Banijya Khareji in Nepal | Commerce Dissolution Process

Banijya Khareji in Nepal | Commerce Dissolution Process commonly referred to as commerce dissolution, is the legal procedure to officially close a registered business in Nepal. This process involves the cancellation of a business registration certificate issued under the Partnership Act, 2022 B.S. (1965 A.D.). Whether the business is a sole proprietorship, partnership, or firm, its closure must be documented through the Department of Commerce (DoC) or the District Administration Office (DAO).

By formally dissolving the business, owners relieve themselves of legal obligations such as renewal, tax filing, and regulatory reporting. This measure is essential to eliminate future liabilities, including penalties and outstanding taxes. Business owners may initiate the process voluntarily or in response to legal or financial situations such as insolvency, prolonged dormancy, or structural changes.

However, dissolution only becomes effective once all relevant authorities—including the Inland Revenue Office (IRO)—approve it and issue final clearance. This ensures that the business has no pending dues or unresolved legal matters. Medha Law and Partners Is a Leading Corporate Law Firm in Nepal.

Why Do Businesses Choose to Dissolve in Nepal?

Businesses in Nepal opt for Banijya Khareji for several legitimate reasons. First and foremost, a significant number of owners close their businesses due to long-term financial loss or insolvency. In other situations, some firms voluntarily decide to dissolve because their business model has shifted, the firm has merged with another entity, or the business has relocated.

Here are key reasons for business dissolution:

• Prolonged dormancy or inactivity

• Mergers, acquisitions, or structural changes

• Expiry of contractual or partnership terms

• Migration to another business jurisdiction

• Inability to meet compliance and renewal requirements

• Legal notice due to non-compliance or unpaid dues

Clearly, commerce dissolution serves as a responsible legal mechanism to prevent unwanted liabilities and penalties.

When Can You Legally Close a Business?

In Nepal, any registered business can legally file for dissolution at any time—provided that it has no unpaid dues or unresolved legal issues. According to the Partnership Act, 2022 B.S., businesses can proceed with closure under specific circumstances:

• Upon expiration of a fixed-term business agreement

• After voluntary closure declared by the owner or partners

• Due to prolonged inactivity or operational halt

• Following bankruptcy or legal liquidation

• After a business merges into or is acquired by another entity

Before initiating this process, businesses must obtain a Tax Clearance Certificate (TCC) from the Inland Revenue Office. This confirms that the business has paid all taxes, including VAT and income tax. Moreover, businesses with pending court cases, unpaid debts, or compliance violations must resolve those issues before applying for dissolution.

Who Can File for Banijya Khareji?

Only individuals with legal authority can submit a commerce dissolution application. In the case of a sole proprietorship, the business owner is solely responsible for filing the application. Meanwhile, for partnerships or firms, any authorized signatory may apply on behalf of the entire entity.

Eligibility Criteria Include:

• The applicant must be listed as the proprietor or a partner on the registration certificate

• Valid citizenship or passport must be presented

• A Power of Attorney is required if a third party is applying

• A signed resolution from all partners is necessary in case of a firm

Foreign nationals who have registered businesses in Nepal can also file for dissolution. Nevertheless, they must comply with all tax obligations and typically need a local legal representative to act on their behalf.

Where Should You Submit the Application?

The application for Banijya Khareji must be submitted at the office where the business was initially registered. This could be the Department of Commerce, the District Administration Office, or even the Municipal Authority, depending on the scale and scope of the business.

Filing Authorities by Business Type:

• Local-Level Businesses: District Administration Office (DAO)

• National-Level Firms: Department of Commerce (DoC)

• Municipal Businesses: Metropolitan or Sub-Metropolitan City Offices

Additionally, the Inland Revenue Office (IRO) must be notified to deactivate the Permanent Account Number (PAN). Without PAN deactivation, the commerce dissolution process remains incomplete.

How to Dissolve a Registered Business in Nepal

The dissolution process involves a systematic application with supporting documents submitted to both the registering authority and the tax office. Follow these structured steps:

1. Collect and Fill the Dissolution Form from DAO or DoC

2. Visit the IRO to submit final tax returns and obtain tax clearance

3. Receive the Tax Clearance Certificate (TCC)

4. Prepare and Notarize All Required Documents

5. Submit Application Packet to the original registering office

6. Wait for Document Verification and Approval

7. Collect the Final Dissolution Letter from the authority

In addition to surrendering the registration certificate, businesses must also cancel their PAN and notify all relevant government departments. In some cases, especially for larger businesses, a public notice in a national daily may be required.

What Documents Do You Need?

When filing for Banijya Khareji, applicants must submit a comprehensive set of documents to prove legitimacy and compliance:

• Application form for dissolution

• Original commerce registration certificate

• Copy of PAN registration

• Tax Clearance Certificate from the IRO

• Citizenship of proprietor or partners

• Partnership deed or agreement

• Board resolution or partner agreement for closure

• Power of attorney (if applicable)

• Self-declaration of no liabilities

• Most recent renewal payment receipts

For foreign applicants, translated and notarized copies of passports and relevant documents are also required.

