How to Register for PAN & VAT Online in Nepal (2026 IRD Guide)

If you’re starting a business, freelancing, or providing IT services in Nepal, you’ll almost certainly run into two acronyms: PAN and VAT. They sound related, and they’re both handled by the same government office, but they are not the same thing.

PAN (Permanent Account Number) is your tax identity — a unique number the Inland Revenue Department (IRD) issues to identify you as a taxpayer. VAT (Value Added Tax) is a separate indirect-tax status that lets you legally charge tax on sales and claim credit on purchases. Having a PAN does not automatically mean your business is VAT-registered. Whether you need VAT depends on your turnover, your industry, and specific rules under the VAT Act, 2052 (1996).

This guide walks through both processes step by step — who needs what, the current turnover thresholds, how to apply online through the IRD Taxpayer Portal, what documents you’ll need, and what happens after you’re registered.

Quick Answer / At a Glance

What Is PAN in Nepal?

PAN (Permanent Account Number) is a unique, typically 9-digit number that the IRD assigns to every registered taxpayer — an individual, a sole proprietorship, a partnership, a company, or another entity. It’s issued under the Income Tax Act, 2058 (2002), and it functions as your permanent identity within Nepal’s tax system.

PAN itself is not a tax and it’s not a payment. It’s an identification number — similar in concept to a Social Security Number or Tax ID in other countries. Once you have a PAN, the IRD can track your income, transactions, and filings under that single number for life (or for the life of the business).

Nepal generally recognizes a few practical categories of PAN:

• Personal/Individual PAN — for salaried employees, self-employed individuals, freelancers, and other natural persons
• Business PAN — for sole proprietorships, partnerships, and companies
• Personal PAN (PPAN) — increasingly used as the umbrella term for an individual’s PAN, obtainable through the portal or the government’s Nagarik App

Beyond tax filing, PAN has become a practical requirement for everyday transactions in Nepal — banks ask for it when opening business accounts, the Land Revenue Office asks for it during property registration, and vehicle registration increasingly requires it too.

What Is VAT in Nepal?

VAT (Value Added Tax) is Nepal’s main indirect tax on the sale of goods and services, governed by the Value Added Tax Act, 2052 (1996) and the VAT Rules, 2053 (1997), both administered by the IRD. VAT has applied in Nepal since it replaced the earlier sales tax system in November 1997.

The concept, in plain terms:

• A VAT-registered business charges VAT on top of its selling price — this is output VAT.
• That same business also pays VAT when it buys goods or services for the business — this is input VAT.
• At the end of each filing period, the business pays the government the difference: output VAT collected minus eligible input VAT paid.
• The final consumer, who cannot claim input credit, effectively bears the cost of VAT.

A VAT-registered business must:

• Charge VAT correctly on every taxable sale
• Issue proper VAT (tax) invoices
• Keep detailed purchase and sales records
• File periodic VAT returns (monthly, for most businesses)
• Pay any net VAT due to the government

A business that is not VAT-registered cannot legally charge VAT on its bills, and it cannot claim input VAT credit on its purchases — even if it paid VAT to its own suppliers.

PAN vs VAT

So, do you need both PAN and VAT? Everyone doing business or earning taxable income in Nepal needs a PAN. VAT is only required on top of that once your turnover crosses the applicable threshold, or if your business falls into a category that must register for VAT regardless of turnover (see below).

Who Needs PAN?

• Employees whose income falls under filing or withholding requirements
• Freelancers and self-employed individuals earning business or professional income
• Sole proprietors running any registered business activity
• Partnerships and companies, which must obtain a business PAN as part of formalizing the entity
• Professionals such as consultants, contractors, and service providers
• Online sellers and IT/digital service providers
• Landlords, investors, and anyone entering transactions the IRD designates as PAN-requiring (e.g., property transactions, certain bank transactions, vehicle registration)

Not every individual in Nepal is required to hold a PAN by default — obligations depend on income level, business activity, and specific transactions. For anyone forming a business entity (sole proprietorship, partnership, or company), PAN is effectively mandatory as part of becoming operational, since banks, clients, and suppliers will all expect it.

Who Needs VAT Registration?

VAT registration in Nepal isn’t simply “register once you cross X turnover.” The Value Added Tax Act sets out a few distinct triggers.

Mandatory VAT registration

Under Section 10 of the VAT Act, a person or business must register for VAT once its annual taxable turnover crosses the applicable threshold (see the next section). Businesses generally have 30 days from the point of crossing the threshold to register.

Mandatory regardless of turnover (“specified” categories)

Certain sectors and transaction types must register for VAT from their very first sale, irrespective of turnover. Reported examples across current guides include importers of taxable goods, and certain specified goods/services sectors (for instance, categories like liquor, hardware/software and IT services in some listings, and other sectors the IRD periodically designates by circular). Because this list is set and updated by IRD notice rather than being fixed in the Act itself, confirm your specific sector’s status directly with the IRD or a qualified tax advisor rather than relying on a general list.

