VAT in Nepal: 13%, Registration Thresholds and Monthly Returns

The single rate

Nepal charges Value Added Tax at a flat 13% on most goods and services. Some items are exempt (basic agricultural products, education, health services, certain financial services) and exports are zero-rated, which means you charge 0% but can still reclaim input VAT.

When registration is mandatory

• Annual turnover above रु 50 lakh for goods, or रु 30 lakh for services (or mixed).
• Regardless of turnover, if you import for business, or operate in listed sectors, for example hotels, software, consulting and several others named in the Act.
• Anyone can register voluntarily to reclaim input VAT and to appear credible to corporate customers.

Output minus input

Each month you total the VAT you charged customers (output VAT) and subtract the VAT you paid suppliers on business purchases (input VAT). The difference is paid to the IRD; if negative it carries forward, and after a period of continuous credit it can be refunded.

Input credit requires a proper tax invoice showing the supplier's PAN, your PAN, an invoice number and the VAT amount. Personal expenses and some categories (like most vehicles and entertainment) are blocked.

Invoicing rules

VAT-registered businesses must issue a sequentially numbered tax invoice for every sale, and larger businesses must use IRD-approved billing software connected to the Central Billing Monitoring System. Keep sales and purchase registers in the prescribed format.

Filing cycle

Payment is made through connected banks or the portal. Nil returns are still mandatory.

Penalties

Late filing attracts a fixed fee per return, and unpaid VAT accrues 15% annual interest plus penalties. Non-registration when required leads to back-assessment for the whole period.

Practical tips

Reconcile your VAT return to your ledger every month, match input credits to physical invoices, and file nil returns during quiet months rather than skipping.