Value Added Tax (VAT) is one of the key revenue sources for the Government of Nepal. If a person running a business or offering taxable services, you should understand how to register, file, and pay VAT for staying compliant and avoiding penalties. This guide explains everything you need to know about how to pay VAT in Nepal in every fiscal year.
Understanding VAT in Nepal
What is Value Added Tax (VAT)?
Value Added Tax (VAT) is a consumption-based tax levied on the value added at each stage of production or distribution of goods and services. In Nepal, the standard rate of VAT is 13%, which is applied on most goods and services unless specifically exempted by the government of Nepal.
Why VAT is Important for Businesses in Nepal
VAT contributes to national revenue and also helps businesses maintain proper financial records and builds credibility in the market. VAT compliance is often required for participating in government tenders and large-scale B2B transactions.
Who Needs to Pay VAT in Nepal?
Businesses or individuals whose annual turnover exceeds Rs. 5 million for goods or whose annual turnover exceeds Rs. 3 million for services or both are required to register for VAT. This includes wholesalers, retailers, service providers, and importers.
VAT Registration Process in Nepal
Who Should Register for VAT?
The businesses must register for VAT if:
Annual taxable transaction exceeds Rs. 5 million for goods or Rs. 3 million for services or both.
Deal in import/export of goods and services.
Want to claim VAT credit.
Documents Required for VAT Registration
To register for VAT, you need:
PAN certificate
Copy of company registration certificate
Rental agreement and ownership documents
Citizenship certificate of the proprietor/directors
Passport-sized photo
How to Register for VAT Online and Offline
Registration is available via the IRD Nepal e-portal through online and submit your documents to the nearest Inland Revenue Office (IRO) and track application status.
Step-by-Step Guide to Pay VAT in Nepal
How to Calculate VAT Amount
To calculate VAT, use this simple formula:
VAT = (Selling Price × 13%)
For example, if you sell a product for Rs. 10,000, the VAT would be Rs. 1,300.
Filing VAT Returns Through IRD Portal
Go to ird.gov.np
Log in with your credentials
Choose "VAT Return" under the tax section
Fill out details of taxable sales, purchases, and VAT credit
Submit and generate your payment voucher
Check the extension for VAT return provided by Government of Nepal for the circumstances beyond the control arises after Gen z movement in Nepal.
Making Online VAT Payments via ConnectIPS or Bank
Once the voucher is generated:
Log in to ConnectIPS
Select "Tax Payment"
Enter voucher details and confirm the payment
You can also pay VAT through selected commercial banks authorized by IRD.
Deadline for VAT Submission in Nepal
VAT returns must be filed monthly and submitted within the 25th day of the following month. For example, VAT for Jestha must be filed by 25th of Ashad.
VAT Filing Frequency and Deadlines
Monthly vs. Trimester VAT Filing
Monthly filing is mandatory for most VAT-registered taxpayers.
Trimester filing is allowed for small taxpayers whose annual turnover is less than Rs 10 million upon requestv of the taxpayer to IRD.
Penalties for Late Filing or Payment
Failure to file or pay VAT on time can result in:
Fines of up to Rs. 1,000 per return
15% of the unpaid VAT as penalty
10% annual interest on the outstanding amount
VAT Compliance Calendar in Nepal
It is essential to maintain a monthly calendar with reminders to:
File returns before the 25th of following month
Keep purchase/sales records updated
Reconcile input and output VAT
VAT Credit and Refunds
How Input VAT Credit Works
You can deduct the VAT you paid on purchases (input VAT) from the VAT you collected on sales (output VAT). This helps reduce your overall tax liability.
Conditions for VAT Refund in Nepal
Refunds are available if:
Input VAT exceeds Output VAT consistently
if business export goods or services
How to Apply for VAT Refund
File a VAT Refund Request via the IRD portal by submitting:
Proof of excess input VAT
Supporting invoices
Bank account details
Online Platforms for VAT Payment
Using the IRD eFiling Portal
The IRD portal (ird.gov.np) allows you to:
File VAT returns
View tax history
Generate tax payment vouchers
Paying VAT Through ConnectIPS
ConnectIPS is a secure, government-approved platform to pay VAT electronically using your linked bank account.
Payment Options via Commercial Banks
You can also pay VAT using bank cheques or cash at authorized commercial banks like:
Rastriya Banijya Bank
Nabil Bank
Siddhartha Bank
Common Questions About Paying VAT in Nepal
Can Individuals Pay VAT?
Yes, if individuals provide taxable services (like consultants, freelancers), and cross the turnover threshold, they must register and pay VAT.
Is VAT Mandatory for Freelancers or Small Businesses?
Yes, if their annual revenue exceeds Rs. 5 million for goods, Rs. 3 million for services or both. Otherwise, VAT registration is optional but beneficial for B2B services.
What to Do If You Miss the VAT Deadline?
Immediately file your return and pay the VAT due. Penalties and interest will apply, but timely filing prevents further legal action.
Tips for Smooth VAT Payment and Compliance
Keep Proper Sales and Purchase Records
Maintain organized records of:
Sales invoices
Purchase bills
VAT paid and collected
Hire a Registered Tax Consultant or Auditor
A qualified accountant or tax professional can help you:
Calculate VAT correctly
File returns on time
Avoid compliance errors
Regularly Check IRD Notifications and Deadlines
Stay updated with the latest tax circulars and changes in VAT law by checking IRD’s notices section.
Conclusion
Paying VAT in Nepal may seem complicated at first, but with the right knowledge and tools, it becomes a routine part of doing business. Timely registration, accurate filing, and using digital platforms like the IRD portal and ConnectIPS can save time and prevent legal issues. Whether you're a startup, SME, or freelancer, staying VAT-compliant ensures smooth operations and long-term growth.
If you’re an entrepreneur looking to file vat return of your business or need guidance at any step, Estartup Nepal is here to help. From vat return filing to business consulting, we make the process simple, stress-free, and fully compliant. Have questions or facing any issues? Feel free to reach out—our team is always ready to support you.