The tax registration process and the decision whether to register a business under PAN or VAT can be quite confusing for many entrepreneurs. Especially, entrepreneurs with ideas relating to alcohol distribution, export and import, handicrafts often seem to have queries on requirements for registration. Based on such queries received from various aspiring entrepreneurs this blog attempts to provide basic details on the tax registration system of Nepal.
All businesses in Nepal are required to obtain a PAN registration certificate from Inland Revenue Office (IRO) before coming into operation. The law of Nepal mandates PAN registration, therefore, it is crucial to understand PAN and the process of obtaining PAN.
PAN (Permanent Account Number) is a unique identification number issued to all taxpayers and tax deducted at source (TDS) withholding agents throughout Nepal. The one time allotted PAN of a taxpayer or TDS withholding agent never changes.
As per the law, the kinds of companies and organizations which have to obtain a PAN certificate as a mandate are:
The process to apply for the registration of PAN begins with either collecting application form for registration from respective Inland Revenue Office (IRO) or downloading the forms from the link provided in the website of Inland Revenue Department (IRD). Then the application form must be filled and submitted at the concerned Office of Inland Revenue.
The documents required to be submitted at Office of Inland Revenue includes:
Note: And case where an individual desires to register his partnership firm, limited company, corporation or any other organization through a representative, the authority must be given through a signed Power of Attorney (POA) form to the representative. The signed POA must be presented before the tax officer at IRO along with the submission of the application for PAN registration. The representative must also produce his/her citizenship card.
VAT registration is also as important as PAN registration to understand prior to a business coming into operation.
VAT (Value Added Tax) is a broad-based tax that covers the value added to each commodity by an organization/ firm at all stages of production and distribution. The VAT registration certificate is provided by the Inland Revenue Office (IRO) subsequent to VAT registration. VAT registration is denoted in the PAN certificate itself and separate certificate is not provided.
Any individual engaged in any taxable transaction must submit an application for registration in the prescribed form before IRO. However, there are few thresholds, not exceeding which, does not require VAT registration.
Subsequent to VAT registration there are statutory requirements a VAT registrant must fulfill in accordance to law. They are:
For further details regarding PAN and VAT registration please visit the Inland Revenue Department Website or consult a Tax Consultant.
If you require help in Business Registration then visit our blog on Registering Business in Nepal here.