GFCS

Appointment

VAT Return Filing in Nepal

Table of Contents

What is VAT and who needs to register for it?

Value Added Tax (VAT) is an indirect tax levied on the value added to goods and services at each stage of production and distribution. In Nepal, VAT is governed by the Value Added Tax Act, 2052 (1996) and Value Added Tax Rules, 2053 (1997).

Businesses meeting the following criteria must register for VAT in Nepal:

  • Annual turnover exceeding NPR 5 million for goods
  • Annual turnover exceeding NPR 2 million for services
  • Importers and exporters, regardless of turnover
  • Specific businesses as designated by the Inland Revenue Department

Voluntary registration is also possible for businesses below these thresholds.

What are the VAT rates applicable in Nepal?

Nepal applies the following VAT rates:

  • Standard rate: 13% on most goods and services
  • Zero rate: 0% on exports and certain essential goods
  • Exempt: No VAT on specific goods and services

How often do I need to file VAT Returns?

VAT-registered businesses in Nepal must file returns:

  • Monthly: For businesses with annual turnover exceeding NPR 10 million
  • Bi-monthly: For businesses with annual turnover between NPR 5-10 million
  • Quarterly: For businesses with annual turnover below NPR 5 million

What is the process for VAT Return filing in Nepal?

The VAT return filing process in Nepal involves:

  1. Collect and organize sales and purchase invoices
  2. Calculate total sales, purchases, and VAT collected/paid
  3. Determine VAT payable or refundable
  4. Complete the VAT return form (VAT-20)
  5. Submit the return along with required documents
  6. Pay any VAT due or claim refund if applicable

What documents are required for VAT Return filing?

Essential documents for VAT return filing include:

  • Completed VAT return form (VAT-20)
  • Sales and purchase ledgers
  • Tax invoices for sales and purchases
  • Bank statements
  • Import and export documents (if applicable)
  • Stock records
  • Any additional supporting documents

How do I calculate VAT payable or refundable?

To calculate VAT payable or refundable:

  1. Sum up VAT collected on sales (output VAT)
  2. Sum up VAT paid on purchases (input VAT)
  3. Subtract input VAT from output VAT
  4. If positive, the difference is VAT payable
  5. If negative, the difference is VAT refundable

What are the deadlines for VAT Return filing?

VAT return filing deadlines in Nepal are:

  • Monthly filers: Within 25 days of the end of each month
  • Bi-monthly filers: Within 25 days of the end of every two months
  • Quarterly filers: Within 25 days of the end of each quarter

How can I file VAT Returns online in Nepal?

To file VAT returns online in Nepal:

  1. Register for e-filing on the Inland Revenue Department website
  2. Log in to your e-filing account
  3. Select “VAT Return” from the available options
  4. Fill in the required information in the online VAT-20 form
  5. Upload supporting documents if necessary
  6. Submit the return electronically
  7. Pay any VAT due through online banking or at designated banks

What are the penalties for late VAT Return filing?

Penalties for late VAT return filing in Nepal include:

  • Late filing fee: NPR 1,000 per month or 0.05% of the tax due, whichever is higher
  • Interest: 15% per annum on unpaid tax
  • Additional penalties for repeated non-compliance or tax evasion

How do I claim input VAT credit in Nepal?

To claim input VAT credit in Nepal:

  1. Ensure purchases are from VAT-registered suppliers
  2. Obtain valid tax invoices for all purchases
  3. Record purchases in VAT purchase book
  4. Include input VAT in VAT return (VAT-20 form)
  5. Retain all supporting documents for potential audits

Input VAT credit is generally not allowed for:

  • Personal or non-business expenses
  • Entertainment expenses
  • Vehicle purchases (except for vehicle rental businesses)

What items are exempt from VAT in Nepal?

VAT-exempt items in Nepal include:

  • Basic agricultural products
  • Essential goods like rice, lentils, and flour
  • Educational services
  • Health services
  • Financial services
  • Public transportation
  • Books and newspapers
  • Electricity and water supply
  • Certain religious and cultural items

How do I handle VAT for exports and imports?

For exports:

  • Apply zero-rate VAT (0%)
  • Maintain proper documentation for exports
  • Claim input VAT credit on purchases related to exports

For imports:

  • Pay VAT at customs along with import duties
  • Claim input VAT credit on imports in VAT return
  • Maintain proper import documentation

What are the record-keeping requirements for VAT in Nepal?

VAT-registered businesses must maintain:

  • Sales and purchase ledgers
  • Tax invoices for all transactions
  • VAT account showing VAT collected and paid
  • Stock records
  • Bank statements
  • Import and export documents
  • All VAT returns and supporting documents

Records must be kept for at least 6 years from the date of the last entry.

How can I amend a VAT Return after submission?

To amend a VAT return in Nepal:

  1. File a revised return within 30 days of the original filing
  2. Submit a written request to the tax office for amendments after 30 days
  3. Provide reasons for the amendment and supporting documents
  4. Pay any additional tax due or claim refund if applicable
  5. Be prepared for potential scrutiny from tax authorities

What assistance is available for VAT Return filing in Nepal?

Assistance for VAT return filing in Nepal includes:

  • Inland Revenue Department helpdesk and customer service
  • Tax consultants and chartered accountants
  • Online resources and guides provided by the IRD
  • Training programs and workshops organized by tax authorities
  • Professional associations offering support to members

Additional FAQs:

How does VAT affect pricing strategies for businesses?

VAT impacts pricing strategies by:

  • Increasing the final price of goods and services
  • Requiring businesses to decide whether to absorb VAT or pass it on to customers
  • Influencing competitiveness, especially for businesses near VAT registration thresholds
  • Affecting cash flow due to the timing of VAT payments and refunds

What are the VAT implications for digital services in Nepal?

VAT implications for digital services in Nepal include:

  • Digital services provided by non-resident businesses may be subject to VAT
  • Reverse charge mechanism may apply for B2B transactions
  • Challenges in determining the place of supply for digital services
  • Potential requirement for non-resident providers to register for VAT in Nepal

How do I handle VAT refunds for tourists in Nepal?

VAT refunds for tourists in Nepal:

  • Currently, Nepal does not have a formal VAT refund scheme for tourists
  • Tourists generally cannot claim VAT refunds on purchases made in Nepal
  • Some duty-free shops at international airports may offer tax-free shopping

What are the VAT considerations for non-profit organizations?

VAT considerations for non-profit organizations in Nepal:

  • Some non-profit activities may be exempt from VAT
  • Non-profits engaged in taxable activities may need to register for VAT
  • Input VAT recovery may be limited for exempt activities
  • Donations and grants are generally not subject to VAT
  • Proper record-keeping is essential for VAT compliance

How does VAT apply to real estate transactions in Nepal?

VAT application to real estate transactions in Nepal:

  • Sale of land is generally exempt from VAT
  • Construction services are subject to VAT at the standard rate
  • Rental of residential properties is exempt from VAT
  • Commercial property rentals may be subject to VAT
  • Input VAT on construction costs may be recoverable for commercial properties

Related Professionals

Nabaraj Regmi

Nabaraj Regmi

Chief Executive Officer

Ramhari Khanal

Ramhari Khanal

Head of Finance