Starting a business in Nepal is exciting, but the first year can be confusing. You have to register, get your tax numbers, keep proper records and file returns on time. Miss a deadline and you pay penalties and interest, which no new business needs.
This first year tax and complaince checklist is written for business owners who are starting out in the 2026-2027 fiscal year (FY 2083/84). It covers what to do before you begin trading, what to do every month, and what to do at year end. It also covers what changed in the latest budget.
The fiscal year runs from 1 Shrawan 2083 (16 July 2026) to the end of Ashadh 2084 (about 16 July 2027). Nepal does not use the January to December year, so plan your books around Shrawan to Ashadh.
Quick Summary: First Year Tax and Complaince for Businesses in Nepal
- Register your business and get a PAN before your first sale
- Decide early whether you need to register for VAT
- Deposit TDS and file VAT returns by the 25th of each month
- Pay advance income tax in three instalments (Poush, Chaitra, Ashadh)
- File your annual income tax return within three months of year end
- Keep clean records from day one, because everything else depends on them
What Changed in The 2026-27 Budget
The budget was presented on 15 Jestha 2083 (29 May 2026). These are the changes most likely to matter to a new business:
- Personal income tax was reset. The first NPR 10 lakh of income is now taxed at 1%, up from NPR 5 lakh. The top rate falls from 39% to 29%. This matters if you run a sole proprietorship or partnership, because your profit is taxed as personal income.
- Company tax stays the same. The standard rate is still 25%. Banks, insurance, telecom, tobacco and alcohol stay at 30%.
- VAT stays at 13%. The budget also announced a 10% instant refund for customers who pay digitally, and a lottery that turns every VAT bill into a ticket. The aim is to get more customers to ask for proper invoices.
- IT exporters get a smaller break. The income tax exemption on IT export earnings drops from 75% to 50%. Employees in the IT sector get a full exemption on sweat equity they receive.
One warning. Some details, such as the exact middle tax bands, were still being confirmed through Inland Revenue Department (IRD) circulars after the budget. Check the final Finance Act 2083 before you set up payroll or work out your tax.
Step 1: Before You Start Trading
Get these done first, in this order:
- Choose your structure. A sole proprietorship, partnership or private company each has different tax and audit rules. Companies pay 25% tax and must have their accounts audited every year. Sole proprietors pay tax at personal rates.
- Register the business. Companies register with the Office of the Company Registrar. Other businesses register with the relevant local or department office.
- Get your PAN. A Permanent Account Number is your tax identity. You need it to open a business bank account, issue invoices and register for VAT.
- Open a business bank account. Keep business money separate from personal money. Mixed accounts are one of the fastest ways to create problems at audit time.
- Decide on VAT. Registration is compulsory once your yearly turnover goes above NPR 50 lakh for goods. Some service businesses have lower limits, and some sectors must register from the first sale. Below the limit you can register voluntarily, which lets you claim back VAT on your purchases. Confirm your threshold with the IRD or your accountant before you decide.
- Get local licences. Depending on your business, you may need a municipal licence, a shop registration or a sector-specific permit.
- Set up your books. Pick accounting software or a simple system, and decide who will keep it up to date.
Do not start selling before your PAN is ready. Sales made without valid invoices are hard to fix later.
Step 2: What To Do Every Month
Most of your first-year work is small, repeated tasks. Build the habit early.
By The 25th of Each Month
- File your VAT return. If you are VAT registered, the return for one Nepali month is due by the 25th of the next. The Shrawan return, for example, is due by 25 Bhadra. File even if you had no sales, because a nil return is still a return.
- Deposit TDS. Tax deducted at source must be paid and reported by the 25th of the following month. Common rates include 15% on professional and service fees, 10% on rent and 1.5% on contract payments. Check the current rates for each type of payment.
- Issue TDS certificates to the people you deducted from.
Through The Month
- Issue a proper tax invoice for every sale.
- Keep every purchase bill, especially those with your PAN or VAT number on them.
- Record transactions weekly, not at year end.
- Reconcile your bank statement against your books.
Late filing brings penalties and interest, and the amounts can grow quickly. Setting calendar reminders for the 20th of each month gives you a five day buffer.
