Last Updated: May 12, 2026 · Source: Nepal Inland Revenue Department (IRD) and VAT Act 2052 (1995) as amended by Finance Act 2081
TL;DR: Nepal levies VAT (Value Added Tax) at a flat rate of 13% on almost all goods and services. This rate has been unchanged since VAT was introduced on November 16, 1997. VAT registration is mandatory for businesses with annual turnover above NPR 50 lakh (NPR 5,000,000) for goods businesses, or NPR 30 lakh (NPR 3,000,000) for service businesses. Businesses must register within 30 days of crossing the threshold. VAT returns must be filed monthly by the 25th of each Nepali month. The Finance Act 2081 (2024) extended VAT obligations to foreign digital service providers under the Digital Services Tax Act 2024, requiring them to register for VAT once sales to Nepali customers exceed NPR 30 lakh annually.
VAT in Nepal is the single largest source of indirect tax revenue for the government. Every business selling taxable goods or services above the registration threshold must charge 13% VAT, file monthly returns, and issue invoices in the prescribed format. This guide explains the Nepal VAT rate, registration thresholds, who must register, how to calculate and file VAT, exempt goods and services, and the recent 2024 changes that affect foreign digital businesses. For businesses operating internationally with Nepal as a base, understanding VAT is also relevant to anyone using the Nepal Digital Nomad Visa to establish long-term operations here.
What is the VAT rate in Nepal?
Nepal applies a single, flat VAT rate of 13% on all standard taxable goods and services. This rate has been in place since VAT was introduced on November 16, 1997 (replacing the previous sales tax, entertainment tax, contract tax, and hotel tax). The Finance Act 2081, the most recent amendment via the annual budget, did not change the 13% rate. It continues to apply for FY 2082/83 (2026). The 13% is calculated on the net selling price (excluding VAT) and added to the customer’s invoice. The final consumer bears the full VAT burden; businesses only collect it on behalf of the government.
Who must register for VAT in Nepal?
VAT registration becomes mandatory when your annual business turnover crosses the thresholds set by Section 10(1) of the VAT Act. You must register within 30 days of crossing the threshold.
| Business type | Annual turnover threshold | Approx. in USD | Registration deadline |
|---|---|---|---|
| Goods (trading) businesses | NPR 50 lakh (NPR 5,000,000) | ~USD 37,000 | Within 30 days of crossing |
| Service businesses | NPR 30 lakh (NPR 3,000,000) | ~USD 22,000 | Within 30 days of crossing |
| Mixed (goods and services) | NPR 30 lakh (NPR 3,000,000) | ~USD 22,000 | Within 30 days of crossing |
| Foreign digital service providers | NPR 30 lakh (NPR 3,000,000) in Nepal sales | ~USD 22,000 | Within 30 days of crossing |
Certain businesses must register for VAT regardless of turnover. These include importers of taxable goods, exporters, and businesses specified by the IRD. Businesses below the mandatory threshold may voluntarily register for VAT under Section 10(2) of the Act, which allows them to claim input tax credits on purchases.
What goods and services are exempt from VAT in Nepal?
Schedule 1 of the VAT Act lists goods and services that are completely exempt from VAT. Key exempt categories include basic food items (rice, wheat, dal, vegetables, fruit), agricultural produce and seeds, healthcare services and medicines, educational services, financial services, religious and social services, and books and periodicals. The exempt list is updated periodically through annual Finance Acts. Businesses dealing exclusively in exempt goods or services do not need to register for VAT, but they also cannot claim input tax credits on their purchases.
How is VAT calculated in Nepal?
VAT is calculated on the net selling price (the price before VAT). Here is a worked example. If you sell a product for NPR 90,000 before VAT:
| Item | Amount (NPR) |
|---|---|
| Net selling price (taxable value) | 90,000 |
| VAT at 13% | 11,700 |
| Total invoice amount | 1,01,700 |
The 13% is applied only to the taxable value, not on top of another tax. VAT-registered businesses collect VAT from their customers (output VAT) and pay VAT to their suppliers (input VAT). The business remits only the difference to the IRD: Output VAT minus Input VAT equals VAT payable. If input VAT exceeds output VAT in a month (for example, if you exported goods at zero rate), you can claim a refund from the IRD.
What is the Nepal VAT invoice format?