Costs and Government Fees

Dissolving a business in Nepal involves nominal costs, primarily for document processing and notarization. Here is a breakdown of expected expenses:

Note: All outstanding government dues, including penalties and unpaid taxes, must be cleared before final submission. The authorities will reject any incomplete applications.

Legal Prerequisites for Business Closure

Nepalese laws require businesses to meet specific legal obligations before proceeding with commerce dissolution:

• Settle all tax dues and obtain a Tax Clearance Certificate

• Deactivate PAN through the Inland Revenue Office

• Resolve contractual obligations with vendors and creditors

• Settle all employee dues and formally terminate staff (if applicable)

• Surrender all government-issued licenses and operational permits

Furthermore, if the business also falls under the Companies Act, 2063 or Industrial Enterprises Act, 2076, those respective laws must also be followed for complete legal closure.

Authorities Involved in the Process

The following authorities play key roles in the Banijya Khareji process:

• Department of Commerce (DoC) – Oversees national-level firms

• District Administration Office (DAO) – Handles local-level businesses

• Inland Revenue Office (IRO) – Issues tax clearance and PAN deactivation

• Municipality or Ward Office – Verifies closure of local business activity

Each office checks submitted documents, verifies pending issues, and grants final dissolution approval after full compliance.

Laws Governing Business Closure in Nepal

Commerce dissolution in Nepal follows a structured legal framework. The key laws and regulations include:

• Commerce Act, 2022 B.S.

• Income Tax Act, 2058 B.S.

• Company Act, 2063 B.S. (if applicable)

• Local Governance Operation Act, 2074 B.S.

• DoC and DAO Directives on Public Notices

These regulations ensure that businesses shut down responsibly and maintain transparency with the state and creditors.

Step-by-Step Summary of the Khareji Process

For your reference, here’s a step-by-step checklist:

1. Collect application form

2. Gather and notarize all documents

3. Visit Inland Revenue Office for tax clearance

4. Obtain the Tax Clearance Certificate

5. Submit documents to DAO or DoC

6. Wait for verification

7. Receive the official dissolution letter

8. Deactivate PAN and notify other authorities

Regular follow-ups will help prevent delays in the process.

Estimated Timeline

Typically, Banijya Khareji takes between 15 to 30 working days, depending on document accuracy and office responsiveness:

• Document Preparation: 3–5 days

• Tax Clearance Process: 7–10 days

• Verification and Approval: 5–15 days

Delays often result from missing documents or unpaid liabilities. Hence, early preparation and legal consultation are highly recommended.

Post-Dissolution Legal Obligations

Once the business is dissolved, owners must complete a few final steps:

• Submit PAN cancellation request

• Maintain business records for at least 5 years

• Notify all stakeholders (banks, vendors, clients)

• Archive official dissolution documents

Final Checklist:

✅ Tax Clearance Certificate obtained
✅ PAN deactivated
✅ No outstanding legal or financial liabilities
✅ Original registration certificate surrendered
✅ DAO/DoC final approval letter received

Common Challenges in the Process

Many businesses face hurdles while completing the dissolution process. These may include:

• Delays in tax clearance from IRO

• Incomplete or invalid documents

• Disputes over ownership or unresolved debts

• Procedural mistakes or outdated records

To avoid such issues, it’s best to consult a legal expert and ensure all paperwork is correct and current.

FAQs

What is Banijya Khareji?
Banijya Khareji is the legal termination of a registered business in Nepal. It involves tax clearance, PAN deactivation, and official surrender of the registration certificate.

Where should I apply for closure?
Submit your application at the same office where you initially registered—either DAO or DoC—and notify the Inland Revenue Office as well.

How much does it cost?
The total cost ranges from NPR 1,000 to NPR 3,000, including notary fees, application processing, and newspaper publication if required.

How long does the process take?
The average duration is 15 to 30 working days, depending on document completeness and tax clearance speed.

Which documents are needed?
You’ll need your original registration certificate, PAN, tax clearance, citizenship, and any partnership agreements or dissolution resolutions.

Who approves the application?
Either DAO or DoC approves it after verifying all submitted documents and receiving the TCC from IRO.

Can I proceed without tax clearance?
No. The Inland Revenue Office must first issue a Tax Clearance Certificate. Without it, your application will be rejected.

Why is legal closure important?
It helps avoid future penalties, tax liabilities, and ensures the business is not listed as active in government records.

Do I need to renew post-closure?
No. Once the closure is officially approved, there are no further renewal requirements.

Can foreigners close their Nepal-based business?
Yes. Foreigners can dissolve their businesses by fulfilling all requirements and working through a local legal representative.