VAT billing in Nepal explained: rates, invoices, registers and returns

What is the VAT rate in Nepal?

VAT in Nepal is charged under the Value Added Tax Act 2052 on most goods and services at a single standard rate: 13% VAT. Some supplies are zero-rated. That means the tax on the sale is nil, but you can still claim back the VAT you paid on related purchases (input VAT). Other supplies are exempt, which means they are outside the VAT system. The schedule a product falls into affects your margin, so check it instead of guessing.

Rates and schedules are amended by Finance Acts. If a figure matters to a decision you are making, confirm the current position with the IRD or your accountant.

Who has to charge VAT?

VAT registration becomes compulsory once your annual taxable turnover (total taxable sales in a year) crosses the threshold in the Act. The threshold is NPR 50 lakh annual turnover for goods, and the lower figure of NPR 30 lakh annual turnover for services or mixed supply. Certain trades must register from the first day, whatever their turnover. Any business may also register voluntarily. Once you are liable, you have 30 days to apply.

The full mechanics, documents and penalty categories are in VAT registration in Nepal, and the distinction between a permanent account number and VAT registration is in PAN vs VAT registration in Nepal.

What must a VAT invoice show?

A tax invoice carries your name, address and VAT registration number; the buyer’s details and their registration number where the buyer is registered; a serial number and date; the items with quantity, rate and amount; any discount before tax; the taxable value; the VAT as its own line; and the total.

Two of these cause the most problems in practice.

Show the tax on its own line. A bill with a single total is not a tax invoice, and a registered buyer cannot claim input VAT from it.

Keep one numbering sequence per fiscal year. Leave no gaps, reuse no number, and do not run a second bill book alongside your system.

For retail sales to consumers who will not claim the VAT back, there is a shorter document called the abbreviated tax invoice. It is still numbered, but a buyer cannot use it to support an input VAT claim. Above certain values the full tax invoice is required, so confirm the current limit with the IRD or your accountant.

You never correct an issued invoice by editing it. A credit note reduces what a customer owes and a debit note increases it. Both refer back to the original invoice. The detail, including the reprint rules, is in what a VAT invoice in Nepal must contain.

How does VAT actually work?

Output VAT is what you charge customers. Input VAT is what you pay suppliers on purchases for the business. What you pay the Department is output minus eligible input.

Only eligible input VAT counts, and this is where many businesses lose money. To claim input VAT, you need a valid tax invoice from a registered supplier. It must show the tax separately and carry the right registration numbers. A delivery note, a quotation, an abbreviated bill or a bill with the tax hidden inside the price will not support a claim. If your input VAT is more than your output VAT in a period, you hold a credit. That credit is generally carried forward to later periods. Refunds are available only in the cases the Act provides.

So the purchase side of a billing system matters as much as the sales side. A shop that bills carefully but records supplier bills three weeks late is still losing money.

Which registers must you keep?

You keep four registers and a summary. If your billing system works properly, it produces all of them as reports:

• The sales register, listing what you issued.
• The purchase register, listing what you recorded.
• The sales return register and the purchase return register, carrying credit and debit notes.
• A VAT summary laid out by Nepali month, showing monthly, cumulative and remaining figures.

Next to these is the counterparty schedule, usually called by its number, Annex 13. A counterparty is a business you bought from or sold to. Instead of totals, this schedule reports the period one party at a time. It lists registration numbers, trade names, opening and closing balances and the split between goods and services. The Department uses it to match your figures against the figures your counterparties report. It is explained in Annex 13 explained.

Good registers also make an inspection straightforward. They match your invoices, and your invoices match your numbering.

When is the VAT return due?

Most registered businesses file monthly, by the 25th of the following Nepali month, and pay at the same time. A return is due even in a month with no trade. A practical routine is to reconcile (check your records against each other) in the last week of the month and file early in the next month. That way you do not find a difference on the 24th. The step by step version is in how to file a VAT return in Nepal every month.

If you bill electronically

Separate rules apply to the billing software itself. Under the Electronic Billing Procedure 2074, the software has to be enlisted with the Inland Revenue Department, which means it appears on the Department’s official list. Your own business also needs a permission letter from its tax office.

The software must:

• Number invoices in sequence within the fiscal year.
• Print each invoice once, and mark any later copy as a copy with a reprint count.
• Record cancellations with a reason instead of deleting them.
• Keep an activity log that can be printed.
• Export its tables.
• Be able to send invoice data to the Department’s Central Billing Monitoring System.

For cloud products, the server has to be inside Nepal and run by someone registered in Nepal. Each taxpayer’s data must be stored separately.

Two guides cover this: Electronic Billing Procedure 2074 explained for the rules, and IRD-listed billing software in Nepal for checking a vendor’s claim.

The shape of a good month

Issue every sale on a proper document at the time of sale. Record every purchase bill as it arrives, with the supplier’s registration number on the supplier record. Handle every return with a linked note. Reconcile in the last week. File and pay by the deadline. Keep the registers and the payment receipt together. These habits prevent almost every VAT problem a small business has.

What Kuver Books does with all of this

Kuver Books applies VAT per line and prints the tax separately, in A4, A5 and thermal receipt widths. Invoice numbers run in sequence inside the Nepali fiscal year and cannot be reused or edited. Reprints are marked as copies and counted. A cancellation records a reason and keeps the original. Corrections are posted instead of overwriting the original, and an activity log records them. Customer and supplier records hold their permanent account and VAT registration numbers, so the right number reaches the right document and the counterparty schedule. The VAT report hub produces the sales register, the purchase register, both return registers, the summary by Nepali month and the counterparty schedule. All of them export for filing, and you can filter dates in Bikram Sambat or the Gregorian calendar.

You can see the documents on the invoicing page, the reports on the reports page, and our compliance position on the IRD listing page. To check a figure before you issue anything, use the VAT calculator.

Everything on this page is a general description of the law as it applies to a typical small business. For your own trade, your own thresholds and your own filing cycle, confirm with the IRD or your accountant.