Introduction to Tax Registration for Companies
Tax registration represents the foundational compliance requirement for newly incorporated companies in Nepal. The tax system requires companies to register with the Inland Revenue Department before commencing business operations, ensuring proper identification and tracking of taxpayers throughout their operational lifecycle. Companies must obtain multiple tax registrations depending on their business activities, turnover projections, and statutory obligations under various tax laws.
The Income Tax Act, 2058 (2002) and the Value Added Tax Act, 2052 (1996) form the primary legal frameworks governing company tax registration in Nepal. These laws mandate registration procedures, specify documentation requirements, and establish timelines for compliance. The Inland Revenue Department, operating under the Ministry of Finance, administers tax registration processes through its network of offices across the country. Understanding registration requirements helps new companies establish proper tax compliance frameworks from the beginning of their operations.
Companies incorporated under the Companies Act, 2063 (2006) must complete tax registration as part of their operational setup procedures. The Office of the Company Registrar issues incorporation certificates to newly formed companies, which then serve as primary documents for tax registration applications. Foreign companies establishing branch offices or subsidiary operations in Nepal face similar tax registration obligations, with additional documentation reflecting their cross-border corporate structures. Medha Law and Partners Is a leading law firm in Nepal.
Legal Framework for Company Tax Registration
Income Tax Act 2058 (2002)
The Income Tax Act, 2058 establishes comprehensive provisions for taxation of companies operating in Nepal. Section 2 defines a company as a body corporate formed and registered under prevailing Nepalese laws or incorporated outside Nepal. The Act treats companies as separate legal entities subject to income taxation on their worldwide income if resident in Nepal, or Nepal-sourced income if non-resident. Section 4 creates the charge to income tax on company income for each fiscal year.
Section 90 of the Income Tax Act empowers the Inland Revenue Department to assign Permanent Account Numbers to taxpayers, including companies. This provision forms the legal basis for PAN registration requirements applicable to all companies. The section mandates that every person liable to pay income tax must obtain PAN and use it for all tax-related transactions and communications. Companies must quote their PAN on tax returns, payment challans, correspondence with tax authorities, and various business documents.
Section 88 requires employers, including companies, to withhold tax at source from payments made to employees, contractors, and service providers. This withholding obligation necessitates Tax Deduction at Source registration for companies making specified payments exceeding threshold amounts. The withholding tax mechanism ensures tax collection at payment points, reducing evasion risks and providing advance revenue to the government. Companies acting as withholding agents bear legal responsibility for proper tax deduction, timely remittance, and accurate reporting.
Value Added Tax Act 2052 (1996)
The Value Added Tax Act, 2052 governs indirect taxation of goods and services supplied in Nepal. Section 7 establishes mandatory VAT registration requirements for persons whose annual turnover of taxable supplies exceeds NPR 5,000,000. Companies planning operations likely to generate turnover above this threshold must obtain VAT registration before commencing business activities. Section 8 permits voluntary VAT registration for companies with lower turnover projections, allowing them to charge VAT on supplies and claim input tax credits on purchases.
The VAT Act treats companies as taxable persons subject to VAT obligations when making supplies of goods or services in Nepal. Section 3 creates the charge to VAT at 13% on the value of taxable supplies, calculated on consideration received from customers. Companies must collect VAT from customers on their supplies, issue proper tax invoices, maintain prescribed records, file monthly VAT returns, and remit net tax liability to government accounts. These obligations commence from the effective VAT registration date assigned by the Inland Revenue Department.
Companies Act 2063 (2006)
The Companies Act, 2063 provides the legal framework for company formation, registration, and operation in Nepal. Section 3 permits incorporation of private companies, public companies, and subsidiary companies upon satisfaction of prescribed requirements. The Office of the Company Registrar issues certificates of incorporation evidencing legal existence of companies as separate entities. This incorporation certificate serves as the primary document proving company formation and legal status for tax registration purposes.
