Frequently Asked Questions
Yes, every entity is required to register under the applicable authorities before starting business.
For instance, if someone intends to establish a Private or Public Company, they must submit an application to the company registrar’s office, along with supporting documents like the Memorandum of Association (MOA) and Articles of Association (AOA).
Value-added tax (VAT) was implemented on March 20, 1996, with the passage of the new Value Added Tax Act, 2052. (1996).
VAT (The value-added tax) is an indirect tax or consumption tax levied on goods and services. The tax will be imposed on the aggregate value of all taxable goods and services transactions. It must be paid at every point along the supply chain, from the manufacturer to the retailer. It can also refer to a general taxation system in which people in an economy are taxed based on what and how much they consume. In other words, people are taxed based on how much value they add to the economy.
As a result, VAT is a tax levied based on the value they have added from the consumption of people at various stages the product or service passes through.
VAT divides all goods and services into two basic categories, taxable and tax-exempt. Goods and services are either taxed at the standard rate of 13 percent or they are taxed at 0%. Those taxed at the standard rate include all goods and services except those which are specified as taxed at 0% or tax-exempt.
Registration is required for any business:
(a) With an annual taxable turnover of more than 2 million rupees.
(b) Belonging to a conglomerate which has an aggregate annual taxable turnover exceeding 2 million rupees.
Most businesses will require only minor modifications to their record keeping. In order to complete his VAT return a taxpayer will need to ensure that his books and records provide:
(a) The amount of VAT paid on purchases.
(b) The amount of VAT collected on sales.
(c) A method of distinguishing between taxable and exempt sales.
(d) The time the goods and services were supplied.
(e) Evidences that goods were exported, if any.
A taxpayer must keep the following books and records :
(a) A purchase book,
(b) A sales book, and
(c) A VAT accounts.
Purchase and sales books include:
(a) The invoice number
(b) The invoice date
(c) The supplier`s name and PAN number in the purchase book
(d) The customer`s name and PAN number in the sales book
(e) The taxable value, and
(f) The amount of VAT.
Businesses which sell both taxable and exempt goods will need to complete additional columns of information to separate exempt sales and the purchases related to them. IROs will be pleased to provide taxpayers with a sample Purchase Book (Schedule 8) and a sample Sales Book (Schedule 9) format. PAN number refers to the Taxpayer Identification Number which will be allocated to each registrant after completion of the registration process.
Background:
The foreign investments in Nepal are regulated and administered by Foreign Investment and Technology Transfer Act (FITTA) 1992 and Industrial Enterprises Act (IEA) 1992. The department of industries (DOI) is the sole agency for administration and implementation of Foreign Investment and Technology Transfer Act in Nepal.
Private companies are those where number of shareholder(s) can start from 1 but cannot exceed 101. They cannot invite general public for share subscription.
The public companies are the ones with minimum 7 shareholders and with minimum paid up capital of NPR 10 million. They may offer shares to public at Nepal Stock Exchange under Company Act and Securities Act. A Company carrying on business of banking, financial transaction, insurance related transactions, a stock exchange, pension or mutual fund, or any other related business or transactions must be incorporated as a public limited company.