Nepal VAT Guide

VAT Rates (2026)

• Standard rate — 13%: Applies to most goods and services, including electronics, clothing, furniture, professional services, construction, vehicles, machinery, and general consumer products. This is the default rate for all taxable supplies.
• Zero-rated — 0%: Exports of goods and services are zero-rated. This means no VAT is charged, but the exporter can still claim input VAT credits on related purchases. Other zero-rated items include supplies to diplomatic missions and international organisations.
• Exempt supplies: Basic unprocessed food items (rice, lentils, vegetables, fruits), education services (schools, universities), healthcare services (hospitals, clinics), financial services (banking, insurance), real estate transactions (sale/lease of land and buildings), and public transport services are exempt from VAT. Exempt suppliers cannot register for VAT or claim input credits.

VAT Registration

• Registration threshold: Businesses with annual taxable turnover exceeding NPR 5 million must register for VAT. Registration is mandatory once the threshold is crossed. Businesses below the threshold may voluntarily register.
• Voluntary registration: Businesses below NPR 5 million may opt for voluntary VAT registration, which is beneficial for exporters (to claim input credits) and businesses dealing primarily with VAT-registered customers.
• Registration process: Apply to the Inland Revenue Department (IRD) with your PAN certificate, business registration documents, and prescribed forms. The IRD issues a VAT registration certificate with a unique VAT number.
• Non-resident VAT: Foreign companies providing electronic services (streaming, software, SaaS) to Nepali customers may be required to register for VAT under the digital economy provisions. Thresholds and simplified registration may apply.

VAT Returns and Compliance

• Filing frequency: VAT returns must be filed monthly by the 25th of the following month. The return includes details of taxable sales (output VAT), taxable purchases (input VAT), and the net amount payable or refundable.
• Input VAT deduction: Registered businesses can deduct input VAT on purchases used for making taxable supplies. Input VAT on entertainment, passenger vehicles (limited), and exempt supplies is not deductible. Partial exemption rules apply to mixed-use businesses.
• Filing method: VAT returns are submitted to the IRD online portal (or physically at the local IRD office). Electronic filing is encouraged and is mandatory for larger taxpayers.
• Late filing penalties: Late filing attracts a penalty of up to 25% of the tax due or a minimum amount prescribed by the IRD. Late payment incurs interest at the prevailing rate (approximately 12-15% per annum).

Special VAT Rules

• Import VAT: VAT on imports is collected at the customs point (Customs Department) before goods are released. The VAT base includes the CIF value plus customs duty. Importers with valid VAT registration can claim the import VAT as input credit.
• Reverse charge: Imported services (services received from abroad) are subject to reverse charge VAT — the recipient accounts for VAT as if they were the supplier. This applies to consulting, legal, technical, and other cross-border services.
• Retention and withholding: Certain payments (e.g., government contracts) may require the payer to withhold VAT and remit it directly to the IRD, similar to WHT mechanisms.

For corporate income tax rules and rates, see our Corporate Tax Guide →. For personal tax and IIT brackets, see our Personal Tax Guide →.