VAT Registration in Nepal: Made Easy
Is your Business legal? The first thing to check is your VAT.
VAT (Value Added Tax) is a type of tax that businesses collect from customers when selling goods or services. Instead of taxing the entire cost of the item, VAT is only applied to the value added at each stage of production or sale.
In Nepal, the standard VAT rate is 13%.
Criteria For VAT Registration
The following have to mandatorily register for VAT in Nepal:
- Companies with turnover of NPR 50 Lakhs or more (for goods traders).
- Service providers with turnover of NPR 30 Lakhs or more.
- Importers and exporters of services and goods.
- Manufacturers and producers of taxable goods
- Wholesale and retail traders of taxable goods
- Businesses providing taxable services.
Can one be registered for VAT without meeting the mandatory provisions?
Yes, such businesses are allowed to register for VAT without meeting mandatory conditions but it is not compulsory.
- Why would a small business voluntarily register for VAT?
- Improved Credibility: Being registered for VAT makes your business seem more professional and credible.
- Tax Refunds: Refunds of the VAT charged on the buying of goods and services for your business are eligible for you to claim.
- More Business Opportunities: Larger businesses tend to favor doing trade with VAT registered businesses.
- Drawbacks of Voluntary Registration
- More Paperwork
- More Costly for Customers
Steps to Register for VAT
Step 1: Collect Necessary Documents
Accurate and complete documentation is vital for a smooth registration process. For VAT registration, you’ll need:
- Business Registration Certificate: Evidence of the legal establishment of your company.
- Permanent Account Number (PAN): An unique identification number for tax payment.
- Memorandum and Articles of Association: The memorandum defines the company’s purpose, while the articles govern its internal operations and management (how it is owned and run).
(They are only required for companies.)
- Owner’s Identification: Copies of owners’ and/or directors’ citizenship certificates or passports.
- Photos: Recently taken passport-size photos of the business owner(s).
- Address Proof: Rental agreement or ownership documents of the business operation location.
Step 2: Online Application
- Visit the IRD website
Visit the official IRD website and navigate to the ‘Taxpayer Portal’ under ‘Online Services’.
- Initiate Online Registration:
Under ‘Registration (PAN, VAT, EXCISE)’, select ‘Application for Registration’.
- Fill the Application Form:
The application form may require you to fill:
- Type of form: PAN, VAT, Income Tax, Excise or With Holder Pan. Select Vat in this section.
- Business name, type and address.
- Details of owners and/or directors.
- Estimated annual turnover.
- Nature of goods or services offered
…..and so on.
Important Note:
If your business starts selling taxable goods or services, or if a new tax is applied to your transactions, you must apply for VAT registration within 30 days of starting that activity or from the date the tax is imposed.
Step 3: Submission of Physical Documents and Verification
After completing the online VAT registration, you need to:
- Print the online form and gather the necessary documents such as a copy of the company registration certificate, PAN certificate, citizenship of the directors and other relevant documents.
- Submit the printed application along with supporting documents to the nearest IRD office for verification purposes.
After the officials review your documents, you may be required to provide your biometrics like fingerprints, photo, etc.
Step 4: VAT Certificate Issuance
Certificate Collection: The IRD will issue a VAT registration certificate with a unique VAT number.
Display Requirement: It’s compulsory to display the VAT certificate at your business. If you operate in multiple locations, ensure that a certified copy is displayed at each site.
Post VAT Compliance:
VAT Invoicing: Issue VAT invoices for all taxable sales.
Record Keeping: Maintain detailed records of all sales and purchases.
Regular Filings: File VAT returns periodically (monthly or quarterly, as applicable).
VAT Cancellation:
Under certain circumstances, one may need to cancel their VAT registration:
- Cessation: If the business ceases operations.
- Turnover Below Threshold: If annual turnover falls below the mandatory registration threshold and the business opts for deregistration.
Application for Deregistration: Submit an application to the IRD, providing reasons for deregistration. The IRD will process the request after verifying that all tax liabilities are settled.
Special Provisions for Non-Resident Digital Service Providers
Non-resident entities providing digital services to consumers in Nepal must register for VAT if their annual transaction value exceeds NPR 30 Lakhs. The registration process is similar but may involve additional documentation, such as:
- Company Registration Certificate: From the country of residence.
- Tax Identification Number: Issued by the country of residence.
- Representative: Responsible for tax matters in Nepal.