Voluntary VAT registration

A business below the threshold can generally apply to register voluntarily. This is common among:

• Exporters who want to claim VAT refunds on their inputs
• Businesses that want to look more credible to VAT-registered clients (who prefer the lower 1.5% TDS rate that applies to VAT-registered suppliers, versus 15% for PAN-only suppliers)
• Businesses anticipating they will cross the threshold soon

Businesses below the threshold

A business under the turnover threshold and outside any mandatory sector can generally remain PAN-only — filing income tax normally, without charging or filing VAT. This is the position of most freelancers, small consultancies, and early-stage sole proprietorships.

Businesses above the threshold

Once turnover crosses the applicable limit, VAT registration becomes mandatory. Multiple current guides describe this as a rolling 12-month calculation, not a simple fiscal-year cutoff — meaning a business should track turnover continuously, not just wait for year-end.

Special categories

Some goods and services have VAT treatment that doesn’t depend on a straightforward turnover calculation — for example, certain imports, certain exempt categories (education, health, and specific essential goods are commonly cited as exempt in Nepal’s VAT schedules), and reverse-charge obligations on services received from abroad. These require individual assessment rather than a blanket rule.

VAT Threshold in Nepal 2026

For Fiscal Year 2082/83 (mid-2025 to mid-2026, the fiscal year most relevant through much of calendar 2026), multiple current sources converge on the following approximate thresholds, set through the Finance Act 2081 (the “46th Amendment”) and continuing into FY 2082/83:

• Goods-only businesses: annual turnover above NPR 50 lakh (NPR 5,000,000)
• Service-only businesses and mixed (goods + services) businesses: annual turnover above NPR 30 lakh (NPR 3,000,000) — note that this threshold was reportedly raised from a lower figure (around NPR 20 lakh) in a recent amendment cycle, so older articles online may show outdated numbers
• Non-resident persons providing digital or other services: a threshold reported at around NPR 30 lakh, following a reported increase from a previous NPR 20 lakh figure

What turnover is measured: taxable supplies (sales of goods/services subject to VAT), tracked on a continuous, rolling 12-month basis rather than strictly by fiscal year.

Timing: once turnover crosses the applicable threshold, the business generally has 30 days to apply for VAT registration.

Consequences of not registering on time: sources describe a penalty per tax period of default (commonly cited in a range around NPR 10,000–20,000 per period, though figures vary by source and by the specific Finance Act in force), plus recovery of the VAT that should have been charged, plus annual interest on the amount due. Because penalty figures are adjusted periodically, treat any specific number as indicative rather than final, and confirm the exact figure with the IRD or a tax professional before relying on it.

VAT-Exempt, Zero-Rated, and Taxable Supplies

It’s easy to confuse “VAT-exempt” with “VAT rate = 0%,” but they’re different in practice:

• Taxable supplies — goods/services on which the standard 13% VAT rate applies. A VAT-registered seller charges VAT and can claim input credit on related purchases.
• VAT-exempt supplies — goods/services the law specifically excludes from VAT altogether. A seller of exempt supplies does not charge VAT, and importantly, cannot claim input VAT credit on purchases related to producing that exempt supply. Categories commonly described as exempt in Nepal include items like basic agricultural goods, certain health and education services, and other essentials specified in the VAT Act’s schedules.
• Zero-rated supplies — technically taxable, but at a 0% rate (exports are the classic example). Unlike exempt supplies, a business making zero-rated supplies generally can claim input VAT credit — which is why exporters often register for VAT voluntarily to recover input tax through refunds.

The practical difference matters for bookkeeping: an exempt-goods seller simply has no VAT to account for and no input credit to claim, while a zero-rated seller (like an exporter) charges 0% VAT but still tracks and reclaims input VAT paid on business purchases.

Only rely on the exemption/zero-rating status of a specific product or service after checking the current VAT Act schedules or confirming with the IRD — the exact list of exempt and zero-rated items is updated periodically.

Can Freelancers Get PAN Without VAT?

Yes — this is the normal, default position for most freelancers, IT consultants, designers, and other individual service providers in Nepal, as long as they’re below the applicable VAT threshold and not in a mandatory-registration category.

Here’s how it typically plays out for a freelancer or solo IT/digital service provider:

• PAN-only: you invoice clients under your personal or business PAN, without charging VAT. Domestic clients paying you generally withhold 15% TDS on the service fee (since you’re not VAT-registered), which you later reconcile against your annual income tax liability.
• VAT-registered: if your turnover crosses the services threshold (or you choose to register voluntarily), you charge 13% VAT on your invoices, file monthly VAT returns, and clients typically withhold a reduced 1.5% TDS instead of 15% — a meaningful incentive for consultants operating near the threshold to consider voluntary registration.
• Presumptive/turnover-based tax: some very small resident individual businesses below a certain turnover and profit level may qualify for a simplified, fixed presumptive tax regime instead of standard filing — though several professional categories (lawyers, doctors, auditors, chartered accountants, consultants, and engineers, per some current sources) are commonly excluded from this simplified regime and must file under standard rules.

Foreign clients and export of services: whether a payment from a foreign client is treated as an “export of service” (and therefore possibly zero-rated or outside VAT scope) versus a domestic supply depends on where the service is actually performed and consumed, not just where the client is located. Don’t assume a foreign client automatically means no VAT consideration applies — get this confirmed for your specific service type.

