This article is useful for new businesses or startups who have incorporated their business and whose turnover has increased and are in dilemma what are the criteria to get registered in VAT from the taxation laws point of view. We all know that the company should obtain a Permanent account number (PAN) before commencing its business from the tax office where the business is located. If the business has reached the threshold of turnover or it is compulsory to be registered in VAT, the registered person should get registered in VAT within 30 days of obtaining such threshold.
Threshold for VAT Registration in Nepal
Let’s discuss, what are the conditions to be registered in VAT which is also known as threshold. The threshold for VAT registration is presented below:
1. For the business dealing in Goods only, the limit is 50 Lakhs Rupees Within last 12 Months
2. For the business dealing in Services only,the limit is 30 lakhs Rupees Within Last 12 Months
3.For the business dealing in both Goods & Services, the limit is 30 Lakhs Rupees Within Last 12 Months
Implications after getting registered in VAT
The business (registered taxpayer) should file the VAT return within 25 days after the completion of the month in general but the tax department has implemented a new filing period for small and micro businesses.
In case of failure to file of VAT return by the business, the tax department imposes fines and penalties based on the turnover of the business during the filing period.
Frequently Asked Questions for VAT in Nepal
What is VAT Registration in Nepal?
Value Added Tax (VAT) registration is the process by which businesses in Nepal register with the Inland Revenue Department (IRD) to collect and remit VAT on their sales of goods and services. VAT registration provides businesses with a unique VAT registration number that must be used on invoices and tax filings. The VAT registration process ensures businesses are compliant with Nepal’s VAT laws and enables them to claim input tax credits on their purchases.
Is VAT Registration compulsory in Nepal?
VAT registration is compulsory for businesses in Nepal that meet certain turnover thresholds or engage in specific types of business activities. However, not all businesses are required to register for VAT. The VAT Act 2052 (1996) outlines the criteria for mandatory VAT registration.
What companies must register for VAT in Nepal?
Certain types of businesses must mandatorily register for VAT in Nepal regardless of their turnover. These include:
Manufacturing industries
Import-export businesses
Hotels, restaurants and bars
Travel agencies and tour operators
Telecommunications service providers
Consulting firms
Accounting and auditing firms
Legal services
Educational consultancies
Healthcare facilities
Construction companies
Real estate developers
Advertising agencies
Event management companies
Security service providers
Additionally, businesses in other sectors that exceed the turnover thresholds are required to register for VAT.
Procedure for VAT Registration in Nepal
Step 1: Obtain PAN Registration
Description: Before registering for VAT, businesses must first obtain a Permanent Account Number (PAN) from the Inland Revenue Department. PAN registration is mandatory for all businesses in Nepal.
Step 2: Complete Online VAT Registration Application
Description: Businesses can apply for VAT registration online through the IRD’s Taxpayer Portal. The online application requires details such as business information, estimated turnover, bank account details, and director/owner information.
Step 3: Submit Supporting Documents
Description: After completing the online application, businesses must submit supporting documents to their local Tax Office. This includes the company registration certificate, PAN certificate, and other relevant documents.
Step 4: Biometric Verification
Description: The business owner or authorized representative must visit the Tax Office in person for biometric verification. This involves capturing fingerprints and a photograph.
Step 5: Receive VAT Registration Certificate
Description: Upon successful verification and processing of the application, the Tax Office issues a VAT Registration Certificate with a unique 9-digit VAT number. This certificate must be prominently displayed at the business premises.
Documents required for VAT Registration in Nepal
Documents required for VAT Registration in Nepal
Completed VAT registration application form
Company registration certificate
PAN certificate
Memorandum and Articles of Association
Share certificates (for companies)
Citizenship certificates of directors/owners
Recent passport-size photographs of directors/owners
Rental agreement or proof of business premises ownership
Bank account details
Estimated financial statements/projections
Additional documents may be required depending on the nature of the business. All documents should be certified copies.
Timeframe for VAT Registration
The VAT registration process in Nepal typically takes 3-5 working days from the date of submitting a complete application with all required documents. However, the actual processing time may vary depending on the workload of the Tax Office and any additional verifications required.
Cost of VAT Registration in Nepal
There is no official government fee for VAT registration in Nepal. However, businesses may incur costs related to document preparation, notarization, and professional fees if using the services of consultants or lawyers for the registration process.
VAT Deregistration Process in Nepal
Businesses can apply for VAT deregistration if they no longer meet the turnover thresholds or cease operations. The deregistration process involves:
Submitting a written application to the Tax Office
Settling any outstanding VAT liabilities
Undergoing a tax audit
Receiving a deregistration certificate
Businesses must continue to comply with VAT regulations until the deregistration is approved.
Voluntary VAT Registration in Nepal
Businesses that do not meet the mandatory registration thresholds can opt for voluntary VAT registration. This may be beneficial for businesses that:
Deal primarily with VAT-registered customers
Want to claim input tax credits on purchases
Anticipate crossing the threshold soon
Wish to enhance their business credibility
The process for voluntary registration is the same as mandatory registration.
VAT registration is a critical compliance requirement for many businesses operating in Nepal. The registration process, while straightforward, requires careful preparation and submission of accurate information and documents. Businesses should assess their VAT registration obligations based on their turnover and nature of activities. Proper VAT registration enables businesses to legally collect VAT, claim input credits, and avoid penalties for non-compliance.
Cases Where VAT Deregistration is Required
Turnover Falls Below Mandatory Threshold
Businesses with annual taxable turnover below NPR 5 million can apply for VAT deregistration.
Business Closure or Dissolution
If you shut down your business permanently, you must cancel your VAT registration.
Change in Nature of Business
If you stop making taxable supplies or switch to fully VAT-exempt activities, deregistration is allowed.
Transfer or Merger of Business
When a business is sold, merged, or transferred, the old VAT registration can be cancelled, and the new entity must register separately if applicable.
Voluntary Deregistration
Voluntarily registered businesses can apply for deregistration after one year if turnover remains below the threshold.
Death of Sole Proprietor
For sole proprietorships, VAT registration is cancelled in the event of the owner's death unless the legal heir continues the business.
Deregistration by Tax Office
The IRD can cancel a VAT registration if:
The registration was obtained fraudulently.
The business has been inactive for a long time.
The taxpayer repeatedly fails to file returns or pay tax even after notices.
Step-by-Step Process for VAT Deregistration in Nepal
Step 1: Verify Eligibility
Confirm that you meet one of the deregistration criteria such as business closure, turnover below threshold, or voluntary cancellation after one year.
Step 2: File Pending VAT Returns
Submit all outstanding VAT returns up to the date of closure/cessation.
Pay any outstanding tax dues or claim input tax credit if available.
Step 3: Prepare Required Documents
You will need:
Online application form
PAN/VAT certificate copy
Latest VAT return and payment proof
Closure notice, merger agreement, or board resolution (if applicable)
Step 4: Apply Online Through IRD Portal
Visit IRD Taxpayer Portal
Log in with PAN/VAT credentials
Go to Taxpayer Request → VAT Deregistration
Fill details, upload documents, and submit
Step 5: IRD Verification
A tax officer will review your application, check your tax compliance, and may visit your business or conduct an audit.
Step 6: Receive Deregistration Certificate
Once approved, you’ll receive a VAT Deregistration Certificate online or from your tax office.
Step 7: Keep Records for 6 Years
Maintain VAT invoices and records for at least 6 years in case of a future audit.