A valid Nepali VAT invoice (called “Tax Invoice” or “कर बीजक”) must include specific information as prescribed under Rule 17 of the VAT Rules, 2053. A valid tax invoice must show the heading “Tax Invoice” or “कर बीजक”, the supplier’s registered name, address, and PAN/VAT number, the invoice serial number and date (in both BS and AD calendar formats), the buyer’s name, address, and PAN (required for sales above NPR 10,000), a description of goods or services with quantity and rate, the taxable value (subtotal before VAT), VAT at 13%, the grand total in figures and words, and an authorized signature with official seal. Invoices must be issued in triplicate and stored for 6 years. For high-volume retail businesses such as restaurants and supermarkets, abbreviated invoices inclusive of VAT are permitted.
How and when to file VAT returns in Nepal
VAT returns in Nepal are filed monthly. The deadline is the 25th day of every Nepali month (Bikram Sambat calendar month), covering the transactions of the previous month. All VAT-registered businesses must file a return by this deadline, even if there were no transactions in the period (a “nil return” must still be submitted). Returns are filed electronically through the IRD taxpayer portal at taxpayerportal.ird.gov.np. Late filing attracts a penalty of NPR 20,000 per tax period, which accumulates monthly until the return is filed. VAT payments are also due by the 25th of the month following the tax period.
What changed in Nepal’s VAT rules in 2024 and 2026?
The most significant recent change is the Digital Services Tax Act 2024, which came into effect in FY 2081/82 and continues in 2026. This law requires foreign digital service providers (Netflix, Spotify, cloud software companies, SaaS platforms, and similar businesses) to register for VAT in Nepal once their annual sales to Nepali customers exceed NPR 30 lakh (approximately USD 22,000). For B2B transactions where the Nepali recipient is VAT-registered, the reverse charge mechanism applies: the Nepali business self-assesses and pays VAT instead of the foreign supplier collecting it. These changes bring Nepal’s VAT treatment of digital services in line with global norms. Foreign businesses with significant economic presence in Nepal must register through the IRD’s online portal.
How to register for VAT in Nepal
VAT registration in Nepal follows a structured process. The application is submitted online through the IRD taxpayer portal, followed by an in-person biometric verification:
- Obtain a PAN (Permanent Account Number). PAN registration is mandatory for all businesses before VAT registration. Apply at ird.gov.np.
- Submit the VAT registration application online. Complete the form on the IRD taxpayer portal with business registration number, address, director details, and estimated turnover.
- Submit supporting documents to your local Tax Office. Required documents include: company registration certificate, PAN certificate, memorandum and articles of association, director ID documents, business premises proof (rent agreement or ownership document), and bank details.
- Complete in-person biometric verification. A business owner or authorized director must visit the Tax Office in person for biometric verification.
- Receive VAT Registration Certificate. Once verified, the IRD issues the VAT Registration Certificate. Display this at your business premises. The entire process typically takes 7 to 12 business days.
Frequently Asked Questions
What is the current VAT rate in Nepal in 2026?
Nepal applies a flat 13% VAT rate on all standard taxable goods and services. This rate has been unchanged since VAT was introduced in 1997. The Finance Act 2081 (2024) did not change the rate, and it continues unchanged for FY 2082/83 (2026). Certain goods and services listed in Schedule 1 of the VAT Act are exempt from VAT entirely.
What is the VAT registration threshold in Nepal?
For goods businesses: NPR 50 lakh (NPR 5,000,000) annual turnover. For service businesses and mixed businesses: NPR 30 lakh (NPR 3,000,000) annual turnover. Foreign digital service providers must register once their Nepal sales exceed NPR 30 lakh annually. Businesses must register within 30 days of crossing the threshold. Failure to register attracts a penalty of NPR 20,000 per tax period.
Is VAT the same as GST in Nepal?
Nepal uses the term “VAT” (Value Added Tax), not GST. The mechanism is similar to GST in India or Australia: a consumption tax applied at each stage of the supply chain, with businesses claiming credits for VAT paid on inputs. Nepal has not adopted a GST system. The governing law is the VAT Act 2052 (1995), not a GST Act.
Do foreign companies selling digital services to Nepali customers need to register for Nepal VAT?
Yes, since the Digital Services Tax Act 2024. Foreign digital service providers with annual sales to Nepali customers exceeding NPR 30 lakh (approximately USD 22,000) must register for VAT in Nepal. For B2C transactions, they must charge and collect 13% VAT from Nepali consumers. For B2B transactions with VAT-registered Nepali businesses, the reverse charge mechanism applies, and the Nepali business handles the VAT payment.
What are the penalties for not registering for VAT in Nepal?
Failure to register for VAT when required attracts a penalty of NPR 20,000 per tax period (per month), accumulating until registration is completed. Late filing of VAT returns attracts the same NPR 20,000 per period penalty. VAT evasion cases have resulted in criminal prosecution in Nepal’s courts. All penalties and fines are administered by the Inland Revenue Department under the VAT Act 2052.
Official sources used in this article: