How to Register a Company for Tax in Nepal (PAN + VAT Step-by-Step)

A practical walkthrough of PAN and VAT registration for new businesses, including documents, timeline, and common pitfalls.

Once a company is legally incorporated in Nepal, registering it for tax is the next essential step before it can legally issue invoices, hire staff, or open a proper business bank account. Many new business owners assume PAN and VAT registration are the same thing — they are not. This guide walks through both processes clearly.

Difference Between PAN and VAT Registration

A PAN (Permanent Account Number) is the foundational tax identity every business (and many individuals) needs in Nepal. It is what allows a company to be recognized in the tax system, file income tax returns, and conduct standard financial transactions such as opening a business bank account. Every registered company must obtain a PAN essentially as soon as it starts operating.

VAT (Value Added Tax) registration is a separate, additional registration required only once a business meets certain conditions — primarily crossing a turnover threshold, or operating in a category of business subject to compulsory VAT registration regardless of turnover. In other words, every VAT-registered business has a PAN, but not every PAN holder is VAT-registered.

Who Must Register for VAT (Turnover Threshold)

VAT registration becomes mandatory once a business's annual transaction turnover crosses the threshold prescribed by the IRD for its category of trade or service. Below that threshold, most general businesses are not required to register, though some choose to register voluntarily anyway — often to claim input tax credit on their purchases or to appear more credible when dealing with larger, VAT-registered clients who prefer working with VAT-registered vendors. Certain categories of business, regardless of turnover size, may be required to register compulsorily due to the specific nature of the goods or services they deal in.

Documents Required

• Company registration certificate from the Office of the Company Registrar (OCR)
• Memorandum and Articles of Association
• Citizenship certificates of directors/shareholders
• Passport-size photographs of authorized signatories
• Proof of registered business address (rental agreement or ownership document)
• Board resolution authorizing the PAN/VAT application (where applicable)
• Estimated turnover projection, particularly relevant if applying for VAT registration

Step-by-Step IRD Portal Process

1. Complete company incorporation with the Office of the Company Registrar (OCR) and obtain your registration certificate.
2. Apply for PAN through the IRD's online taxpayer portal or the relevant tax office, submitting incorporation documents and director details.
3. Assess your VAT obligation by reviewing your expected turnover against the current registration threshold and checking whether your business category requires compulsory registration.
4. Submit VAT registration (if required or chosen voluntarily) through the same portal, providing additional business detail and estimated turnover figures.
5. Receive your PAN certificate, and where applicable, your VAT registration certificate, both of which should be displayed at your business premises as required by law.

Timeline and Fees

PAN registration is typically processed fairly quickly once documents are complete and in order, often within a short number of working days. VAT registration can take a little longer if the tax office requests a physical verification of the business premises, which is common practice before approving VAT status. Fees associated with registration are generally nominal administrative charges rather than a major cost factor, though businesses should confirm current fee schedules directly with the IRD, as these can be revised periodically.

Common Rejection Reasons

• Mismatched details between the company registration certificate and the PAN/VAT application
• Incomplete or unclear proof of business address
• Missing authorization documents (board resolution or power of attorney) for the person submitting the application
• Unrealistic or inconsistent turnover projections submitted for VAT registration
• Failure to be present or reachable during a physical premises verification visit

Most rejections come down to documentation mismatches rather than eligibility issues, so having consistent, verified paperwork across every submitted document is the single best way to move through registration smoothly.

FAQ: Can One Business Have PAN but Not VAT?

Can a business have a PAN but not be VAT-registered?
Yes, this is actually the normal situation for the vast majority of small and medium businesses in Nepal. Every operating business needs a PAN to exist within the tax system and file its income tax return, but VAT registration is only required once turnover crosses the prescribed threshold or the business falls under a compulsory VAT category. A small retail shop, for example, may operate for years on PAN alone before ever needing VAT registration.

What happens if a business crosses the VAT threshold but doesn't register?
Operating above the threshold without registering for VAT is a compliance failure that can expose the business to penalties, back-dated tax assessments, and interest once discovered. Businesses approaching the threshold should proactively register rather than waiting to be caught out during an audit or inspection.

Can VAT registration be cancelled later if turnover drops?
In certain circumstances, businesses whose turnover falls below the threshold may be able to apply for de-registration, subject to IRD approval and any conditions attached. This is not automatic and generally requires a formal application process.