Section 12 of the Companies Act requires companies to maintain registered offices within Nepal for receiving official communications and maintaining statutory records. The registered office address appears on incorporation certificates and must be provided in tax registration applications. Changes in registered office locations require notification to both the Company Registrar and tax authorities to ensure proper correspondence and jurisdiction determination for tax administration purposes. Medha Law and Partners Is a leading corporate law firm in Nepal.
Permanent Account Number Registration for Companies
PAN Registration Requirements
All companies incorporated in Nepal must obtain Permanent Account Numbers from the Inland Revenue Department before commencing business operations. Section 90 of the Income Tax Act mandates PAN registration for every person liable to pay income tax, encompassing all companies regardless of profitability expectations. Rule 3 of the Income Tax Rules, 2059 specifies detailed registration procedures, documentation requirements, and application formats for obtaining PAN.
Companies must apply for PAN registration within specified timeframes after receiving incorporation certificates from the Company Registrar. The registration process involves submission of prescribed application forms along with supporting documents proving company formation and shareholder details. The Inland Revenue Department verifies submitted information, conducts necessary checks, and issues PAN certificates containing unique nine-digit identification numbers assigned to registered companies.
Documents Required for Company PAN Registration
Tax authorities require comprehensive documentation supporting company PAN registration applications. The document checklist ensures proper verification of company identity, ownership structure, and operational details. Companies must gather and organize required documents before visiting revenue offices or accessing online registration portals.
Mandatory Documents for Company PAN Registration:
- Certificate of incorporation from Office of Company Registrar
- Memorandum of Association and Articles of Association
- Board resolution authorizing PAN registration application
- Citizenship certificates of all directors and shareholders
- Photographs of directors and authorized signatories
- Proof of registered office address (rental agreement or ownership documents)
- Tax clearance certificates of directors if previously registered
- Partnership deed if applicable for partnership firms
- Company seal impression
- Bank account opening recommendation letter
Foreign companies establishing operations in Nepal must provide additional documentation including parent company incorporation certificates, board resolutions approving Nepal operations, work permits for foreign directors or employees, and translated versions of foreign-language documents certified by authorized translators. Branch office registrations require prior approval from the Department of Industry and submission of approval letters with tax registration applications.
PAN Registration Application Process
Companies initiate PAN registration by completing prescribed application forms available from Inland Revenue Offices or downloadable from the IRD website. The application form captures company details including legal name, incorporation date, registered address, business activities, authorized capital, paid-up capital, director information, and shareholder composition. Companies must provide accurate information matching incorporation documents to prevent registration delays or rejections.
PAN Registration Process Steps:
- Obtain company incorporation certificate from Company Registrar
- Gather all required supporting documents
- Complete PAN registration application form
- Visit the jurisdictional Inland Revenue Office
- Submit application with attached documents
- Revenue officers verify submitted information
- Physical inspection of registered office if required
- Approval of registration application
- Issuance of PAN certificate
- Receipt of PAN number for tax compliance
The jurisdictional Inland Revenue Office for company PAN registration depends on the location of the registered office. Companies must apply at revenue offices serving their registered address areas. The revenue officers examine submitted applications for completeness, verify incorporation details with the Company Registrar database, and may conduct physical inspections of registered offices to confirm actual business presence.
Online PAN Registration for Companies
The Inland Revenue Department provides online PAN registration facilities through its electronic portal, enabling companies to complete registration procedures remotely. The online system streamlines the registration process, reduces processing times, and eliminates physical visits to revenue offices. Company representatives access the portal using authorized credentials and complete registration applications through guided online interfaces.
The online registration system requires uploading scanned copies of all required documents in specified formats and file sizes. The portal validates entered information against existing databases and performs automated checks for duplicate registrations or inconsistent data. Upon successful submission, the system generates application reference numbers for tracking registration status. Companies receive electronic PAN certificates after approval, downloadable from the portal for printing and official use.
PAN Certificate Issuance and Usage
Successful completion of registration procedures results in PAN certificate issuance containing the company’s unique nine-digit identification number. The certificate displays company name, registered address, PAN number, registration date, and jurisdiction revenue office details. Companies must maintain PAN certificates at their registered offices and produce them during official inspections or audit proceedings.
The company PAN number must appear on all official documents including letterheads, invoices, contracts, bank account opening applications, VAT registration forms, and correspondence with government agencies. Banks require PAN certificates before opening company accounts, making registration an essential prerequisite for financial operations. The PAN system enables revenue authorities to track company transactions, monitor tax compliance, and maintain comprehensive taxpayer databases supporting efficient tax administration.
Value Added Tax Registration for Companies
VAT Registration Threshold and Requirements
Companies must register for Value Added Tax when their annual turnover of taxable supplies exceeds NPR 5,000,000 as prescribed in Section 7 of the VAT Act. Turnover calculation includes the value of all taxable goods and services sold during the preceding twelve months or projected sales for the upcoming year. Companies approaching or exceeding this threshold must initiate VAT registration procedures within thirty days to ensure compliance with mandatory registration requirements.
Certain company categories face mandatory VAT registration regardless of turnover levels. Manufacturing companies producing goods for commercial sale require VAT registration before commencing production activities. Companies importing goods for resale or business use must obtain VAT registration for customs clearance purposes. Contractors executing government projects or foreign-aided initiatives face compulsory VAT registration before contract awards. These category-based mandates ensure comprehensive VAT coverage across significant economic sectors.
Voluntary VAT Registration for Companies
Section 8 of the VAT Act permits companies with turnover below the mandatory threshold to voluntarily register for VAT. Voluntary registration provides strategic advantages including ability to charge VAT on supplies, claim input tax credits on purchases, and enhance business credibility with customers preferring VAT-compliant suppliers. Companies supplying to other VAT-registered businesses often choose voluntary registration to maintain competitive positions and facilitate customer compliance.
The voluntary registration decision requires evaluation of compliance costs against potential benefits. VAT-registered companies must maintain detailed transaction records, issue proper tax invoices, file monthly returns, and undergo periodic audits. These administrative requirements demand investment in accounting systems, staff training, and compliance management. However, companies anticipating growth or targeting corporate clientele generally benefit from early VAT registration despite additional compliance burdens.
Documents Required for Company VAT Registration
VAT registration applications require submission of company formation documents, tax registration certificates, and business operation proofs. The document requirements ensure proper verification of company identity, business activities, and operational readiness. Companies must compile complete documentation sets before submitting VAT registration applications to prevent processing delays.
Required Documents for Company VAT Registration:
- Company PAN registration certificate
- Certificate of incorporation
- Memorandum and Articles of Association
- Board resolution authorizing VAT registration
- Citizenship certificates of directors
- Proof of registered office and business premises
- Rental agreement or property ownership documents for business location
- Bank account details and verification letter
- Business license from local municipality
- Previous year’s financial statements if available
- Photographs of business premises showing signboards
- Import/export licenses if applicable
Manufacturing companies must provide additional documentation including factory location details, production capacity information, raw material sourcing plans, and environmental clearance certificates. Trading companies submit inventory lists, supplier agreements, and projected sales figures. Service companies provide service descriptions, pricing structures, and client contracts demonstrating business viability and turnover projections.
VAT Registration Application Procedures
Companies initiate VAT registration by submitting prescribed application forms to Inland Revenue Offices having jurisdiction over their business locations. Form 1 prescribed in the VAT Rules serves as the standard registration application format. The form captures company identification details, business activity descriptions, estimated annual turnover, registered office and business premises addresses, director information, and bank account particulars.
VAT Registration Process Steps:
- Complete VAT registration application form
- Gather all required supporting documents
- Submit application at jurisdictional revenue office
- Revenue officers verify submitted information
- Physical inspection of business premises
- Verification of business readiness for operations
- Processing of registration application
- Approval by authorized revenue officer
- Issuance of VAT registration certificate
- Receipt of unique VAT registration number
Revenue officers conduct physical inspections of declared business premises before approving VAT registrations. These inspections verify actual business presence, assess operational readiness, and confirm that companies possess capacity to maintain required records and comply with VAT obligations. The inspection reports form part of registration approval documentation, supporting decisions to grant or deny registration applications.
VAT Certificate and Compliance Obligations
Approved VAT registration results in certificate issuance containing the company’s unique VAT registration number. The certificate displays company name, business address, VAT number, registration date, and jurisdiction revenue office. Companies must display VAT certificates prominently at their business premises where customers can easily view them. The certificate proves registration status when dealing with suppliers, customers, and government agencies.
VAT registration triggers multiple ongoing compliance obligations including monthly return filing, tax payment, invoice issuance, and record maintenance. Section 23 of the VAT Act requires registered companies to file monthly returns by the 25th day of the following month, reporting sales, purchases, output tax, input tax credits, and net tax liability. Section 25 mandates issuance of proper tax invoices for all supplies made to customers, containing prescribed information enabling buyers to claim input tax credits.
Tax Deducted at Source Registration
TDS Registration Requirements
Section 88 of the Income Tax Act requires companies making specified payments to withhold income tax at source and remit it to government accounts. This withholding obligation applies to payments for employee salaries, contractor fees, professional services, rent, interest, dividends, and various other income categories. Companies making such payments must register as Tax Deduction at Source entities with the Inland Revenue Department before beginning withholding operations.
TDS registration becomes mandatory when companies reach specified payment thresholds or employ workers subject to tax withholding. Companies hiring employees receiving salaries above tax exemption limits must register for TDS before processing first payrolls. Businesses engaging contractors or professionals for projects exceeding threshold amounts require TDS registration before making payments. The registration ensures proper tracking of withholding agents and facilitates compliance monitoring by revenue authorities.
TDS Registration Process
Companies obtain TDS registration through applications submitted to Inland Revenue Offices along with supporting documents proving company formation and operational status. The application process resembles PAN registration procedures but focuses specifically on withholding obligations rather than general tax liability. Companies must complete prescribed TDS registration forms providing details about anticipated payment types, estimated payment volumes, and payee categories.
Documents for TDS Registration:
- Company PAN certificate
- Certificate of incorporation
- Board resolution authorizing TDS registration
- List of employees with anticipated salary levels
- Contracts with service providers requiring withholding
- Estimated annual payment volumes by category
- Bank account details for TDS remittance
- Previous TDS returns if company operated elsewhere
Revenue officers review TDS registration applications, verify company PAN status, and assess withholding obligation scope based on declared payment projections. Approved registrations result in TDS registration number issuance, which companies must use when filing monthly withholding returns and remitting deducted taxes. The registration creates records in tax authority databases, enabling monitoring of withholding compliance and matching of deducted taxes with recipient tax returns.
TDS Compliance Obligations
TDS-registered companies must withhold appropriate tax rates from specified payments, remit deducted amounts to government accounts within prescribed timeframes, and file monthly returns reporting withholding activities. Section 89 specifies withholding rates for various payment categories ranging from 1.5% to 15% depending on payment types and recipient characteristics. Companies must apply correct rates based on payment classifications and recipient status as resident or non-resident.
Monthly TDS Compliance Requirements:
- Calculate withholding amounts on payments made
- Deduct appropriate tax rates from gross payments
- Remit withheld taxes by the 25th of following month
- Issue withholding certificates to payees
- File monthly TDS returns reporting all withholding transactions
- Maintain detailed records of payments and withholdings
- Reconcile withholding records with accounting books
- Respond to revenue authority inquiries regarding withholding
Companies must issue Tax Deducted at Source certificates to payees documenting withheld amounts for their tax return purposes. These certificates contain payer details, payee identification, payment amount, applicable withholding rate, and tax deducted amount. Recipients use TDS certificates to claim credit for withheld taxes in their annual income tax returns, ensuring that withholdings count as advance tax payments rather than additional tax burdens.
Special Tax Registrations for Companies
Excise Duty Registration
Companies manufacturing or importing excisable goods must register for excise duty with the Inland Revenue Department. The Excise Act, 2058 and Excise Rules, 2059 govern excise taxation of specified products including alcoholic beverages, tobacco products, and luxury goods. Manufacturers must obtain excise licenses before commencing production of excisable items, with license applications accompanied by facility inspections and capacity assessments.
