference or letter, if available.
Keep scans clear. Match names exactly to the OCR records.
Create an IRD user on the iTax system with the company email.
Complete the PAN form with legal name and registration data.
Upload documents in the specified formats and sizes.
Submit and note the tracking number.
Respond to any IRD queries on address or identity.
Host the site visit if the office is selected for inspection.
Receive the PAN certificate in your account.
Print and display the certificate at your office.
VAT registration is mandatory once your taxable supplies cross the legal threshold set by IRD. Many businesses register voluntarily earlier. They want to claim input credits. Exporters often do this because exports are zero-rated under the VAT Act. Input VAT then becomes refundable or creditable.
Consider VAT early if:
You sell to VAT-registered businesses.
You import goods or equipment.
You will export goods or services.
Your project has heavy input VAT and long build cycles.
Delay VAT if:
You will not make taxable supplies for many months.
Your buyers are unregistered consumers and pricing is sensitive.
Administration cost outweighs near-term credits.
All PAN registration documents listed earlier.
Detailed business activity note and expected revenue streams.
Sample tax invoice format that meets the VAT Act requirements.
Utility bill showing your business address.
Bank account letter or statement with the legal name.
Stock or service description and supplier list if applicable.
Board resolution to register for VAT.
Authorized signatory details and contact information.
Log in to iTax with your PAN credentials.
Select VAT registration and complete the application.
Upload documents and your invoice template.
Respond to IRD queries if any.
Prepare for inspection. Ensure signage and staff presence.
Receive the VAT certificate once approved.
Activate your invoicing with serial-controlled tax invoices.
Set your filing cycle as assigned in your approval.
The standard VAT rate is 13%.
You charge VAT on taxable supplies if registered.
You claim input VAT on business purchases.
You file returns periodically.
You pay net VAT or carry forward credit.
Exports are zero-rated. Keep shipping and customs proofs.
Some goods or services may be exempt. Input VAT on exempt supplies is usually not creditable.
Issue tax invoices with all required fields. Include legal name, PAN, VAT number, address, date, serial number, buyer details, description, taxable value, VAT, and total. Keep canceled invoice ranges documented. Run a proper sequence. Do not mix pro-forma and tax invoices. Keep delivery notes and receipts aligned.
Officers check if the office exists and is operational. Put your company name on the door. Keep the lease, map, and signboard handy. Staff should know the business activity. Show desks, equipment, and storage if relevant. Be ready to answer who manages accounts and where records are kept.
Branch office
Needs PAN.
Registers for VAT if making taxable supplies in Nepal.
Taxed as a permanent establishment under the Income Tax Act.
Can invoice local customers and import goods.
Liaison office
Needs PAN for payroll and TDS only.
Usually does not register for VAT as it does not trade.
No revenue billing in Nepal.
Keeps strong documentation to prove “non-trading” status.
Always align with your FITTA approval conditions and your NRB filings. These define what each office type can do.
Once you pay salaries, TDS rules apply. You deposit withheld tax and file reports. You also need PAN for all employees. Keep appointment letters and attendance records. Payroll must match bank payments and ledger entries. Late deposits draw penalties and interest. Keep calendars and reminders from day one.
Banks use PAN and VAT to complete KYC. They also check FDI approvals, source of funds, and compliance letters. NRB requires clean tax records for repatriation. Dividends and service fee remittances need tax clearance. Missing VAT returns can block repatriation. Keep your filings current to avoid cash lockups.
| Activity | Typical timeline | Government fees | Professional effort |
|---|---|---|---|
| OCR incorporation | 3–7 working days | OCR fees by capital band | High at start, then light |
| PAN registration | 1–3 working days | Nominal | Moderate for docs and inspection |
| VAT registration | 3–10 working days | Nominal | Moderate to high if inspection |
| Initial bank account | 2–5 working days | Bank charges vary | Moderate for KYC |
| First VAT return setup | 1–2 days | Nil | Accounting process setup |
These are working estimates. Actual timelines depend on workload, inspections, and document quality.
Record-keeping starts day one. Keep ledgers and vouchers.
