If you’ve completed company registration in Nepal, your next focus is tax onboarding. You must obtain a Permanent Account Number (PAN). You may also need to register for Value Added Tax (VAT). These registrations unlock bank operations, payroll, lawful invoicing, and import or export. This guide explains the “what’s next” steps. It translates legal requirements into practical checklists for foreign founders and FDI teams.
New entities often rush to open bank accounts and hire staff. Do that only after PAN. VAT may follow, depending on your business model and turnover. The Inland Revenue Department (IRD) manages both registrations. The process is digital first. However, physical verification can still occur.
Key laws and references used throughout this guide (no links):
Companies Act 2063 (2006)
Income Tax Act 2058 (2002) and Finance Acts (annual)
Value Added Tax Act 2052 (1996) and VAT Rules
Foreign Investment and Technology Transfer Act 2019 (FITTA 2019)
Nepal Rastra Bank (NRB) foreign exchange and FDI procedural circulars
IRD e-filing and e-billing notices (current fiscal year)
Note: The standard VAT rate in Nepal is 13% under the VAT Act. Thresholds and procedural circulars can change via Finance Acts or IRD notices.
| Feature | PAN (Permanent Account Number) | VAT (Value Added Tax) |
|---|---|---|
| Purpose | Universal tax identifier for all tax dealings. | Indirect tax on the supply of taxable goods and services. |
| Who must register | All companies, branches, liaison offices that transact or withhold tax. | Businesses making taxable supplies, seeking input credit, importing, or crossing IRD thresholds. |
| Timing | Immediately after incorporation and before first transaction. | Before making VAT-able supplies or when approaching the IRD threshold. |
| Core documents | Incorporation docs, MOA/AoA, board resolution, office lease, director IDs. | Same as PAN plus VAT-specific details (product/service list, billing system, store/site info). |
| Output | PAN certificate. | VAT certificate and VAT account number. |
| Use cases | Bank, payroll, withholding, income tax, e-TDS. | Issue tax invoices, claim input credit, import/export, B2B credibility. |
| Returns | Income tax returns, e-TDS schedules, advance tax, withholding. | Periodic VAT returns with payments or credits. |
| Typical verification | Desk review; site verification possible. | Site verification is more common, especially for trading and warehousing. |
| Consequences of delay | Withholding issues, banking friction, penalties under Income Tax Act. | Loss of input credit, inability to issue VAT invoices, penalties under the VAT Act. |
Board readiness. Approve authorized signatories and tax registrations.
PAN application. Apply online. Prepare originals for verification.
Bank KYC. Use PAN certificate to open the current account.
FDI capital inflow plan. Coordinate NRB compliance and channel funds via the banking route.
Payroll basics. Draft employment agreements and prepare e-TDS workflows.
VAT decision. Assess if your model requires immediate VAT registration. Consider threshold, imports, and B2B sales.
E-billing setup. Choose a VAT-compliant invoicing tool if you register for VAT.
Accounting stack. Implement a Chart of Accounts and document controls.
Statutory registers. Maintain share register, minute books, and related company records.
Compliance calendar. Map monthly, quarterly, and annual deadlines for PAN and VAT.
Every incorporated company and branch office.
Liaison offices that run payroll or withhold taxes.
Entities that will make payments requiring withholding (e.g., rent, services).
Certificate of Incorporation and PAN application form.
MOA/AoA or constitutional documents.
Board resolution approving PAN and naming signatories.
Lease agreement or ownership proof for the registered office.
Director and authorized signatory IDs with photographs.
Contact details, email, and phone number for IRD correspondence.
Online application. Complete entity details and attach documents.
Submission and acknowledgment. Save the reference number.
Verification. Respond to any IRD queries. Keep originals ready.
Approval. Receive PAN certificate.
Activation. Create e-filing credentials and set password hygiene.
Many cases complete within a few business days after correct filing.
Timelines may extend if verification or additional queries arise.
Keep a buffer. Align bank KYC with PAN availability.
Mismatch between lease address and registered office address.
Missing board resolution or signatory pages.
Unclear business activity description.
Not preparing for site verification.
Delayed creation of e-filing credentials.
You make taxable supplies and want to issue VAT invoices.
You need input tax credit on purchases.
You import or intend to export with VAT implications.
Your turnover approaches the threshold notified by IRD for the fiscal year.
IRD directs registration for your activity cluster.
All PAN documents.
Detailed business activity description and HS codes (if importing).
List of goods/services and supply chain summary.
Warehouse or store details and photographs (if applicable).
Sample invoice template and details of e-billing software.
Bank account proof and initial capital evidence.
Threshold and model assessment. Confirm need based on activities and clients.
Pre-readiness. Align invoice format with VAT Act requirements.
Online application. Fill VAT form with supporting documents.
Physical or desktop verification. Keep premises and signage ready.
Approval and VAT number. Set up e-billing and train your team.
First return planning. Prepare inventory opening balances and input claim strategy.
Use a tax invoice with mandatory fields: supplier name, VAT number, buyer name, invoice number, date, description, quantity, unit price, taxable value, VAT amount, and totals.