The excise registration process requires detailed information about manufacturing facilities, production processes, raw material sources, and expected output volumes. Companies must establish bonded warehouses for storing excisable goods before tax payment and implement monitoring systems enabling revenue authorities to track production and removals. Excise compliance involves maintaining production registers, filing periodic returns, and paying excise duty before removing goods from manufacturing premises for sale.
Customs Registration for Importers
Companies engaging in import or export activities must register with the Department of Customs for trade facilitation and tax compliance purposes. Customs registration enables companies to clear imported goods, pay applicable customs duties and VAT, and utilize various customs procedures including temporary admissions and duty drawbacks. The registration process involves submission of company documents, nomination of customs agents, and provision of bank guarantees securing potential duty liabilities.
Importers receive Importer Exporter Codes from the Department of Customs, which they must quote on all customs declarations and import documents. The registration creates customs database records linking import transactions to registered companies, enabling trade monitoring and revenue collection. Companies must maintain customs compliance including proper valuation of imports, correct tariff classifications, and timely payment of duties and taxes at border points.
Social Security Fund Registration
The Social Security Act, 2074 (2017) requires companies employing workers to register with the Social Security Fund and contribute to employee social protection schemes. Companies with employees must obtain social security registration before beginning contribution obligations. The registration process involves submission of company documents, employee lists, and anticipated payroll details to Social Security Fund offices.
Social security registration triggers monthly contribution obligations calculated as percentages of employee salaries. Employers and employees both contribute to the fund, with companies responsible for deducting employee shares from salaries and remitting combined amounts to fund accounts. The contributions finance benefits including medical treatment, maternity leave, workplace injury compensation, and retirement pensions for covered employees.
Municipality Business License
Companies must obtain business operation licenses from local municipalities where they maintain offices or conduct operations. Municipal authorities issue these licenses after verifying company registrations, assessing business activities, and collecting applicable fees. The licenses authorize companies to operate businesses within municipal jurisdictions and serve as prerequisites for various other registrations including VAT and excise licenses.
Municipal license applications require submission of company incorporation certificates, PAN certificates, rental agreements or property ownership documents for business premises, and environmental clearances if applicable. Municipality officials inspect business premises before issuing licenses, ensuring compliance with zoning regulations and building codes. Companies must renew municipal licenses annually by paying prescribed fees and confirming continued operation at licensed locations.
Post-Registration Compliance Requirements
Record Keeping Obligations
Tax-registered companies must maintain comprehensive books of accounts recording all business transactions throughout fiscal years. Section 113 of the Income Tax Act requires taxpayers to preserve accounting records, supporting vouchers, and tax documents for six years from the end of fiscal years to which they relate. The records must remain available for inspection by revenue authorities during audits, investigations, or assessment proceedings.
Required Accounting Records:
- Cash books recording daily cash transactions
- Bank books tracking all banking transactions
- Sales registers documenting sales invoices
- Purchase registers recording supplier invoices
- Fixed asset registers with depreciation schedules
- Stock registers tracking inventory movements
- General ledgers for all accounting heads
- Trial balances and financial statements
- Tax computation worksheets
- Correspondence with tax authorities
Companies must maintain records in Nepali or English languages, using Arabic numerals for financial figures. Manual records require ink entries in bound books without erasures or alterations. Computerized accounting systems must maintain audit trails showing all data entries, modifications, and deletions. Regular data backups protect against loss from system failures or disasters.
Annual Tax Return Filing
Companies must file annual income tax returns with the Inland Revenue Department within specified deadlines after fiscal year ends. Section 91 of the Income Tax Act mandates return filing by Poush end (mid-January) of the fiscal year following the income year. Companies must complete prescribed return forms, attach audited financial statements, and submit comprehensive documentation supporting declared income and tax calculations.
The annual return requires disclosure of all income sources including business profits, investment returns, and other receipts. Companies must calculate taxable income by adjusting accounting profits for tax-specific provisions including depreciation rates, expense disallowances, and timing differences. The calculated tax liability appears in returns along with advance tax payments and withholding tax credits. Companies pay remaining tax liability before filing returns or claim refunds of excess payments.
