VAT( Value Added Tax) was introduced on 16 Nov. 1997 replacing the Sales Tax, Hotel Tax, Contract Tax, and Entertainment Tax. Known as the backbone of the income tax system in Nepal, VAT is a board-based tax that covers the value added to each commodity by a firm during all stages of production and distribution. It helps to smoothen out the collection of taxes, increases efficiency, and also to decrease the tax evasion in Nepal.
In the previous article, I had talked about registering a Business PAN in Nepal, which is quite similar to registering for VAT.
Process of Registration
- Visit the website of IRD and go into ‘Taxpayers Portal’ or directly click here.
- Enter a username password and the following given details.
- Now in the options select ‘VAT’, then click OK.
- Then a screen will appear with Submission Number.
- Enter your PAN and note Down the submission number and press ‘Continue.’
- Now enter your VAT-related details like a PAN number if already registered in Income TAX, registration date if PAN exists, Last Fiscal Year’s Taxable Turnover including export, last Fiscal Year’s Total Assessable Income, etc.
- Enter Contact Person detail for VAT (including address) if it is different than contact person for Income Tax.
- You can either save data or apply by pressing the ‘Save’ button or the ‘Submit’ button respectively.
- Click on the Print button to get a copy of the submitted application form.
- Now, you have to visit the IRD office and submit the printed application to the concerned officer.
- All applications submitted by Taxpayer will be displayed in the Submitted List in the IRO officer’s portal.
Documents Required for VAT
- Copy of Citizenship certificate
- Two Passport Size Photo
- Recommendation letter from the local Chamber of Commerce.
- Location map of the Business
Who should register for VAT?
Registration is required for any business:
- With an annual taxable turnover of over 2 million rupees.
- Belonging to a multi-industry company that has an aggregate annual taxable turnover exceeding 2 million rupees.
Businesses with taxable annual sales of under 2 million rupees may also register for VAT but it must remain registered for a full fiscal year.
Obligations of VAT
VAT registrants are required to:
- Submit VAT return and pay the tax within the 25th day of the following month.
- Provide their customers with a tax invoice.
- Maintain Purchase Book, Sales Book, VAT Account.
- Keep their VAT records for a period of 6 years.
- Inform the IRD of changes to the business including new address, telephone number, or a reorganization of a partnership within 15 days.
- Put their Certificate of Registration in the premises where customers may easily see and read it.
- Allow tax officers to enter the business to examine the business records and the stock on hand.
Time & Cost
After submitting the application at the IRD office, they will verify your details and register your business for VAT. This process usually takes around one day or just hours/minutes, depending on the rush hour. You have to bear no cost throughout the process in the IRD office.