Reconcile monthly. Bank, VAT, and vendor statements.
File VAT returns on time per your assigned cycle.
Deposit TDS on time. File TDS statements.
Close books annually and file income tax returns.
Maintain invoice controls. No gaps and no duplicates.
Respond to notices quickly and in writing.
Using a residential address for VAT.
Fix: Use a commercial lease. Post clear signage.
Delaying PAN while opening bank accounts.
Fix: Get PAN first. It speeds up KYC.
Skipping VAT while importing equipment.
Fix: Register early if you want input credits.
Invoice formats that miss fields.
Fix: Use a vetted tax invoice template.
Liaison offices billing locally.
Fix: Avoid local billing. Use the parent entity if allowed by law.
No board resolution for tax signatory.
Fix: Pass a resolution and keep it on file.
Ignoring export proof for zero-rating.
Fix: Keep shipping, customs, and payment evidence.
A chart of accounts aligned to Nepal tax lines.
Invoice numbering with secure stationery or software.
Vendor onboarding with PAN, bank details, and withholding settings.
Payroll with TDS mapping and calendars.
Document control with shared drives and naming rules.
Monthly close checklist owned by finance and reviewed by management.
Reserve company name at OCR.
Prepare MOA/AOA and register the company.
Appoint a tax signatory by board resolution.
Lease a commercial office and put up signage.
Create IRD iTax credentials.
Apply for PAN with all documents.
Assess business model and VAT threshold exposure.
Decide on VAT registration timing.
Apply for VAT and host any inspection.
Open a bank account with PAN and company papers.
Set up invoicing and VAT codes.
Hire staff and register payroll and TDS.
File your first VAT return if registered.
Close month one with reconciliations and a tax calendar.
Legal name, address, and PAN/VAT numbers.
Invoice date and serial number.
Buyer name and PAN/VAT if any.
Description of goods or services.
Quantity, unit price, and taxable value.
VAT rate and VAT amount.
Total payable in figures and words.
Delivery note or PO reference if applicable.
Authorized signature or digital stamp.
Keep export evidence tight. Match invoices to shipping documents. Keep foreign inward remittance proofs. File refund claims promptly if credits build up. Consider voluntary VAT registration early if inputs are heavy. Speak with your bank on documentation expectations. This reduces review cycles and rework.
Late registration can invite penalties. Late returns attract interest on tax due. Incorrect invoices can lead to denied credits. Repeated non-filing can trigger audits. Keep soft copies and signed PDFs to answer queries fast. Create escalation paths for notices. Do not ignore IRD emails or SMS.
A tax policy memo approved by the board.
Named process owners for returns and payments.
Access-controlled invoice templates.
A compliance calendar with maker-checker controls.
Quarterly self-reviews against VAT and income tax rules.
Secure backup of accounting data and documents.
IT and services exporters: Exports are often zero-rated. Keep contract, SoW, and delivery proofs. Time-stamp your deliveries.
Importers and distributors: You may face VAT at customs. Plan input credits and pricing. Stock records should be precise.
Construction and EPC: Progress billing must follow VAT rules. Document work stages with photos and certificates.
Consulting and training: Track place of supply. Support cross-border invoices with deliverables and attendance logs.
1) Is VAT mandatory for every new company in Nepal?
No. VAT becomes mandatory when you make taxable supplies above the legal threshold. Many firms register early to claim input credits or to export at zero rate.
2) Can a liaison office get VAT in Nepal?
Usually no. Liaison offices do not conduct trading activities. They use PAN for payroll and TDS. VAT registration is uncommon for liaisons.
3) How long does PAN registration take?
PAN often takes 1–3 working days after a complete submission. Timelines can extend if the IRD requests clarifications or conducts a site visit.
4) What is the VAT rate in Nepal?
The standard VAT rate is 13% under the VAT Act. Some items may be exempt or zero-rated. Confirm your specific supply classification.
5) Do exporters get VAT refunds in Nepal?
Yes. Exports are generally zero-rated. You may claim input VAT refunds subject to documentary proof and IRD verification.