Step 3: Hiring You First Staff
Many new businesses take on employees in year one. That brings extra duties:
- Give every employee a written contract
- Register with the Social Security Fund (SSF) and pay contributions on time
- Deduct income tax from salaries and deposit it as TDS
- Pay at least the minimum wage set by the government
- Keep attendance, leave and payroll records
Because the personal tax slabs changed this year, check that your payroll software or spreadsheet uses the new rates. Using last year’s table will cause under or over deduction.
Step 4: Your Year One Tax Calendar
Here is how the fiscal year looks for a new business. Dates are approximate, so check them against the IRD calendar.
- Shrawan to Ashadh: VAT and TDS returns every month, by the 25th
- End of Poush (mid January 2027): first advance income tax instalment, 40% of your estimated yearly tax
- End of Chaitra (mid April 2027): second instalment, bringing the total to 70%
- End of Ashadh (mid July 2027): final instalment, bringing the total to 100%
- End of Ashwin 2084 (mid October 2027): annual income tax return due, based on audited accounts where an audit applies
You can ask the IRD for an extension of up to three months on the annual return, but you need to apply before the deadline. Interest still applies to any tax you owe in the meantime.
Advance tax is often a surprise for new owners. You pay it during the year, based on your estimate, not after the year ends. If your estimate is too low, you pay interest on the shortfall, so make a real forecast rather than copying a guess.
Step 5: Year-end Tasks
When the fiscal year closes at the end of Ashadh, do these:
- Close your books and check every account
- Count your stock and list your fixed assets
- Confirm that all TDS and VAT was deposited
- Get your accounts audited if you are a company or otherwise required to
- Hold your annual general meeting and file your annual return with the Company Registrar, if you are a company
- File your income tax return and pay any balance owing
A first year is usually a part year, and you may make a loss. Report it anyway. Losses can often be carried forward, but only if you file properly and keep records to support them.
First Year Tax and Complaince Mistakes New Businesses Make
- Not keeping records. Without bills and invoices, you cannot prove your expenses, and you may pay tax on money you never made.
- Missing the VAT threshold. Once you pass it, you must register. Not registering can lead to a penalty of NPR 10,000 or 100% of the tax due, whichever is higher.
- Forgetting TDS. If you fail to deduct or deposit it, you can be charged the full amount plus interest.
- Mixing personal and business money. It makes accounts unreliable and audits painful.
- Ignoring advance tax. Skipping instalments leads to interest.
- Leaving everything until year end. Fixing twelve months of records at once is slow and expensive.
How GPR Can Help with First-Year Tax and Compliance
G.P. Rajbahak & Co. is a chartered accountancy firm in Kamalpokhari, Kathmandu, and is licensed by the Institute of Chartered Accountants of Nepal. We help new businesses set up their books, register for tax, file returns and prepare for audit. If you would like a second pair of eyes on your first-year plan, get in touch through our contact page.
This article is general information, not tax advice for your situation. Rules and rates can change, so confirm details with the IRD or a qualified accountant.
FAQs
1. Do I need a PAN before I start my business?
Yes. A PAN is the tax identity for every business in Nepal. You need it to open a business bank account, issue invoices and register for VAT, so get it before your first sale.
2. When do I have to register for VAT?
You must register once your yearly turnover goes above NPR 50 lakh for goods. Some service businesses have lower limits, and some sectors must register from the first sale. You can also register voluntarily below the limit, which lets you claim back VAT on purchases. Check your own threshold with the IRD.
3. How often do I file returns in the first year?
VAT and TDS are monthly, due by the 25th of the following month. Advance income tax is paid three times a year, in Poush, Chaitra and Ashadh. The annual income tax return is due within three months after the fiscal year ends.
4. Does my new business need an audit?
Companies must have their accounts audited every year. Other business types have audit rules that depend on their turnover and structure, so ask your accountant. An audited set of accounts is also the base for your annual tax return
5. How do the new budget changes affect a small business?
If you run a sole proprietorship, the higher 1% band and the lower top rate reduce your personal income tax. If you run a company, the 25% rate is unchanged. Everyone should update payroll for the new slabs and keep proper VAT invoices, since the budget pushes consumers to ask for them.
