Value Added Tax (VAT)
Nepal operates a Value Added Tax system introduced in 1997 through the Value Added Tax Act, 2052 (1996). It is a consumption-based tax levied on the value added at each stage of production and distribution of goods and services.
Single Rate System
Simplified tax structure with 13% standard rate for most goods and services
Input Tax Credit
Mechanism to avoid double taxation and reduce tax burden on businesses
Monthly Filing
Returns filed within 25 days from the end of each month
VAT Rates in Nepal
Standard Rate
Applies to most goods and services in Nepal, including imports
Zero-Rated
Certain goods and services (Schedule 2). Businesses can claim input tax credits on zero-rated supplies
Exempt Supplies
Schedule 1 goods and services. No input tax credits can be claimed on exempt supplies
Registration Requirements
Mandatory Registration
- Goods: Annual turnover exceeding NPR 5 million
- Services: Annual turnover exceeding NPR 2 million
- Importers: All importers, regardless of turnover
- Exporters: All exporters, regardless of turnover
Specific Industries
- Liquor production and distribution
- Brick manufacturing
- Cigarette manufacturing
- Construction businesses
- Private educational institutions
- Private hospitals and nursing homes
Filing & Compliance Requirements
Filing Frequency
Monthly for most businesses. Small taxpayers (annual turnover not exceeding Rs. 10 million) can file on a trimester basis (every four months).
Submission Deadline
Tax return must be submitted within 25 days from the date of expiry of the tax period.
Late Filing Penalty
Higher of 0.05% per day of chargeable VAT or Rs. 1,000 per tax period.
Late Payment Interest
15% per annum on the unpaid tax amount.
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