Audit Requirements
Section 112 of the Income Tax Act mandates annual audits of company financial statements by chartered accountants. All companies regardless of size or turnover must obtain audit reports before filing income tax returns. The audit examines financial statements, verifies accounting records, assesses internal controls, and issues opinions on statement accuracy and compliance with accounting standards and tax laws.
Chartered accountants conducting tax audits must possess practicing certificates from the Institute of Chartered Accountants of Nepal. The audit reports accompany annual tax returns, providing independent verification of declared income and tax calculations. Revenue authorities rely on audit reports during return processing and may accept returns without detailed scrutiny when audit opinions confirm compliance with tax requirements.
Ongoing Compliance Monitoring
Tax-registered companies face ongoing monitoring by revenue authorities through various mechanisms including return analysis, audit programs, and third-party information matching. The Inland Revenue Department operates risk-based compliance programs identifying high-risk taxpayers for detailed examinations. Companies showing unusual patterns, inconsistent reporting, or significant tax refund claims undergo enhanced scrutiny through audits or investigations.
Revenue authorities conduct field visits to business premises, interview company personnel, examine records, and verify operational details during compliance checks. Companies must cooperate with these activities by providing requested information, allowing access to premises and records, and responding to inquiries promptly. Obstruction of compliance monitoring activities constitutes violations attracting penalties and potential prosecution under tax laws.
Common Challenges and Solutions
Registration Processing Delays
Companies often experience delays in tax registration processing due to incomplete documentation, errors in application forms, or revenue office workload constraints. These delays postpone business commencement and create operational difficulties. Companies can minimize delays by ensuring complete and accurate applications, providing all required documents, and following up regularly with revenue offices regarding application status.
Engaging professional tax consultants or chartered accountants familiar with registration procedures helps companies navigate requirements efficiently. Professionals assist with document preparation, form completion, liaison with revenue authorities, and resolution of issues arising during processing. The investment in professional assistance often pays dividends through faster registration completion and reduced compliance errors.
Understanding Tax Obligations
New companies frequently struggle to understand complex tax obligations spanning multiple registration types, return filing requirements, and payment deadlines. The intricacy of tax laws creates confusion and compliance risks for businesses lacking tax expertise. Companies should invest in tax training for accounting staff, establish compliance calendars tracking deadlines, and implement systematic procedures for meeting obligations.
Regular consultation with tax professionals helps companies stay informed about regulatory changes, interpret tax provisions correctly, and optimize tax positions within legal boundaries. Professional advisors review company transactions, identify tax implications, recommend compliance improvements, and represent companies during interactions with revenue authorities. This ongoing professional support reduces compliance risks and enables management focus on core business activities.
Documentation Management
Maintaining comprehensive documentation meeting tax authority requirements challenges many companies, particularly smaller entities lacking sophisticated accounting systems. Poor record-keeping leads to compliance difficulties, audit problems, and potential penalties. Companies must establish robust document management systems from their inception, ensuring systematic filing, preservation, and retrieval of tax-relevant records.
Digital documentation systems offer advantages over paper-based approaches including space efficiency, backup capabilities, and quick retrieval during audits or return preparation. Companies should invest in appropriate accounting software, document scanning equipment, and cloud storage systems supporting comprehensive record maintenance. Regular staff training on documentation requirements ensures consistent application of record-keeping standards throughout organizations.
Conclusion
Tax registration represents a foundational compliance requirement for companies commencing operations in Nepal. The multi-faceted registration process encompasses PAN registration, VAT registration, TDS registration, and various special-purpose registrations depending on business activities. Companies must understand legal requirements under the Income Tax Act, VAT Act, and related legislation to ensure timely and accurate completion of registration procedures.
Successful tax registration requires careful preparation of documentation, accurate completion of application forms, and effective liaison with revenue authorities. Companies benefit from engaging professional advisors familiar with registration procedures and tax compliance requirements. Early establishment of robust compliance systems including proper accounting, documentation, and internal controls positions companies for ongoing tax compliance success throughout their operational lifecycles.