PAN vs VAT Registration in Nepal: Which One Does Your Business Need?

One of the most common questions we get from new shop owners is deceptively simple: 'Do I need PAN, VAT, or both?' The short answer is — almost certainly PAN, and VAT once your turnover crosses the threshold set by IRD.

PAN registration

PAN (Permanent Account Number) is the baseline tax identity for any business in Nepal. It lets you issue PAN bills, open a current account, and file income tax. If you sell anything as a business, you need it.

When VAT becomes mandatory

VAT registration becomes mandatory once your annual turnover crosses the IRD-specified threshold (currently NPR 50 lakhs for goods and NPR 30 lakhs for services, subject to change). Some categories — like alcohol, tobacco, and certain services — require VAT from day one regardless of turnover.

Once VAT-registered, every taxable sale must carry a VAT bill with 13% VAT shown separately. You also gain the right to claim input VAT on purchases.

What changes day-to-day

Your invoice template changes. You file monthly VAT returns. You maintain a sales and purchase register that ties out to your bills. Good software handles all of this automatically — bad software turns it into a part-time job.