Freelancers should also be aware of reverse-charge VAT, which can apply when a Nepal-based recipient pays for services from a foreign supplier (e.g., certain cloud subscriptions or foreign consulting services) — this is a separate mechanism from output VAT on your own sales.

PAN for Sole Proprietorships

A sole proprietorship is the simplest business structure in Nepal — one owner, full personal liability, and comparatively light registration requirements. Typical path:

1. Register the business at the relevant local ward office/municipality (and, for certain regulated trades, at a sector-specific authority) to get a firm registration certificate.
2. Apply for PAN at the IRD using that business registration certificate, your citizenship document, and details of your business address and activity.
3. Register for VAT, if and when required, using the same PAN.
4. Open a business bank account — most banks require both the business registration certificate and the PAN certificate.

Getting a PAN for your proprietorship does not itself create a private limited company or grant limited liability — it simply registers the existing sole-proprietor business with the tax authority.

PAN for Private Limited Companies

For a private limited company, PAN registration comes after incorporation, not instead of it.

1. Incorporate the company with the Office of the Company Registrar (OCR) under the Companies Act, 2063 — this produces a Certificate of Incorporation, plus the company’s Memorandum of Association (Prabandha Patra) and Articles of Association (Niyamawali).
2. Apply for PAN at the IRD using the Certificate of Incorporation and related company documents, typically within a set period after incorporation (commonly cited as around 30 days).
3. Register for VAT, if applicable, based on the company’s expected business activity and turnover.

Some current sources describe increasing digital coordination between OCR’s CAMIS platform and the IRD — including notices about more automated PAN-related verification following company registration. However, OCR incorporation and IRD tax registration remain two separate, sequential legal steps — completing OCR registration does not by itself constitute completing your IRD tax registration; you (or your authorized representative) still need to actively apply for PAN at the IRD.

For the incorporation stage itself, see our Private Limited Company Registration guide.

PAN for Partnerships

A partnership formed under Nepal’s partnership laws follows a similar sequence:

1. Register the partnership with the relevant authority and execute a partnership deed setting out the partners, capital contributions, and profit-sharing arrangement.
2. Apply for a business PAN at the IRD in the partnership’s name, using the partnership deed, registration certificate, and the partners’ citizenship documents.
3. Designate a responsible partner for tax correspondence and filings, where the process calls for one.
4. Register for VAT if the partnership’s activity or turnover requires it.

Document requirements can vary depending on the number of partners and the nature of the business — confirm the current checklist with your local Inland Revenue Office.

PAN for Foreign Companies and Non-Resident Taxpayers

This is one of the more complex areas of Nepal tax registration, and it deserves individual attention rather than a generic answer. At a high level:

• Permanent establishment: whether a foreign company is treated as doing business “in” Nepal for tax purposes often depends on whether it has a permanent establishment (a branch, liaison office, project office, or similar fixed presence) here.
• Branch/liaison office route: a foreign corporation can register a branch under the Companies Act (commonly citing Section 154), submitting a certified incorporation certificate from the parent company, a board resolution approving the Nepal branch, and a power of attorney for a local representative — followed by PAN and, where applicable, VAT registration.
• Non-resident individuals: non-resident Nepalis (NRNs) and other non-resident individuals with Nepal-source income (dividends, rent, interest, consultancy fees, etc.) are generally subject to withholding tax on that Nepal-source income, at rates that differ by income type.
• Withholding tax on payments to non-residents: Nepali payers making payments to non-resident service providers are commonly required to withhold tax at source, separate from any VAT reverse-charge obligation on the same transaction.
• Cross-border digital services: foreign digital service providers and Nepali recipients of foreign digital services may both have tax touchpoints — the recipient side through reverse-charge VAT, and potentially the provider side depending on future digital-service-tax developments.
• Tax representative: non-resident taxpayers are often expected to designate a local representative for tax correspondence and compliance.

Documents Required for PAN Registration

Document requirements can vary by tax office and change periodically — the tables below reflect commonly reported requirements. Confirm the current list with the IRD before applying.

Individual PAN

Sole Proprietorship / Business PAN

Partnership

Company

Foreign Company / Non-Resident

Official IRD Taxpayer Portal

The IRD Taxpayer Portal is the official online system for tax registration, filing, and payment in Nepal, run by the Inland Revenue Department under the Ministry of Finance.

• Main IRD website: ird.gov.np
• Taxpayer Portal: taxpayerportal.ird.gov.np (linked from the IRD homepage under “Taxpayer Portal”)

Through the portal, taxpayers can:

• Register for PAN, VAT, and Excise
• Log in to an existing taxpayer account
• File VAT returns, income tax returns, and eTDS returns
• Make tax payments and view payment history
• Apply for business registration-related services
• Apply for VAT closure/deregistration

The government’s Nagarik App also offers PAN registration for individuals, and reportedly supports business PAN applications as well. See our Nagarik App guide for the registration workflow.

