Tax Guide — SME Hub Nepal

Visit IRD or apply online

taxpayerportal.ird.gov.np — online PAN application. Or visit nearest IRD office (Lazimpat, Kathmandu + all districts).

Submit documents

Citizenship + business registration certificate (OCR/ward office). For companies: company certificate + board resolution.

Receive 9-digit PAN

Issued within 1–3 days. PAN is permanent — never expires unless business is deregistered. Free of charge.

Use PAN on all documents

All business invoices, bank accounts, import/export docs, contracts, and tax returns must show your PAN.

PAN vs VAT — Who Needs What

	PAN	VAT
Who	All businesses	Goods turnover > NPR 50L/year Services turnover > NPR 20L/year
Cost	Free	Free
Where	IRD	IRD (same office)
Filing	Annual ITR	Monthly VAT return
Tax rate	Per slab (see Income Tax)	13% on taxable supply

ℹ️

You can voluntarily register for VAT even below the threshold — useful if most buyers are VAT-registered businesses who want to claim input VAT credit.

How VAT Works

Output VAT = 13% on your sales (you collect from customers)

Input VAT = 13% on your purchases (you pay to suppliers)

VAT Payable to IRD = Output VAT − Input VAT

If Input > Output → IRD owes you a refund (apply for VAT refund)

VAT-Exempt vs Zero-Rated

Type	Rate	Examples
Standard	13%	Most goods and services
Zero-rated	0%	Exports (claim input VAT back)
Exempt	No VAT	Basic food, medicine, education, health services, agricultural products

Monthly VAT Return Process

Collect all bills for the month

Output: all sales bills issued. Input: all supplier bills received with VAT.

taxpayerportal.ird.gov.np → VAT Return. If using Tally/Busy, export data directly to portal.

Submit by 25th of next month

Submit return and pay any VAT due. Late filing = NPR 1,000 fine + 15% annual interest on unpaid amount.

Individual / Sole Proprietor Tax Slabs (FY 2081/82)

Annual Income	Tax Rate
Up to NPR 5,00,000	1% (Social Security Tax)
NPR 5L – 7L	10%
NPR 7L – 10L	20%
NPR 10L – 20L	30%
Above NPR 20L	36%

ℹ️

Women entrepreneurs get an additional 10% rebate on tax payable. Register business in your own name (not spouse's) to claim this benefit.

Corporate Tax Rates

Entity Type	Tax Rate
Manufacturing companies	20%
Export-focused companies (>50% export)	15%
General Private Ltd.	25%
Banks, Financial Institutions	30%
Co-operatives	5–15% (tiered)

Allowable Deductions

✅ Business expenses (rent, utilities, salaries)

✅ Depreciation on fixed assets

✅ Interest on business loans

✅ Marketing and advertising expenses

✅ Training and development costs

❌ Personal expenses (mixed use must be apportioned)

❌ Fines and penalties

Deadline	Obligation	Where	Penalty for Late
25th of each month	Monthly VAT return + payment	IRD portal	NPR 1,000 + 15% interest
25th of each month	E-TDS monthly deposit + return	IRD portal	15% interest + 50% penalty
End of Poush (mid-Jan)	Advance income tax — 1st installment (40%)	IRD portal / bank	15% interest on shortfall
End of Chaitra (mid-April)	Advance income tax — 2nd installment (30%)	IRD portal / bank	15% interest on shortfall
End of Ashad (mid-July)	Advance income tax — 3rd installment (30%)	IRD portal / bank	15% interest on shortfall
End of Poush (mid-Jan)	Annual Income Tax Return (ITR) — with audit report	IRD portal	NPR 1,000/month late fee
Within 3 months of FY end	Company annual audit to OCR	OCR portal	OCR deregistration risk
Per payroll cycle	SSF (Social Security Fund) contribution — 31% of salary	ssf.gov.np	Fines + employee claims

💡 Hire a CA: For businesses above NPR 1Cr turnover, the annual audit by a Chartered Accountant is legally mandatory and will save more in tax optimization than it costs (typically NPR 15,000–60,000/year).

Tax Guide for Nepal SMEs

PAN Registration