Many individuals and businesses in Nepal assume that if they earned no income or had no transactions during a fiscal year, they simply don't need to deal with the Inland Revenue Department (IRD) at all. This is a costly misunderstanding. If your PAN is active and registered for a particular tax type, you are generally still required to file a return, even when that return shows zero income and zero tax payable. This is known as a nil return.
This guide explains who must file a nil return in Nepal, exactly how to do it online, and why skipping this step can create serious problems later, even if you genuinely owed nothing.
Who Needs to File a Nil Tax Return?
A nil return is generally required for:
- Registered businesses with no activity: A company or firm that registered but has not started operations, or that had zero sales and zero purchases during the period.
- VAT-registered taxpayers with no transactions: If your PAN is VAT-registered, you are typically expected to file a return every tax period, regardless of whether any sales occurred.
- Individuals with income below the taxable threshold: Some individuals who are registered taxpayers but earned below the exempt income limit for that year may still need to submit a return reflecting this.
- Dormant or inactive entities: A company that has stopped operating but has not been formally deregistered continues to carry filing obligations until it is properly closed with IRD and the Office of the Company Registrar.
Step-by-Step: How to File a Nil Return in Nepal
Step 1: Confirm your filing requirement. Check your PAN registration details on the IRD portal to identify which tax types (income tax, VAT, excise) you are registered for, since each may need its own periodic filing, even at zero value.
Step 2: Log in to the IRD e-filing portal. Use your PAN and password to access the Taxpayer Portal, then navigate to the e-filing or return submission section relevant to the applicable tax type and period.
Step 3: Select the correct return form and period. Choose the fiscal year, month, or trimester as applicable to your registration, and open the standard return form used for that tax type.
Step 4: Declare all fields as nil or zero. Enter zero in the income, sales, purchase, and tax payable fields as appropriate. Do not leave fields blank; the system typically expects explicit zero values to register the submission as a valid nil return rather than an incomplete form.
Step 5: Submit the return and save your acknowledgement. After submission, the portal will generate a filing confirmation or acknowledgement receipt. Download and store this document, since it is your proof of compliance for that period.
Consequences of Not Filing, Even With Zero Income
It is a common and expensive mistake to assume that no income means no obligation. In practice, failing to file a required nil return can result in:
- Late filing fees: IRD can impose penalties for each period a required return was not submitted, regardless of the fact that no tax was actually owed.
- Compounding non-compliance: Missed nil returns accumulate over multiple periods, and clearing this backlog later is far more time-consuming than filing on time each period.
- Complications during deregistration: If you eventually want to close your business or deregister your PAN, IRD will typically require all outstanding returns, including nil ones, to be filed and cleared first.
- Reduced credibility: A history of missed filings, even nil ones, can affect your standing when applying for loans, tenders, or renewals of business licenses.
Nil Return vs. Non-Filing Exemption: What's the Difference?
These two concepts are often confused, but they are not the same:
- Nil Return: You are still an active, registered taxpayer, and you actively submit a return showing zero values for the period. Filing itself is mandatory; only the tax amount is zero.
- Non-Filing Exemption: This applies only in specific circumstances where IRD has formally exempted a taxpayer category from the filing requirement altogether, or where a business has been properly deregistered and no longer holds an active filing obligation.
Unless you have received explicit written exemption or completed formal deregistration, the safest assumption is that a nil return is still required for every applicable period.
Frequently Asked Question
Does a dormant company still need to file nil returns?
Yes. A company that has stopped active operations but has not been formally deregistered with IRD and the Office of the Company Registrar is still considered a registered taxpayer, and is generally expected to continue filing nil returns for each applicable period until the deregistration process is fully completed.
Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. Filing requirements can vary by taxpayer category and may change over time; please consult an ICAN-registered Chartered Accountant or the Inland Revenue Department directly for advice specific to your situation.
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