How to Apply for PAN Online

Step 1: Determine Your Taxpayer Type

Decide whether you’re applying as an individual, a sole proprietor, a partnership, a company, or a foreign entity — this determines which application form and document set you’ll need.

Step 2: Prepare Documents

Gather the documents listed in the tables above for your taxpayer type. Have digital copies (scans or clear photos) ready for upload, and originals ready for in-person verification.

Step 3: Open the Official IRD Taxpayer Portal

Go to taxpayerportal.ird.gov.np, or navigate there via ird.gov.np → “Taxpayer Portal.”

Step 4: Start Taxpayer Registration / PAN Application

Look for the registration option — commonly labeled something like “Registration (PAN, VAT, Excise)” or “Application for Registration.” Individuals with a linked National ID can often complete a streamlined flow.

Step 5: Enter Personal/Business Information

Fill in your name (or business name), address, citizenship or company registration details, contact information, and the nature of your business activity.

Step 6: Enter Business Information (for business/company applicants)

Provide business address, business activity/sector classification, and relevant ownership or director details.

Step 7: Upload Documents

Upload the required scanned documents as prompted by the portal.

Step 8: Submit

Submit the completed application. You should receive a reference or application number to track status.

Step 9: Verification

Most applicants — particularly first-time individual applicants and all business/company applicants — complete a follow-up verification step at their local Inland Revenue Office, which commonly includes biometric capture (photo/fingerprint) and a review of original documents against the uploaded copies.

Step 10: PAN Issuance/Activation

Once verification is complete, the IRD issues the PAN. Processing timelines reported across current sources range from same-day to a few working days for straightforward, complete applications; incomplete files take longer.

Portal layouts and exact button labels change periodically as the IRD updates its systems — treat the above as the general workflow rather than a pixel-exact walkthrough, and follow the current on-screen prompts.

Business PAN Application Through the Tax Office

Even though the application starts online, most business PAN applicants still need to interact with a physical tax office at some point — typically for the verification step described above.

• Jurisdiction: you’re generally assigned to the Inland Revenue Office (IRO) or Taxpayer Service Office (TSO) covering your registered business address.
• What to bring: original versions of all documents you uploaded online, plus any additional documents the tax officer requests.
• Authorized representative: if the owner/director cannot attend in person, a representative with a proper power of attorney or authorization letter can often complete this step instead.
• PAN certificate: after approval, you receive your PAN certificate/registration details, which you should keep on file — banks, landlords, and government offices will frequently ask to see it.

Not every applicant is required to physically visit an office for every type of transaction — some individual applications with a linked National ID can be completed largely online — but for most business and company PAN applications, an in-person verification step remains part of the current process.

How to Register for VAT

VAT registration is a separate, subsequent step that requires an active PAN.

Step 1: Determine Whether VAT Registration Is Required

Check your turnover against the current threshold, and check whether your business activity falls into a mandatory-registration category regardless of turnover.

Step 2: Confirm Business/Taxpayer Information

Make sure your existing PAN details (name, address, business activity) are accurate and current — VAT registration builds on your PAN record.

Step 3: Prepare Documents

Typical documents cited across current guides include: company/business registration certificate, PAN certificate, citizenship certificates of owners/directors, proof of business premises, bank account details, and photographs of the business premises.

Step 4: Access the IRD System

Log in to the IRD Taxpayer Portal using your existing taxpayer credentials.

Step 5: Select VAT Registration/Service

Navigate to the VAT registration option under the registration menu.

Step 6: Enter Required Information

Provide estimated annual turnover, business activity classification, registered address, and start date of operations.

Step 7: Submit Application

Submit the VAT registration form along with uploaded supporting documents.

Step 8: Complete Verification

As with PAN, expect a verification step — commonly including document checks and, in some cases, a premises visit or biometric confirmation — before the Tax Officer approves the registration.

Step 9: VAT Registration Approval

Once approved, the IRD activates your VAT registration under your existing PAN. Reported processing timelines range roughly from 3 to 12 business days depending on document completeness and office workload.

Step 10: Obtain VAT Registration Details/Certificate

You’ll receive VAT registration confirmation/certificate details, which many businesses display at their premises as required.

Step 11: Start Issuing Compliant VAT Invoices

From the effective registration date, you must charge VAT on taxable supplies and issue proper tax invoices (see the VAT invoice section below).

Step 12: Begin VAT Filing/Payment Obligations

Start filing periodic VAT returns and paying any net VAT due, on the applicable schedule (monthly for most businesses).

PAN + VAT Registration Workflow

A simplified end-to-end view of how the pieces typically connect:

Business/entity registration → PAN registration with IRD → Assess VAT requirement (threshold or mandatory sector) → VAT registration with IRD (using existing PAN) → Issue VAT-compliant invoices → Maintain purchase/sales VAT records → File VAT return → Pay net VAT due

The exact sequence and timing can vary — a company registers with OCR before PAN, while a sole proprietor registers locally before PAN; a business anticipating high turnover from day one might apply for VAT registration almost immediately after PAN, while most small operators only revisit VAT once they approach the threshold.

