Quick Answer
A new business in Nepal must register for a business licence and PAN before its first transaction, register for VAT only if it crosses the applicable turnover threshold or operates in a mandatorily-registered sector, then follow the standard monthly TDS, quarterly, and annual filing calendar from its very first fiscal year, with the first annual income tax return due by end of Ashwin after the year closes.
The first year of running a business in Nepal is where most preventable tax penalties happen, not because founders are careless, but because nobody hands new entrepreneurs a single, ordered checklist of what to register and when. Between company registration, PAN, VAT, payroll, and the annual return, it is easy to miss a step while focused on actually building the business. This guide lays out the first-year compliance path in the order it actually needs to happen.
Registration Deadlines (PAN, VAT if applicable)
Registration is the foundation everything else sits on, and it happens in a specific sequence. Business or company registration comes first, since PAN registration requires proof of the legal business entity. VAT registration, where applicable, comes after PAN and is triggered either by turnover or by operating in a sector where registration is mandatory regardless of size.
| Step | Where | Deadline |
|---|---|---|
| Company or firm registration | Office of Company Registrar (for companies) or local Ward Office (for a sole proprietorship firm) | Before commencing business activity |
| PAN certificate | Local Inland Revenue Office or IRD Taxpayer Portal | Before issuing the first invoice or receipt |
| VAT registration | IRD Taxpayer Portal, in person biometric verification required | Within 30 days of crossing NPR 50 lakh (goods) or NPR 30 lakh (services/mixed), or immediately if in a mandatory sector |
| Social Security Fund registration | SSF online portal | Within the prescribed period after hiring the first employee |
First-Year Filing Obligations Timeline
Once registered, a first-year business enters the same recurring filing calendar as an established one, there is no reduced-compliance grace period simply for being new. The obligations that apply depend on whether the business has employees, is VAT-registered, and how it estimates its first-year tax liability.
- Monthly VAT return (if VAT-registered): due by the 25th of the following Nepali month, from the very first month of registration.
- Monthly TDS deposit (if paying staff, rent, or contractor fees subject to withholding): due by the 25th of the following month, with a quarterly TDS return.
- Advance income tax instalments (if estimated annual tax liability exceeds the prescribed threshold): 40% by end of Poush, 70% by end of Chaitra, 100% by end of Ashadh.
- Annual income tax return: due by end of Ashwin, three months after the close of the fiscal year in which the business started, even for a partial first year of operation.
Note: A business that starts operations partway through a fiscal year, say in Falgun, still files its first annual return for that partial year by the following Ashwin end. There is no rule that delays the first filing until a full twelve months have passed.
Monthly vs Annual Obligations Overview
New business owners often confuse the rhythm of monthly obligations with the once-a-year income tax return, leading to either over-filing or, more commonly, forgetting the monthly cadence entirely while focused on the annual deadline months away.
| Frequency | Applies To | Core Obligation |
|---|---|---|
| Monthly | VAT-registered businesses | File VAT return and pay 13% VAT by the 25th of the following month |
| Monthly | Businesses with employees or withholding payments | Deposit TDS by the 25th of the following month |
| Quarterly | Businesses with TDS obligations | File the TDS return summarising the quarter's deductions |
| Three instalments per year | Businesses above the advance tax threshold | Pay 40% / 70% / 100% of estimated tax by Poush, Chaitra, and Ashadh end |
| Annually | All businesses | File the annual income tax return by end of Ashwin |
Common First-Year Mistakes and Penalties
Most first-year penalty exposure in Nepal comes from a small, repeatable set of mistakes rather than complex tax planning failures.
- Delaying PAN registration until after the first few sales, which puts every early invoice on shaky legal footing.
- Ignoring the VAT threshold check until well after crossing it, resulting in a late registration penalty plus VAT liability on sales made during the gap.
- Treating the annual return as the only deadline and missing monthly VAT or TDS filings for months at a stretch, each of which accrues its own penalty and 15% annual interest under Section 118 of the Income Tax Act.
- Not separating personal and business bank accounts, which makes it far harder to reconstruct accurate books when the annual filing deadline approaches.
- Assuming a slow first year means no filing is needed, when in fact a dormant or low-transaction business is still generally required to file a return, even if it reports zero or minimal tax due.
Downloadable First-Year Compliance Checklist
Use the six-step checklist below as a simple, ordered reference for the first twelve months of operation. Print it, save it, or pin it above your desk, the goal is to make the recurring deadlines a routine rather than a scramble each month.
- 1. Register your business entity (company or firm) before starting operations.
- 2. Apply for a PAN certificate before issuing your first invoice.
- 3. Check your projected turnover against VAT thresholds monthly, and register within 30 days of crossing the limit.
- 4. Set up basic monthly bookkeeping from day one, sales, purchases, and any TDS withheld.
- 5. Mark the 25th of every month on your calendar for VAT and TDS filing and payment.
- 6. Mark end of Ashwin for your first annual income tax return, regardless of how many months you actually operated.
Stay ahead of every Nepal tax deadline. Bookmark Bandhu Fintech for plain-language guides on IRD compliance, NEPSE, and personal finance in Nepal.
Frequently Asked Questions
Do I need to register for VAT immediately when starting a new business?
Only if you operate in a sector where VAT registration is mandatory from the first sale, or if you reasonably expect to cross the applicable turnover threshold within a rolling 12-month period. Otherwise, register once you actually cross the threshold, within 30 days.
What if my business made very little income in its first partial year?
You are still generally required to file an annual income tax return for that partial year by the following Ashwin end, even if the tax due is minimal or zero.
Can I file my first annual return myself, or do I need an accountant?
Simple sole proprietorships with straightforward records can often file directly through the IRD portal, but businesses with VAT registration, employees, or more complex transactions commonly engage an accountant to reduce error risk, especially in the first year.
What penalty applies if I miss the monthly VAT filing deadline in my first year?
Late VAT filing generally attracts a penalty plus 15% annual interest on any unpaid tax, calculated from the original due date, regardless of whether the business is in its first year or its tenth.
Is there a simplified tax regime for very small new businesses in Nepal?
Small businesses below certain turnover levels may fall under presumptive or simplified tax provisions with reduced record-keeping requirements; check the current Finance Act's specific thresholds for small taxpayer schemes, as these are revised periodically.
This article is for general informational purposes and reflects publicly available guidance under the Income Tax Act 2058 and VAT Act 2052 as amended by the Finance Act. Tax rules and deadlines can change with each annual Finance Act. Always confirm current deadlines on the official Inland Revenue Department website at ird.gov.np or consult a registered tax professional before filing.
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