What Taxes Must a Company File in Nepal?
Every registered company in Nepal has multiple tax obligations. The three main ones are Income Tax, Value Added Tax (VAT), and Tax Deducted at Source (TDS). Missing any of these can result in penalties, interest charges, and even legal action from the Inland Revenue Department (IRD).
| Tax Type | Governing Law | Filing Frequency |
|---|---|---|
| Income Tax | Income Tax Act, 2058 (2002) | Annual (with quarterly advance payments) |
| VAT | VAT Act, 2052 (1996) | Monthly |
| TDS | Income Tax Act, 2058 — Section 88 | Monthly |
Corporate Tax Rates by Company Type
Nepal’s corporate tax rate depends on the nature of your business. The standard rate is 25%, but certain sectors pay more or less:
| Company Type | Tax Rate |
|---|---|
| Most Pvt. Ltd. / Public Ltd. companies | 25% |
| Banks, finance companies, general insurance | 30% |
| Petroleum, tobacco, alcohol companies | 30% |
| Special/IT industries, power generation | 20% |
| Infrastructure (roads, bridges, tunnels) | 20% |
| Sole proprietorship | Progressive rates (1%–36%) |
Key Point: These rates are set by the annual Finance Act. Always check the Finance Act for the current fiscal year (e.g., FY 2082/83) as rates and thresholds can change.
The Tax Filing Process: Step by Step
Step 1: Get Your PAN and VAT Registration
Before you can file anything, your company must have a Permanent Account Number (PAN) from the IRD. If your annual turnover exceeds NPR 50,00,000, VAT registration is mandatory. Some sectors (electronics, hardware, catering, liquor, health clubs) require VAT regardless of turnover.
Step 2: Maintain Books of Accounts
Throughout the fiscal year (Shrawan 1 to Ashad end — mid-July to mid-July), maintain proper financial records:
- Sales and purchase ledgers
- VAT invoices (issued and received)
- Bank statements and cash records
- Payroll records with TDS deductions
- Asset registers with depreciation schedules
- Expense receipts and supporting documents
Step 3: File Monthly VAT Returns
If your company is VAT-registered, you must file a VAT return every month within 25 days of the Nepali month-end. This is done through the IRD Taxpayer Portal. The return declares your sales (output VAT) and purchases (input VAT), and you pay or claim the difference.
Step 4: Deposit TDS Monthly
When your company makes certain payments, you must deduct tax at source and deposit it with the IRD within 25 days of the Nepali month-end. Key TDS rates:
| Payment Type | TDS Rate |
|---|---|
| Rent (to individuals) | 10% |
| Rent (to companies) | 15% |
| Professional/service fees | 15% |
| Contract/supply payments (above NPR 50,000) | 1.5% |
| Interest, commission, royalty | 15% |
| Dividends | 5% |
| Salary | Progressive rates based on estimated annual income |
Important: TDS returns must now be filed electronically through the ETDS system on the IRD portal. Manual TDS submissions are no longer accepted.
Step 5: Pay Advance Tax in Installments
Companies must pay estimated income tax in three installments during the fiscal year:
| Installment | Cumulative Amount | Deadline |
|---|---|---|
| 1st Installment | 40% of estimated tax | End of Poush (~mid-January) |
| 2nd Installment | 70% of estimated tax | End of Chaitra (~mid-April) |
| 3rd Installment | 100% of estimated tax | End of Ashad (~mid-July) |
If your total estimated tax for the year is less than NPR 7,500, you are exempt from advance tax payments.
Step 6: Get Your Accounts Audited
All registered companies (Pvt. Ltd. and Public Ltd.) must get their financial statements audited by a registered auditor (CA or RA) every year, regardless of turnover. The auditor prepares:
- Audited Balance Sheet
- Profit & Loss Statement
- Cash Flow Statement
- Tax Audit Report
Step 7: File the Final Income Tax Return
Submit your annual income tax return within 3 months of the fiscal year-end (i.e., by end of Ashwin / ~mid-October). The return must be accompanied by your audited financial statements and tax audit report.
You can request an extension of up to 3 additional months for filing the return, but this does not extend the tax payment deadline — interest accrues on any unpaid amount regardless.
Step 8: File Annual Return with OCR
In addition to tax returns with IRD, companies must also file an annual return with the Office of Company Registrar (OCR) along with audited financial statements within 6 months of the fiscal year-end.