VAT Bill / VAT Invoice Requirements

A VAT-registered business must issue a proper tax invoice on every taxable sale. The format and content requirements sit within the VAT Rules, 2053, with the standard tax invoice format commonly associated with Rule 17 (governing tax invoices) and related schedules; a simplified/abbreviated invoice format is available for smaller, high-volume transactions.

A standard VAT tax invoice commonly needs to show:

• The heading “Tax Invoice”
• Supplier’s name, address, and PAN/VAT number
• Invoice serial number and date
• Customer’s name, address, and PAN (where the customer requests a full tax invoice, especially for business-to-business transactions)
• Description of the goods or services supplied
• Quantity and rate
• Taxable value (before VAT)
• VAT rate and VAT amount, shown separately
• Grand total, commonly required in both figures and words
• Authorized signature and business seal/stamp

Abbreviated/simplified invoices: current guides describe an allowance for retailers with high-volume small transactions (for example, restaurants, small shops, pharmacies) to issue a simplified invoice for transactions under a set value (commonly cited around NPR 10,000), showing VAT-inclusive pricing without a full itemized breakdown — but a full tax invoice must still be issued if the customer specifically requests one.

Recent format changes: some current sources report that tax invoices must now include additional detail such as HS (Harmonized System) product codes for goods, following updates to the invoice format schedules. Software used for computerized billing has reportedly needed updates to comply. Confirm the current required invoice fields with the IRD or your accountant, since these format details are updated periodically.

Because the specific rule numbering and content requirements can be revised, verify the current provision against the latest VAT Rules or an IRD notice before finalizing your invoice template, rather than relying solely on a rule number cited in any single article — including this one.

VAT Invoice vs Normal Bill

VAT Rate in Nepal

Nepal applies a single, flat standard VAT rate of 13% on most taxable goods and services, unchanged since VAT was introduced in November 1997 and continuing through FY 2082/83. This is distinct from Nepal’s income tax rates, which are progressive for individuals and vary by entity type for businesses — don’t confuse the two.

Alongside the 13% standard rate, the VAT Act recognizes:

• Exempt supplies — no VAT charged, no input credit claimable (see the exemption section above)
• Zero-rated supplies — 0% VAT charged (chiefly exports), but input credit generally remains claimable

Confirm the current rate at the time of filing, since it is technically subject to change through the annual Finance Act, even though it has remained stable for many years.

Input VAT vs Output VAT

• Output VAT — the VAT a registered business charges its customers on taxable sales.
• Input VAT — the VAT a registered business pays on its own eligible business purchases (raw materials, equipment, certain services, imports used for the business, etc.).
• Net VAT liability — in simple terms: Output VAT collected − eligible Input VAT paid = Net VAT payable.

If input VAT exceeds output VAT in a period, the excess is commonly carried forward to future periods, or, in some cases, claimed as a refund (this is common for exporters).

Not every purchase automatically qualifies for input credit. Input VAT is generally only creditable when:

• The purchase relates to the business’s taxable (not exempt) activity
• It’s properly documented with a valid tax invoice
• It falls within categories the VAT Act and Rules allow for credit (certain personal, entertainment, or non-business expenses are commonly excluded)

Because eligibility rules are detailed and periodically clarified by IRD circulars, businesses should maintain careful purchase records and consult a tax professional or accountant when in doubt about a specific expense.

VAT Return Filing

• Who must file: every VAT-registered business, for every applicable period — including a nil return if there were no transactions.
• Filing frequency: monthly, for most VAT-registered businesses. Certain sectors (tourism-related services, and reportedly hoteliers, transportation, publishers, and some others depending on the source) may be eligible to apply for bi-monthly or trimester filing under specified conditions.
• Filing deadline: commonly reported as the 25th day of the following Nepali month.
• Where to file: through the IRD Taxpayer Portal.
• What’s included: sales records, purchase records, output VAT, input VAT, and the resulting net VAT payable or carried forward.
• Late filing: attracts a penalty — figures reported across sources vary (commonly cited as roughly NPR 1,000 per return or a percentage of the tax amount, whichever is higher), plus possible interest on any unpaid VAT. Confirm the exact current figures with the IRD before assuming a specific penalty amount applies.

VAT Payment

• When VAT becomes payable: generally alongside the periodic (monthly) return, based on the net VAT liability for that period.
• How it’s calculated: output VAT collected minus eligible input VAT credit for the period.
• Payment channels: official government payment channels, commonly including bank deposit and approved digital payment gateways (such as ConnectIPS or eSewa) linked to the IRD system.
• Records to retain: payment receipts/confirmations, alongside your underlying sales and purchase records — commonly required to be kept for several years (some sources cite around 6 years) to support any future IRD review.

Always use official government payment channels shown within the IRD Taxpayer Portal itself, and never send payment to an unofficial account based on an email, call, or third-party website claiming to process IRD payments.

Income Tax and PAN Compliance

Getting a PAN is the start of your tax obligations, not the end of them. PAN taxpayers — whether or not they’re also VAT-registered — generally have ongoing income tax responsibilities:

• Income tax return — an annual filing declaring income and computing tax due, generally within a set period after fiscal year-end (commonly cited as within three months of year-end).
• Advance tax — larger businesses may need to pay estimated tax in installments during the year rather than as one lump sum at filing time.
• Withholding/TDS — tax withheld by payers on certain payments made to you, which is later reconciled against your final tax liability.
• Recordkeeping — maintaining sales, purchase, expense, and payment records to support your filings.

