Tax Rules for Travel Agencies & Trekking Companies in Nepal (2026 Guide)
Nepal's tourism sector runs on a mix of package tours, hotel and airline commissions, and government-collected trekking fees — and each of these streams is taxed differently. Travel agencies and trekking companies that lump everything into one "tour income" line often end up either overpaying VAT or missing an exemption they were entitled to. This guide breaks down exactly how domestic tours, international tour components, commission income, and permit fees are treated under Nepal's tax law, so you can price your packages correctly and stay compliant with the Inland Revenue Department (IRD).
VAT on Package Tours: Domestic vs International Components
A single package tour sold to a foreign visitor often bundles services that happen entirely inside Nepal (hotel stays, guided trekking, domestic transport) with services that are billed as part of an international arrangement (airfare, cross-border logistics). The tax treatment splits along this line:
Domestic tour component: Services consumed within Nepal — accommodation, local transport, guiding, meals arranged locally — are subject to the standard 13% VAT, just like any other domestic service supply. This applies regardless of whether the client is a Nepali resident or a foreign tourist, because the place of supply and consumption is Nepal.
International tour component: Where a portion of the package genuinely represents a service rendered to a person outside Nepal and paid for in convertible foreign currency — for example, a package booked and paid for entirely from abroad through an inbound tour operator arrangement — that portion can be considered for export-of-service treatment, which is zero-rated rather than exempt. Zero-rating is important because it still allows the agency to claim input VAT credit on related purchases, unlike an exemption.
In practice, most trekking and travel agencies should maintain a clear invoice-level split between the "inbound package" portion and any purely domestic add-ons sold locally, since tax officers will expect supporting documentation — foreign currency remittance certificates, booking confirmations, and correspondence with the overseas partner agency — before accepting zero-rated treatment on an audit.
Commission Income from Airline and Hotel Bookings
Most agencies also earn commission or referral income by booking flights, hotels, and activities on behalf of clients, separate from the package tour fee itself. This commission is treated as ordinary business income and is taxed accordingly:
If the agency is VAT-registered, 13% VAT applies to the commission amount (not the full ticket or room value, only the agency's margin), since the agency is only supplying an intermediary booking service. The commission also forms part of taxable business profit for income tax purposes, and is combined with tour service income when computing annual tax liability. Agencies that receive commissions from foreign airlines or global distribution systems (GDS) in foreign currency should still record these separately, as they may be relevant when calculating any export-of-service claim.
TIMS and Trekking Permit Fees: Not the Agency's Income
A common bookkeeping mistake is treating Trekkers' Information Management System (TIMS) cards, national park entry fees, and restricted-area trekking permits as part of the agency's revenue. They are not. These are statutory fees collected by the agency on behalf of the government or the relevant authority (such as the Nepal Tourism Board or park offices) and simply passed through to the client.
Because the agency is acting as a collection agent rather than a service provider for this component, these amounts should be recorded as a pass-through liability, not as income, and should not attract VAT or income tax in the agency's hands. What is taxable is any service charge or handling fee the agency adds on top of the actual permit cost for processing it — that markup is ordinary taxable income.
VAT Registration Threshold for Travel Agencies
Travel and trekking agencies, being service providers, must register for VAT once their annual turnover crosses the threshold applicable to service businesses under the Value Added Tax Act. Once registered, VAT must be charged on all taxable domestic supplies, and monthly or trimester returns must be filed with the IRD along with the corresponding tax payment. Agencies operating below the threshold may still register voluntarily, which is often useful if a large share of revenue qualifies for zero-rated export treatment, since voluntary registration unlocks input VAT credit.
Practical Compliance Checklist
Keep separate ledger heads for package tour income (split domestic/international), commission income, and pass-through permit collections. Retain foreign currency encashment certificates for any export-of-service claim. Issue VAT invoices showing the correct rate for each line item rather than one blended figure. File VAT returns on time even in months with primarily zero-rated sales, since a nil or zero-rated return is still a return. Reconcile TIMS and permit collections against amounts actually remitted to the issuing authority at each financial year-end.
Frequently Asked Questions
Is a foreign tourist's payment routed through a Nepali agency taxed as export service?
Not automatically. The payment being made by a foreigner is not, by itself, enough to qualify for export-of-service treatment. What matters is whether the service is genuinely consumed outside Nepal or structured as a business-to-business arrangement with an overseas tour operator, and whether payment is received in convertible foreign currency through proper banking channels. A domestic trekking package sold directly to a foreign tourist for services entirely delivered inside Nepal is generally still subject to standard 13% VAT, because the place of consumption is Nepal, even though the payer is foreign. Agencies should assess each booking arrangement individually and keep documentation ready to support whichever treatment they apply, rather than assuming foreign payment automatically means zero-rating.
Do trekking agencies need to charge VAT on national park entry fees?
No. Statutory entry fees and permits collected on behalf of a government body are pass-through amounts, not the agency's own supply, so VAT is not charged on the fee itself. VAT would only apply to any service or handling charge the agency adds for processing the permit.
Can a small trekking company below the VAT threshold still claim input VAT?
Only if it registers voluntarily. Businesses below the mandatory threshold are not required to register, but without registration they cannot charge output VAT or claim input VAT credit on purchases such as vehicles, office equipment, or subcontracted services.
Disclaimer: This article is for general information only and does not constitute legal or tax advice. Tax rules and thresholds can change, and their application depends on your specific facts and circumstances. Please consult an ICAN-registered Chartered Accountant before making any tax or compliance decisions.
Discussion