Key Deadlines at a Glance
Nepal’s fiscal year runs from Shrawan 1 to Ashad end (mid-July to mid-July). Here are all the critical dates:
| Obligation | Deadline |
|---|---|
| Monthly VAT return | 25th of following Nepali month |
| Monthly TDS deposit (ETDS) | 25th of following Nepali month |
| Advance tax — 1st installment (40%) | End of Poush (~mid-January) |
| Advance tax — 2nd installment (70%) | End of Chaitra (~mid-April) |
| Advance tax — 3rd installment (100%) | End of Ashad (~mid-July) |
| Final income tax return | Within 3 months of FY-end (~mid-October) |
| Annual return to OCR | Within 6 months of FY-end (~mid-January) |
How to File Online: IRD Taxpayer Portal
The IRD has made e-filing the standard method for all tax returns. Here’s how to use the portal:
- Register on the portal — visit the IRD Taxpayer Portal and create your login using your PAN/VAT number
- Log in and select the return type — choose from VAT return, ETDS, or income tax return
- Fill in the form — the portal provides auto-calculation and form validation to reduce errors
- Upload supporting documents — attach audited statements and tax audit report (for annual returns)
- Submit and pay — make payment via bank transfer or online payment gateways
- Download acknowledgment — save the receipt for your records
Tip: Physical filing at the local Inland Revenue Office (IRO) is still available for exceptional cases, but e-filing is faster, gives instant acknowledgment, and is increasingly being mandated by the IRD.
Required Documents for Tax Filing
Gather these before you start the filing process:
- Audited financial statements (Balance Sheet, P&L, Cash Flow)
- Tax audit report from a registered auditor
- PAN/VAT registration certificate
- Bank statements for the fiscal year
- TDS certificates (for taxes deducted at source on your income)
- VAT return summaries (if VAT-registered)
- Income records and expense receipts
- Asset and depreciation schedules
- Previous year’s tax clearance certificate
- Partner/shareholder details and profit-sharing ratios
Penalties for Late Filing and Non-Compliance
The IRD takes non-compliance seriously. Here are the penalties you risk:
| Violation | Penalty |
|---|---|
| Late income tax return | 0.1% of assessable income per month or NPR 100/month (whichever is higher) |
| Late VAT return | 0.05% per day or NPR 1,000 per tax period (whichever is higher) |
| Late payment of tax | 15% per annum interest on unpaid amount |
| Understatement of income | 100% of the tax on understated amount |
| Failure to maintain records | Up to NPR 1,000 per instance |
| Non-submission of tax audit report | NPR 1,000 per month of delay |
| Failure to deduct/deposit TDS | Equal to the amount that should have been deducted, plus interest |
Warning: Understatement of income carries a 100% penalty on the tax amount. Always declare your income accurately. The Revenue Leakage (Investigation and Control) Act, 2052 gives the IRD additional powers to investigate and penalize tax evasion.
Tax Requirements by Company Type
| Company Type | Tax Rate | Audit Required? | Special Notes |
|---|---|---|---|
| Pvt. Ltd. | 25% | Always | Must file with both IRD and OCR |
| Public Ltd. | 25% | Always | Additional disclosure requirements |
| Partnership Firm | 25% | If turnover > NPR 50 lakh | Partners taxed on profit share |
| Sole Proprietorship | 1%–36% | If turnover > NPR 50 lakh | Uses individual progressive rates |
| Banks / Finance | 30% | Always (NRB regulated) | Additional NRB reporting obligations |
| IT / Manufacturing | 20% | Always | Reduced rate as government incentive |
The Role of PAN and VAT Registration
PAN (Permanent Account Number)
Every business must have a PAN. It is your unique taxpayer identifier across all tax filings. You need it to open bank accounts, register with government agencies, issue invoices, and file any tax return. Apply at the IRD — processing takes 1–3 working days.
VAT Registration
VAT registration becomes mandatory when your annual turnover exceeds NPR 50,00,000. Once registered, you must:
- Charge 13% VAT on all taxable sales
- Issue proper VAT invoices for every transaction
- File monthly VAT returns within 25 days
- Maintain purchase and sales books
- Display your VAT registration certificate at your business premises
Voluntary VAT registration is allowed even below the threshold — useful if most of your clients are VAT-registered businesses, as it allows them to claim input tax credit on your invoices.
Quick Compliance Checklist
Monthly Tasks
- File VAT return by the 25th of following Nepali month
- File ETDS return and deposit TDS by the 25th
- Reconcile bank statements and update books
- Issue and collect proper VAT invoices
Quarterly Tasks (Advance Tax)
- Pay 40% estimated tax by end of Poush (~mid-January)
- Pay 70% cumulative by end of Chaitra (~mid-April)
- Pay 100% by end of Ashad (~mid-July)
- Review and revise tax estimates if business performance changes
Annual Tasks (After Fiscal Year-End)
- Get financial statements audited by a registered CA/RA
- File final income tax return within 3 months of FY-end
- File annual return with OCR within 6 months of FY-end
- Obtain tax clearance certificate from IRD
- Renew business licenses and Ward Office registration
Need Help With Tax Filing?
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