VAT returns and income tax returns are separate filings with separate deadlines — filing one does not substitute for the other.

TDS / Withholding Tax

TDS (Tax Deducted at Source) is the mechanism by which a payer deducts a portion of certain payments and deposits it directly with the IRD on the recipient’s behalf, under the Income Tax Act, 2058.

Key points for a beginner:

• Any business or employer making payments such as salary, rent, consultancy or service fees, contract payments, interest, dividends, commission, or royalty is commonly required to withhold TDS at the applicable rate before paying the recipient.
• Becoming a withholding agent is automatic once you make such payments in the course of business — there’s no separate registration required for this role.
• The withheld amount is deposited with the IRD, an eTDS return is filed (commonly by the 25th of the following Nepali month), and a withholding certificate is issued to the payee.
• A recurring theme across current guides: the TDS rate on consultancy/service fees is commonly reported as 15% for a PAN-only (non-VAT-registered) service provider, versus a reduced 1.5% for a VAT-registered service provider presenting a valid VAT invoice — one of the practical reasons some freelancers choose to register for VAT voluntarily as their business grows.
• A common reported threshold for TDS applicability on service/contract payments is cumulative payments exceeding NPR 50,000 to a single party within a fiscal year.

TDS rates differ by payment type, recipient residency status, and whether the recipient is VAT-registered — do not assume a single flat TDS rate applies to every transaction. Verify the current rate for your specific payment type before deducting or remitting.

Business Recordkeeping

Businesses in Nepal — PAN-only and VAT-registered alike — should retain:

• Sales invoices and VAT tax invoices
• Purchase invoices and bills
• Bank statements and transaction records
• Expense receipts
• Tax payment receipts/confirmations
• Copies of filed tax returns (income tax, VAT, eTDS)
• Contracts and agreements relevant to the business
• Payroll and TDS-related records, where applicable

Retention periods are set by law and by IRD practice — some current sources cite a commonly required retention period of around 6 years for VAT-related records — but confirm the exact current requirement, since it can differ by document type and hasn’t been independently verified for every category in this guide.

Updating PAN Information

If your details change, update your taxpayer record with the IRD promptly. Common triggers include:

• Name correction
• Address change (personal or business)
• Change in business activity or nature of business
• Change in company/ownership structure
• Contact number or email change

Some updates — particularly simple contact detail changes — may be completable directly through the Taxpayer Portal. Others, especially changes involving legal identity, ownership, or core business details, commonly require an in-person visit to your local Inland Revenue Office with supporting documents. Note that taxpayers whose mobile number isn’t updated in the system are commonly instructed to visit their nearest tax office in person to have it corrected before they can use certain online self-service features.

VAT Deregistration

VAT registration isn’t necessarily permanent. Common grounds for deregistration, reported under Section 11 of the VAT Act, include:

• Business closure or cessation of taxable activity
• Turnover falling and remaining below the applicable threshold for a sustained period (some sources cite roughly the prior 12 months)
• Other legal grounds specified in the Act

The process generally involves:

1. Submitting a deregistration application through the IRD system
2. Filing a final VAT return covering the period up to deregistration
3. Settling any outstanding VAT liability
4. Continuing to retain business records for the legally required period even after deregistration

A business cannot simply stop filing or delete its VAT registration informally — deregistration is a formal application process, and failing to follow it while ceasing to file can itself trigger penalties for non-filing.

What Happens If You Should Have Registered for VAT But Did Not?

If a business crosses the VAT threshold (or falls into a mandatory category) and fails to register, it faces compliance exposure that generally includes:

• A registration-related penalty per tax period of default
• Recovery of the VAT that should have been charged and collected during the unregistered period (some sources describe this at a rate tied to a percentage of the tax that would have been payable)
• Interest accruing on the unpaid amount
• Potential further scrutiny or audit risk

Exact penalty figures are set and periodically revised through the Finance Act — this guide will not state a specific number as fact, since figures reported across current sources vary. If you believe your business should have registered but hasn’t, the most practical step is to contact the IRD directly or a qualified Nepal tax professional promptly, rather than continuing to operate unregistered while the exposure grows.

Online Business & E-Commerce

Online stores, marketplace sellers (Daraz and similar platforms), social-media sellers (Instagram/Facebook shops), SaaS businesses, and digital agencies all sit under the same basic framework as any other business:

• PAN is required to operate legally and to formalize the business relationship with payment processors, banks, and marketplaces.
• VAT becomes relevant once turnover crosses the applicable threshold, or if the specific product category falls into a mandatory-registration sector.
• Income tax applies regardless of VAT status, based on the business’s actual profit.
• Digital payments — receipts through digital wallets, bank transfers, and marketplace payouts should still be tracked as business income for tax purposes.
• Invoices should be issued for sales, in VAT-compliant format once VAT-registered.
• Recordkeeping matters even more for online sellers with many small transactions, since transaction-level records support both VAT and income tax filings.

