If you are selling online in Nepal — whether on Instagram, a Facebook page, or your own store — the most common worry is not marketing or delivery. It is tax. "Do I need a PAN? When does VAT kick in? Will the Inland Revenue Department come after me?" The good news: the rules are clearer than they feel, and getting registered early is cheap, fast, and protects you as you grow. This guide breaks down exactly what a new e-commerce seller must register for, and when.
First, understand the three things you might register for
Most confusion comes from mixing up separate registrations. For a typical online seller in Nepal, there are three layers:
- PAN (Permanent Account Number) — your tax identity, issued by the Inland Revenue Department (IRD). Almost every business needs this.
- VAT (Value Added Tax) — a 13% tax you charge customers and pass to the government, required once you cross a turnover threshold (or sell certain goods/services).
- Business/company registration — registering the firm itself (as a sole proprietorship at the Department/local ward, or a company at the Office of the Company Registrar).
They are connected but not the same. You can have a PAN without VAT. You usually cannot get VAT without a PAN and a registered business.
PAN: get it from day one
A PAN is the foundation of selling legally. If you are issuing any bill, buying stock from wholesalers who ask for your PAN, or planning to scale beyond a hobby, you should have one. There are two relevant types:
- Personal PAN — tied to you as an individual, often used for salary or very small informal activity.
- Business PAN — issued in your firm's name after you register the business. This is what an e-commerce seller normally needs.
To get a business PAN you typically register your firm first (sole proprietorship is the simplest and cheapest path for a single owner), then apply through the IRD's online taxpayer portal and submit documents at your local IRD or taxpayer service office. You will generally need your citizenship certificate, a passport-size photo, the business registration certificate, and proof of business location (rent agreement or ownership). Once issued, your PAN goes on your invoices and is how you file taxes.
Why bother if you're small? Because payment gateways, wholesalers, and marketplaces increasingly ask for it. If you want to accept eSewa, Khalti, or bank/QR settlements into a business account and issue proper bills, a PAN makes that smooth instead of a future scramble.
VAT: when the 13% becomes your responsibility
VAT is where new sellers panic unnecessarily. You do not charge 13% from your first sale. VAT registration is triggered mainly by turnover. The commonly applied thresholds (measured over a 12-month period) are:
- Annual transactions above NPR 50 lakh (5 million) for goods, or
- Above NPR 20 lakh (2 million) for services, or for a mix of goods and services.
Below those levels, many small sellers operate under PAN with simplified income tax instead of charging VAT. However — and this is the part people miss — certain businesses must register for VAT regardless of turnover. The IRD maintains a list of goods and services where VAT is compulsory from the first rupee (for example, certain electronics and specified categories). If you sell in one of those categories, the threshold does not protect you.
Because these lists and limits are revised in the annual budget and Finance Act, treat the numbers above as a starting point, not gospel. Confirm your specific category with the IRD or a local accountant before you assume you are exempt.
What changes once you're VAT-registered
- You add 13% VAT on top of your selling price and show it on the bill.
- You file VAT returns (monthly or as assigned) even in months with no sales — a "nil return" is still required.
- You can claim back VAT you paid on business purchases (input credit), which actually helps your margins once you buy stock in volume.
The takeaway: VAT is not a punishment, it is a stage of growth. Cross the threshold, register promptly, and build the 13% into your pricing so it does not eat your profit.
Income tax still applies — even below VAT
Skipping VAT does not mean skipping tax. Small sellers under PAN typically fall under simplified income tax rules, including presumptive options for very small taxpayers with low turnover. You file an annual return, and tax is based on profit (or a presumptive amount for the smallest businesses). Keeping clean records of sales, COD collections, and purchases makes this filing painless. This is exactly why organized bookkeeping from day one matters more than most new sellers expect.
The practical e-commerce reality in Nepal
On the ground, here is what compliance looks like for an online store:
- Digital payments need a clean trail. Money landing via eSewa, Khalti, bank QR, or fonepay into a business account is traceable. That is good — it means your declared turnover should match your settlements. Reconcile them regularly.
- COD is still taxable. Cash-on-delivery collected through your courier is sales revenue. Whether the customer paid digitally or in cash to the delivery rider, it counts toward your turnover and your VAT threshold.
- Dashain and Tihar can push you over the line. A festival season spike is wonderful, but a few big months can carry your 12-month turnover past the VAT threshold faster than you planned. Watch your running annual total, not just the current month.
- Issue real bills. Proper invoices with your PAN (and VAT number once registered) build trust with B2B buyers and protect you in any IRD review.
This is where good tooling saves you. A platform like Saauzi keeps your online orders, in-store POS sales, eSewa/Khalti settlements, and COD records in one place — so when it is time to file, your turnover and tax numbers are already organized instead of scattered across screenshots and notebooks. Compliance becomes a report, not a research project.
A simple registration roadmap
- Register your business as a sole proprietorship (or company if you have partners/investors).
- Get your business PAN from the IRD and put it on every invoice.
- Track turnover monthly against the VAT thresholds, and check whether your product category requires compulsory VAT.
- Register for VAT the moment you cross the threshold (or immediately if your category requires it), and start charging 13%.
- File on time — income tax annually, VAT returns on schedule, nil returns included.
Your actionable takeaway
This week, do two things: register your business and get a PAN if you don't have one, and set up a single system that records every sale — online, POS, digital, and COD — so you always know your rolling 12-month turnover. With those in place, VAT becomes a planned step you take when you cross the threshold, not an emergency. Selling online in Nepal legally is not about being big — it is about being organized from the start. When the rules in your category are unclear, spend an hour with a local accountant; it is the cheapest insurance your growing store will ever buy.
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