Mandatory PAN Card Registration in Nepal: Understanding the Requirements

If you are evaluating private vs public company in Nepal, PAN card registration is not a side issue. It is a legal gatekeeper. Every company operating in Nepal must obtain a Permanent Account Number (PAN) before it can hire staff, open bank accounts, or issue invoices.

For foreign companies, the choice between a private and public company directly affects PAN eligibility, compliance exposure, disclosure, and future scalability. This guide explains the rules clearly, without legal clutter, and shows how foreign investors should think about structure, tax registration, and long-term control.

By the end, you will know which structure works, when PAN is mandatory, and how to avoid regulatory missteps.

What Is a PAN Card in Nepal?

A PAN (Permanent Account Number) is a tax identification number issued by Nepal’s Inland Revenue Department. It tracks all tax-related activities of an individual or entity.

Without a PAN, a company cannot legally operate in Nepal.

PAN registration is compulsory for:

• Private companies
• Public companies
• Foreign-owned entities
• Branch offices and project offices
• Any entity earning taxable income in Nepal

In short, if you exist legally, PAN applies.

Why PAN Registration Matters for Foreign Companies

Foreign investors often focus on incorporation first. That is only half the picture.

PAN registration is what activates the company in the tax system.

Without PAN:

• Bank accounts remain restricted
• Payroll registration fails
• VAT registration is blocked
• Withholding tax compliance is impossible
• Repatriation approvals get delayed

PAN is not optional. It is foundational.

Private vs Public Company in Nepal: A Structural Overview

Before diving into PAN mechanics, it helps to clarify the core difference.

Private Company in Nepal

A private company is the default entry vehicle for foreign investors.

Key characteristics:

• 1 to 101 shareholders
• Share transfer restrictions
• No public share issuance
• Lower disclosure burden
• Faster incorporation

Most foreign-owned subsidiaries in Nepal are private companies.

Public Company in Nepal

A public company is designed for capital markets and public ownership.

Key characteristics:

• Minimum 7 shareholders
• Can issue shares to the public
• Higher paid-up capital norms
• Mandatory disclosures and audits
• Tighter regulatory oversight

Public companies are rare for first-time foreign entrants.

Mandatory PAN Registration for Private and Public Companies

PAN registration is mandatory for both structures. There is no exemption.

However, the process, scrutiny, and post-registration compliance differ.

When PAN Must Be Registered

PAN must be obtained:

1. After incorporation approval
2. Before commencing operations
3. Before opening operational bank accounts
4. Before hiring employees
5. Before issuing invoices

Delays trigger penalties and compliance flags.

PAN Registration Process in Nepal

PAN registration follows a defined administrative flow.

Step-by-Step PAN Registration

1. Company incorporation approval from Office of Company Registrar
2. Lease agreement or registered office proof
3. Board resolution authorizing PAN registration
4. Submission to Inland Revenue Office
5. Issuance of PAN certificate

Most registrations complete within a few working days if documents are clean.

Documents Required for PAN Registration

Common Documents (Private and Public Companies)

• Certificate of Incorporation
• Memorandum and Articles of Association
• Office lease or ownership proof
• Board resolution
• Passport copies of directors
• Authorized signatory details

Additional Requirements for Public Companies

• Prospectus approval (if applicable)
• Share capital verification
• Enhanced disclosure filings

Comparison Table: Private vs Public Company PAN Implications

Insight: PAN compliance cost scales faster in public companies. This matters for early-stage foreign investors.

Tax Compliance After PAN Registration

Once PAN is issued, tax obligations begin immediately.

Core PAN-Linked Obligations

• Monthly withholding tax filings
• Annual income tax return
• Advance tax payments (if applicable)
• Payroll tax deductions
• VAT registration (if threshold met)

PAN is not a one-time event. It is a continuous compliance anchor.

Private Company PAN Compliance: What Foreign Investors Should Expect

Private companies offer predictability and control.

After PAN registration:

• Reporting remains streamlined
• Shareholder data stays private
• Tax audits are routine, not intrusive
• Regulatory exposure is manageable

For foreign subsidiaries operating as cost centers or service hubs, this structure aligns best.

Public Company PAN Compliance: Hidden Complexity

Public companies face expanded oversight.

After PAN registration:

• Financials are publicly scrutinized
• Tax positions are more frequently audited
• Related-party transactions attract attention
• Penalties escalate faster

This structure only makes sense if public capital is a real objective.

Common PAN Registration Mistakes Foreign Companies Make

Avoid these recurring issues:

• Delaying PAN until after operations begin
• Using incorrect office addresses
• Mismatch between incorporation and tax details
• Ignoring withholding tax rules
• Assuming PAN equals VAT

PAN is necessary, but not sufficient, for full compliance.

How PAN Ties into Foreign Investment Approval

Foreign companies must align PAN registration with:

• Foreign investment approval
• Capital inflow documentation
• Bank account setup
• Repatriation planning

Misalignment creates bottlenecks later, especially during dividend remittance.

Choosing the Right Structure: Private vs Public Company in Nepal

For most foreign companies:

• Private company first
• PAN registration immediately
• Scale later if needed

Public company structures should be strategic, not default.

Key Takeaways for Foreign Investors

• PAN registration is mandatory for all companies
• Private companies offer smoother PAN compliance
• Public companies increase tax and disclosure risk
• Early alignment saves future regulatory cost

Choosing the right structure upfront matters more than speed.

Conclusion

When assessing private vs public company in Nepal, PAN card registration is the common denominator that turns legal existence into operational reality.

For foreign companies, private companies provide faster PAN registration, lower compliance friction, and better control. Public companies amplify obligations and should only be chosen with a clear capital-raising strategy.

If your goal is stable market entry, predictable taxation, and compliant operations, start with structure, secure PAN early, and build forward with confidence.

Frequently Asked Questions

Is PAN mandatory for foreign-owned companies in Nepal?

Yes. All foreign-owned entities must obtain PAN before commencing operations.

Can a company operate without PAN in Nepal?

No. Operating without PAN is illegal and triggers penalties.

Is PAN registration different for private and public companies?

The obligation is the same, but documentation and scrutiny are higher for public companies.

Does PAN registration automatically register VAT?

No. VAT requires a separate registration once thresholds apply.

How long does PAN registration take in Nepal?

Typically a few working days if documents are complete.