Not every online seller has identical VAT obligations — a small Instagram seller doing a few lakh in turnover per year sits in a very different position from a Daraz seller doing tens of lakhs, or a SaaS company billing internationally.

IT Services and Software Companies

Software development, IT consulting, web development, SaaS, digital marketing, hosting, and other remote-service businesses have a few specific considerations:

• PAN and, where applicable, VAT registration follow the general company/proprietorship rules above.
• Domestic clients: billed under normal PAN or VAT invoice rules, with standard TDS treatment applying.
• Foreign clients: payments received in foreign currency from clients outside Nepal require careful classification — this can affect both income tax treatment (foreign-source vs. Nepal-source income considerations) and VAT treatment (whether the service qualifies as an “export of service”).
• Foreign-currency receipts: typically need to be routed through proper banking channels and documented for both tax and foreign-exchange compliance purposes.
• Software/IT services sector: some current sources list software and IT services among sectors subject to specific or mandatory VAT treatment by IRD circular — confirm your specific service classification directly with the IRD, since this can change.

Do not assume cross-border service delivery automatically falls outside VAT scope — the actual legal treatment depends on the nature of the service, where it’s performed, and current IRD guidance.

Foreign Clients and Remote Work

It’s worth separating a few concepts that often get blurred together:

• Client located outside Nepal — where your customer is based doesn’t, by itself, determine tax treatment.
• Service physically performed in Nepal — most freelance and remote-work services are performed by someone sitting in Nepal, even if the client is abroad.
• Export of services — a specific legal classification that may carry different VAT treatment (potentially zero-rated) than a domestic supply, but this classification has its own conditions under the VAT Act and isn’t automatic.
• Foreign-currency payment — a payment method, not a tax exemption in itself.
• Income-tax obligations — Nepal-resident freelancers are generally taxed on worldwide income, including income earned from foreign clients, subject to any applicable treaty relief.

PAN vs Business Registration

These are two different processes with two different authorities:

• Business registration happens with the local ward office/municipality (for a proprietorship), the Office of the Company Registrar (OCR) (for a company), or another sector-specific authority (for regulated industries) — and establishes your business’s legal existence and operating permission.
• PAN registration happens with the IRD and establishes your tax identity.

Getting a PAN does not replace or substitute for:

• Company or firm registration
• Ward/municipal business operation registration
• Industry-specific licenses (tourism, healthcare, manufacturing, etc., where relevant)
• Other sector regulatory approvals

Think of business registration as “permission to exist and operate,” and PAN as “your identity for tax purposes” — you typically need both, in sequence, not one instead of the other.

Tax Office and Jurisdiction

Every PAN holder in Nepal is associated with a specific Inland Revenue Office (IRO) or Taxpayer Service Office (TSO), determined largely by their registered business or residential address. The IRD operates a network of field offices — including Large Taxpayer and Medium Level Taxpayer Offices for bigger entities — across the country.

• Why it matters: in-person verification, document submission, and certain queries are typically handled at your assigned office.
• Finding your office: the IRD Taxpayer Portal and IRD website list office locations; your assigned office is usually confirmed during your registration process.
• Online vs. in-person: many services (filing, payment, some updates) are available online, but registration verification and certain corrections commonly still require an in-person visit.

Don’t rely on assumed office addresses or working hours from third-party sites — confirm current details on the official IRD website.

Fees

• PAN registration: widely and consistently reported across current sources as free of government charge, both for individuals and businesses — aside from your own costs for document preparation, photocopying, or notarization where required.
• VAT registration: reporting is inconsistent — some sources describe VAT registration as free (bundled into the same no-fee PAN/VAT registration process), while at least one source cites a nominal registration fee (around NPR 1,000). Confirm the current position directly with your local Inland Revenue Office before assuming either figure.
• Certificate/document reissuance: where you need a replacement PAN certificate or similar document, a modest administrative fee has been reported (commonly a few hundred to around one thousand rupees), though this too should be confirmed locally.

Penalties and Compliance Risks

Nepal’s tax law imposes penalties across several categories of non-compliance. Exact figures are set and periodically revised by the Finance Act, so treat the ranges below as indicative rather than final:

• Failure to register for VAT when required — a penalty per tax period of default, plus recovery of uncollected VAT and interest
• Late VAT return filing — a penalty commonly described as a flat amount per return or a percentage of tax due, whichever is higher
• Late VAT payment — annual interest on the outstanding amount (commonly cited around 15% per annum across several sources)
• Incorrect or non-compliant invoices — penalties for issuing invoices that don’t meet the prescribed format, or for issuing false invoices (which some sources describe as carrying much steeper penalties, given the fraud risk)
• Failure to maintain required records — penalties for inadequate recordkeeping
• Failure to file returns generally — separate penalties from late payment
• Incorrect taxpayer information — can also trigger corrective action or penalties depending on the nature of the error

Do not treat any single figure cited above as legally authoritative for your situation — verify the exact, currently applicable penalty structure with the IRD or a qualified tax professional, particularly if you’re already facing a specific compliance issue.

Practical Examples

The following examples are illustrative only and simplified for clarity — they are not a substitute for individual tax advice.

