VAT Registration Process in Nepal

What is VAT Registration?

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.

Requirements & Thresholds for VAT Registration in Nepal

The key requirements and thresholds for VAT registration in Nepal are:

Annual turnover exceeding NPR 5 million for businesses dealing in goods
Annual turnover exceeding NPR 2 million for businesses providing services
Annual turnover exceeding NPR 2 million for businesses dealing in both goods and services
Businesses importing taxable goods valued at over NPR 10,000 in a single transaction
Businesses that obtain commercial loans exceeding NPR 1 million

Businesses meeting any of these criteria must register for VAT within 30 days of becoming eligible. The turnover is calculated on a rolling 12-month basis, looking at either past or projected turnover.

Procedure for VAT Registration in Nepal

Obtain PAN Registration
Complete Online VAT Registration Application
Submit Supporting Documents
Biometric Verification
Receive VAT Registration Certificate

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

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.

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Conclusion

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.

Frequently Asked Questions

What is VAT?

VAT is a consumption tax levied on the sale of goods and services in Nepal. It is collected at each stage of the production and distribution chain, with the final consumer bearing the ultimate tax burden.

How to register for VAT in Nepal?

VAT registration in Nepal involves obtaining a PAN, completing an online application, submitting supporting documents, undergoing biometric verification, and receiving a VAT certificate from the Tax Office.

What is the threshold for VAT Registration in Nepal?

The VAT registration threshold in Nepal is NPR 5 million annual turnover for goods businesses and NPR 2 million for service businesses or those dealing in both goods and services.

How long does VAT Registration take?

VAT registration in Nepal typically takes 3-5 working days from the submission of a complete application with all required documents to the Tax Office.

Should I register PAN or VAT in Nepal?

PAN registration is mandatory for all businesses in Nepal and must be obtained before VAT registration. VAT registration is only required if you meet the turnover thresholds or engage in specific business activities.

How to register a company in VAT in Nepal?

To register a company for VAT in Nepal, complete the online application on the IRD portal, submit supporting documents to the Tax Office, undergo biometric verification, and obtain the VAT registration certificate.

Is the company VAT Registered?

To check if a company is VAT registered in Nepal, you can verify their VAT number on the IRD website or request to see their VAT registration certificate.

How much VAT for Business in Nepal?

The standard VAT rate for businesses in Nepal is 13% on the sale of taxable goods and services. Some goods and services may be exempt or zero-rated.

Contact Tax Lawyer in Nepal

Disclaimer: This material is presented solely for informational purposes, without constituting legal advice, counsel, or solicitation, and no liability shall arise from any actions, omissions, or reliance on its contents, directly or indirectly, in any manner whatsoever, irrespective of the jurisdiction or specific circumstances.