Records for Statutory Compliance

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Records for Statutory Compliance

(This is the 4th part of a 4 part series)

Compliance of laws is a statutory requirement. While registering transfer of shares in a company or while acquiring more investment through shares, the tax department looks for documents to ensure that the company is meeting all statutory requirements and all dues pending up to the time of transfer are paid. Written evidences should be obtained while meeting these requirements.

Though many feel that these are strict norms mandated by the government, compliance of these requirements has long-term benefits for the company. You can get more details about the specific compliance requirements applicable for your company from your tax and legal consultants. A few of the general requirements are given below:

VAT

  • Registers (Kharid Khata and Bikri Khata) are obtained and verified from the local tax office at the beginning of each fiscal year for entering purchase and sales records. If these registers are not obtained before the stipulated time the company can incur a fine of NPR 10,000.
  • VAT return form should be submitted and payments should be cleared by 25th day of the next month, either on a monthly basis or every trimester depending on the requirement. Interest and penalties are payable on any delays of payments of liabilities or filing of returns.
  • Liabilities can be assessed through Taxpayer portal inside ird.gov.np. After payment the return has to be verified through the portal. Details of turnover and VAT purchases recorded on Registers are needed for VAT calculation.

Income Tax

  • TDS is not applicable for procurement of goods however it is mandatory while paying for services received.
  • TDS rate for payments of VAT Bill is 1.5% of service value and in absence of VAT Bill 15% of service value.
  • Incase of payment of house rent 10% TDS should be deducted.
  • These taxes should be paid to the Department within 25th of the subsequent month through payment vouchers, which are available at the tax offices.
  • Income tax should be assessed and paid within the relevant stipulated time after the end of the Financial Year.
  • It is a healthy practice to obtain tax clearance certificate after clearing all tax dues and filing necessary documents. However, obtaining tax clearance certificate does not relieve the company off its responsibilities – tax authorities can obtain more details about the company until 5 years after the financial year and demand payments for taxes that may have escaped during the initial assessment.

Companies Act

  • MOA (Memorandum of Association- Prabhanda Patra) and AOA (Article of Association) is submitted at the time of company registration. The company should properly maintain these documents.
  • 1st Annual General Meeting should be conducted within 3 months from the time of registration and minutes of the meeting from this meeting should be filed with the Office of Company Registrar within the stipulated time.
  • Audited Annual reports of the company and minutes of AGM/ board meetings should be submitted to the CRO (Company registration office)

Read also:

Is Negligence Costing Startups? Steps to Keep your Finances in Order

Recordkeeping of Assets and Liabilities

Recordkeeping for Performance Assessment