Example 1 — Small freelancer

A graphic designer working with a few local clients, earning well under the services VAT threshold. She registers for a personal/business PAN, invoices clients under PAN only, and her clients withhold 15% TDS on her fees. She is not required to register for VAT.

Example 2 — Sole proprietor crossing the VAT threshold

A retail shop owner selling goods sees turnover climb past the applicable goods threshold partway through the year. Once the rolling 12-month turnover crosses the threshold, he has 30 days to apply for VAT registration, after which he must begin charging VAT and filing monthly returns.

Example 3 — Private limited IT company

A software company incorporates with OCR, then registers for PAN using its Certificate of Incorporation. As it starts billing larger domestic clients who prefer working with VAT-registered vendors (for the reduced 1.5% TDS rate), it applies for VAT registration, sets up VAT-compliant invoicing, and begins monthly VAT filing alongside its annual corporate income tax return.

Example 4 — Online seller

An online seller on a local marketplace keeps careful records of every sale and platform payout. As turnover approaches the applicable threshold, she monitors it closely and prepares to register for VAT before crossing the line, to avoid a late-registration penalty.

Example 5 — Foreign-client software developer

A Kathmandu-based developer works exclusively for clients abroad, paid in foreign currency. Because the correct VAT treatment of cross-border service income depends on specific “export of service” conditions, he consults a Nepal tax professional to confirm his VAT position and his income tax treatment, rather than assuming his foreign clients automatically exempt him from VAT considerations.

Common PAN Problems

Common VAT Problems

Complete PAN + VAT Checklist

Before Registration

• Determine your taxpayer type (individual, sole proprietor, partnership, company, foreign entity)
• Register your business/entity where required (ward office, OCR, or sector authority)
• Prepare citizenship/company documents
• Determine your registered business address
• Determine your business activity/classification
• Check whether current VAT requirements apply to you

PAN

• Open the official IRD Taxpayer Portal
• Register/apply for PAN
• Enter taxpayer details accurately
• Upload required documents
• Submit the application
• Complete verification (often in person)
• Obtain your PAN certificate/information

VAT

• Determine whether VAT registration is mandatory, or worth pursuing voluntarily
• Prepare required documents
• Apply through the official IRD system, using your active PAN
• Complete verification
• Obtain VAT registration confirmation/certificate
• Set up VAT-compliant invoicing

After Registration

• Maintain complete sales, purchase, and expense records
• Issue correct invoices (PAN bill vs. VAT tax invoice, as applicable)
• File required returns on schedule (income tax, and VAT if registered)
• Pay taxes on time
• Monitor turnover on a rolling basis
• Update taxpayer information whenever business details change

Official IRD Sources

• Inland Revenue Department, Government of Nepal: ird.gov.np
• IRD Taxpayer Portal: taxpayerportal.ird.gov.np
• Value Added Tax Act, 2052 (1996) and Value Added Tax Rules, 2053 (1997) — published texts available via the IRD website and the Nepal Law Commission
• Income Tax Act, 2058 (2002) — published text available via the Nepal Law Commission
• Annual Finance Act — published each fiscal year, updating thresholds, rates, and penalty figures

Related SolutionsNepal Guides

• Private Limited Company Registration in Nepal — useful background on how OCR incorporation connects to your later PAN and VAT registration steps.
• VAT Calculator Nepal — add or remove 13% VAT from any price instantly.
• Nepal Salary Calculator (SSF & Income Tax) — for PAN taxpayers estimating monthly TDS and take-home pay.
• Freelancer Take-home Calculator — see your real freelance income after fees, expenses and tax.
• Business Break-Even Calculator — find how much you need to sell to cover costs.
• Government Service Cost & Document Checklist — to prepare document sets for IRD office visits.

Final Summary

A PAN identifies you as a taxpayer; VAT is a separate registration you only need once your turnover or business category requires it. Every business or serious freelancer in Nepal should expect to register for PAN through the IRD Taxpayer Portal — a largely online process that still typically ends with an in-person verification step. VAT registration builds on that PAN, becomes mandatory once you cross roughly NPR 50 lakh (goods) or NPR 30 lakh (services/mixed) in rolling annual turnover — or if your sector requires it regardless of turnover — and brings with it monthly filing, proper tax invoices, and ongoing compliance obligations. Whichever stage you’re at, keep your records clean, track your turnover continuously, and check specifics directly with the IRD before making decisions that carry real financial or legal consequences.

Last updated: September 2026 (recheck note added October 2026), reflecting Fiscal Year 2082/83 figures reported across current sources. The FY 2083/84 Finance Act (Economic Act, 2083) has since been gazetted — confirm whether the 50L goods / 30L services thresholds carried over before relying on them. Tax registration requirements, VAT thresholds, tax rates, filing deadlines, fees, and compliance rules can change. Always verify the latest information with the Inland Revenue Department and applicable Nepal tax laws before registering or filing. SolutionsNepal is an independent informational website and is not affiliated with the Inland Revenue Department or the Government of Nepal. This guide is for general informational purposes and is not a substitute for professional tax or legal advice.