VAT in Nepal

What exactly is VAT?How Do I Register My Business For VAT In Nepal?

What exactly is VAT?

Value-added tax (VAT) was implemented on March 20, 1996, with the passage of the new Value Added Tax Act, 2052. (1996).

 VAT (The value-added tax) is an indirect tax or consumption tax levied on goods and services. The tax will be imposed on the aggregate value of all taxable goods and services transactions. It must be paid at every point along the supply chain, from the manufacturer to the retailer. It can also refer to a general taxation system in which people in an economy are taxed based on what and how much they consume. In other words, people are taxed based on how much value they add to the economy.

As a result, VAT is a tax levied based on the value they have added from the consumption of people at various stages the product or service passes through.


Section 10 of the Value Added Tax Act of 2052 (1996) states that before engaging in any transaction, a person must file an application for registration with the Tax Officer in the prescribed format. Similarly, Section 10(2) of the aforementioned act states that if a person’s goods or services are declared taxable, or if a person operates as a result of a transaction, that person must file an application for exemption.

registration in the prescribed format to the Tax Officer within thirty days of the date of levy of such tax or the commencement of such transaction.

(a) Any transaction involving the manufacture of bricks, as well as any business derived from the operation of an industry.
concerning liquor, wine, health club, discotheque, massage therapy, motor parts, electronic software, custom agent, toy business, trekking, rafting, ultralight flight, paragliding, tourist transportation, crusher, sand mine, slate and stone

(b) if any person operates hardware, sanitary, furniture, fixture, furnishing, automobiles, electronics, marble, educational consultancy, account and audit-related services, catering services, party palace business, parking services, dry cleaning using machinery equipment, restaurant with bar, ice cream industry, color lab, boutique, delivery of uniform for educational institutes or health institutes, or any other entity metropolitan, sub-metropolitan, or within a specified area, Similarly, mentions in Schedule 1 of the Value Added Tax Act, 2052 (1996) are not required to be registered.

VAT threshold Cap

According to Rule 6 of the Value Added Tax Regulation 2053, small business transactions are exempt from mandatory VAT registration (1997). In the previous 12 months, such transactions do not need to be registered under VAT in respect of products, transactions up to 50 lakh, and mixed transactions such as products and services where the individual’s gross annual turnover is up to 20 lakh. Individuals who do not require VAT registration, have product transactions of up to 50 lakh, or mixed product and service transactions of up to 20 lakh, must post a notice in their place of transactions stating that they do not require VAT registration.

VAT in Nepal has the following characteristics.

A. . VAT is levied at every stage of the sales process. It is calculated based on the gross margin.

B. This tax is calculated and collected from the time the product is shipped from the manufacturer to the retailer.

C.  As a result, it is critical for the multistage tax system to eliminate the tax-on-tax effect.

D. The person/unit liable to pay VAT must report monthly sales and purchases to the Inland Revenue department, along with information on exports.

E. The Value Added Tax is calculated in two parts. Output VAT and Input VAT are the two types of VAT.

Should I Register My Business for VAT?

All manufacturers who participate in the production of goods and services must register for VAT. The Value Added Tax Act, 2052 (1996) Schedule categorizes what must and must not be registered under VAT. Registration for VAT is not required in Nepal. For businesses and entities that are not listed in Schedule 1 of the 2058 VAT Act. Schedule 1 goods and services include basic agricultural products, basic needs goods, live animals and animal products, agricultural inputs, medicine, medical and similar health services, and education. Furthermore, those with an annual turnover of Rs 50 lakhs or more dealing in goods are required to register for VAT. Those with a turnover less than that amount can voluntarily register for VAT, but it is not required. Individuals who provide services and have an annual turnover of more than Rs. 20 lakh are required to register for VAT.

Entities and businesses must also register for VAT if their commercial loans exceed Rs 1 million. Similarly, if their stock holdings exceed the limit set by the Inland Revenue Department, they must register for VAT.Furthermore, if a company imports taxable goods worth more than Rs 10,000, the law requires that the company register for VAT; however, if the taxable goods are imported for personal consumption, this requirement is waived.

How Do I Register My Company for VAT?

A. To register for VAT, the business must first obtain a PAN (Permanent Account Number). They can apply to the Inland Revenue Office (IRO) and the Inland Revenue Department for both a PAN and a VAT number (IRD).

B. Businesses can now access the VAT registration form online in this day and age. Businesses can do so by taking the following steps:

C. Navigate to the ‘Taxpayers Portal’ on the IRD website, where you can enter a username, password, and other information. Then, in the options, select ‘VAT,’ then click OK, and the submission number will appear on the screen.

D. After that, enter your PAN number and press the “Next” button.

E. Then, if the contact person for sales tax differs from the contact person for income tax, you must enter the contact person for sales tax’s information (including address). You can save or request the data by clicking the “Save” or “Send” buttons.

F. Then, to print a copy of the completed application form, click the Print button. You must go to the IRD office and hand in your application to the officer in charge. All applications submitted by taxpayers will be included in the list submitted to the IRO official portal.

Required Documents:

A. You must bring a copy of your citizenship certificate. Every other form of legal identification for foreigners.

B. A copy of a commercial enterprise’s registration certificate (if applicable).

C. Two identical passport-size photographs of the applicant signing the application form are required. For Partnership Firms, each partner’s photo should be the same size.

D. If proof of deposit is required, contact your local Inland Revenue Office (foreigners only).

E. A hand-drawn map of the location of your main or headquarters.

F. TDS on rental payments for three (3) months is included in the rental settlement. Documents requiring the use of a company’s seal.

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