For the creative individuals dwelling on their projects
keeps them at bay from the legalities regarding operating a business in any given country;
however one cannot escape the reality.
An aspiring entrepreneur is always on the lookout for new opportunities or creating one when they see preexisting issues in the society. For these creative individuals dwelling on their projects keeps them at bay from the legalities regarding operating a business in any given country; however one cannot escape the reality. In context of Nepal, tax registration system can be quite confusing for a new entrant in the market, but one cannot deny the fact that tax payment is absolute necessity whilst running a business.
In Nepal, registering a business under PAN or VAT can be mystifying for many entrepreneurs but as per the Government of Nepal, all businesses in Nepal are obligated to attain a PAN REGISTRATION CERTIFICATE from the Inland Revenue Office. PAN (Permanent Account Number) is an identification number that is provided to any taxpayers.
PAN or Permanent Account Number is an identification number provided for all taxpayers and tax deducted at source (TDS) withholding agents within Nepal.
Personnel who are into business accounting to commercial transaction with or without a firm are mandatorily required to attain a PAN certificate.
Company, Organization of Partnership run businesses paying income tax and VAT to the Government should also have a PAN certificate.
Organizations who deduct TAX at source. Application form for registering under PAN can be obtained from the Inland Revenue Office (IRO) directly or can be downloaded from the respective website. Once the application form is filled out, the form along with other relevant documents enlisted below must be submitted at the concerned IRO.
Sorting Your Documents
Citizenship Certificate (Nepalese). Authentic Identification Document (Foreigners)
Two passport size photos for the signee (if individual registration). Partnership firm
requires two photos each of each partner.
Company Registration Certificate (if relevant)
Map drawn with office location.
Rental agreement including TDS receipt or 3 months rental payment.
Depository proof, if IRO requires (foreigners)
Value Added Tax (VAT)
VAT can be simplified as a tax that is implied at each stage in the process of production/distribution of goods or services. The VAT Registration Certificate is also provided by the IRO (Inland Revenue Office), however VAT registration is indicated on the PAN certificate itself and no separate certificate is provided. The stages where the tax is levied can be import, manufacturing, wholesalers, retailers etc. VAT is aimed to be transparent as every individual in the supply chain has an enticement to make certain that every other company or individual pays the VAT, this reduces the chances of TAX evasion. In Nepal, a business operator collects the VAT from the end consumer after a commercial transaction takes place. The TAX percentile was increased from 10 to 13% in 2005 and since its introduction in the Nepalese market, VAT has proven to be a strong backbone for internal revenue generation. All imported products are taxed and this also enables in generating more contribution towards revenue.
Businesses such as Electronics, Motor Parts, Automobiles, Furniture, Education Consultancy, Discos, and Restaurant with Bar, Health Club etc. are obligated to be registered under VAT. An individual with an annual transaction accounting to less than Nrs. 50 Lakh are not required toregister under VAT.
After VAT Registration:
Based on your company type, submission of VAT returns and pay is applicable.
Purchase and Sales book need to be maintained.
IRO needs to be informed of any changes, for e.g. address, phone number, new additional partner etc.
Certificate of VAT Registration should be hanged in a visible place within business operating premises.
Customers need to be provided with invoice with VAT.
As per the IRO, there is still a huge due amount from taxpayers every year, the malpractices of no-billing or under-billing results to such results. The enforcement should be stricter with their rules and regulations so that such misconducts from the vendors diminish in the long run. For new company registration, understanding the genre of Business and registering under simply PAN or VAT can be sorted out with the help of an expert team of individuals and Trilegal Nepal can be your best of choice.