Include 13% VAT where applicable.
Map exempt, zero-rated, and standard-rated supplies correctly.
Keep sequential invoice numbers and secure e-billing controls.
Issue credit notes and debit notes for adjustments as per VAT Rules.
VAT returns are filed periodically as per IRD’s schedule.
Maintain purchase and sales registers for each period.
Reconcile input credit with supplier output declarations.
Pay any net VAT due with the return.
Maintain audit trails for refunds and zero-rating claims.
Deduct TDS on qualifying payments such as rent, services, and payroll.
File e-TDS schedules and deposit on time.
Issue TDS certificates to vendors and employees.
Reconcile TDS with annual returns under the Income Tax Act.
Review projected profit and set advance tax installments.
Update rolling forecasts each quarter.
Maintain books under the Companies Act and Income Tax Act.
Statutory audit is mandatory for companies.
Prepare financial statements and tax computations.
File corporate returns by IRD deadlines.
Keep vouchers, ledgers, contracts, and e-billing records for statutory periods.
Maintain electronic backups and off-site copies.
FITTA 2019 governs investment approvals and repatriation rights.
Bring capital via the formal banking channel.
Secure NRB compliance for foreign currency flows.
Keep capital evidence (SWIFT, bank advice) ready for future repatriation.
VAT is common for B2B or import-export models.
Obtain PAN for withholding and corporate tax obligations.
VAT depends on the branch’s supply profile.
Keep foreign head office support agreements on file.
Place emphasis on PE (permanent establishment) considerations under tax law.
Liaison offices are typically non-commercial.
PAN may still be needed for payroll and withholding.
VAT is generally not applicable if no taxable supply occurs.
Maintain strict scope control to avoid PE risk.
| Item | Government fees | Professional fees | Typical timeframe | Notes |
|---|---|---|---|---|
| PAN registration | Nil or nominal | Varies by scope | Few business days | Keep originals ready; desk review common. |
| VAT registration | Nil or nominal | Varies by scope | One to two weeks | Site verification and e-billing readiness can extend time. |
| e-billing setup | — | Software + setup | 3–5 days | Ensure fiscal rules and formats are compliant. |
| Compliance calendar setup | — | Advisory package | 1–2 days | Map all monthly and annual filings. |
These are ballpark planning figures. Actuals depend on activity, verification, and IRD workload.
Week 1–2: PAN application, bank KYC, e-filing credentials, accounting stack.
Week 2–3: VAT assessment; if needed, submit VAT application and prepare for verification.
Week 3–4: VAT approval; implement e-billing, staff training, and invoice controls.
Month 2: First TDS filings, VAT return planning, input credit documentation.
Month 3: Quarterly tax review, advance tax planning, audit readiness checklist.
Late registration can trigger penalties under the VAT and Income Tax Acts.
Wrong invoicing leads to disallowed credits and assessments.
TDS non-compliance creates cascading vendor issues and interest costs.
Poor records increase audit exposure and delay refunds.
FDI traceability gaps complicate repatriation and capital verification.
Mitigation: Use checklists, segregate duties, reconcile monthly, and document every assumption. Review updates from the Finance Act each fiscal year.
IRD e-filing credentials with secure access control.
VAT-compliant invoicing with sequential numbering and export features.
General ledger software aligned to Nepali GAAP and tax rules.
Document management for contracts, leases, and tax letters.
Payroll and e-TDS system with accurate coding and certificate generation.
Internal controls: maker-checker for invoices, bank reconciliations, and period close.
Finalize board resolutions for PAN and VAT.
Prepare the document pack and confirm registered office readiness.
Apply for PAN and track verification.
Open the bank account using PAN.
Assess VAT need based on turnover, imports, and B2B customers.
Align invoice formats with VAT rules.
Apply for VAT and complete any site verification.
Configure e-billing and train the team.
Set up e-TDS workflows and calendars.
Begin periodic filings with reconciliations and variance review.
Master invoice template and numbering policy.
Customer master with VAT numbers.
Daily sales register and credit note log.
Purchase register with supplier VAT numbers for input credit.
Evidence of exports or zero-rated supplies, where applicable.
Monthly VAT return file with payment proofs and reconciliations.
1) Is VAT mandatory for every new company in Nepal?
No. PAN is mandatory. VAT depends on your taxable supplies, threshold status, and business model. Many B2B and import/export companies register early to issue VAT invoices and claim input credit.
2) What is the VAT rate in Nepal?
The standard VAT rate is 13% under the Value Added Tax Act 2052. Exempt and zero-rated categories exist. Apply the correct rate based on your goods or services.
3) Can a liaison office get PAN but avoid VAT?
Often yes. Liaison offices are typically non-commercial. They may need PAN for payroll and withholding, but they usually do not register for VAT unless they make taxable supplies.
4) When should I apply for PAN after incorporation?
Immediately. Obtain PAN before bank operations, payroll, and any transaction that requires withholding or tax reporting to avoid penalties and delays.
5) What happens if I delay VAT registration?
You risk penalties, denied input credits, and inability to issue valid tax invoices. Early assessment prevents compliance gaps and protects margins.