Reference

Nepal business and tax glossary

Every abbreviation you will meet registering and running a business in Nepal, explained in one or two sentences. No jargon used to explain jargon.

Registration and regulators

OCROffice of the Company Registrar: The government office where companies are registered in Nepal. It issues the incorporation certificate and receives the annual return every company must file.More →
IRDInland Revenue Department: Nepal's tax authority. It issues PAN and VAT registration, receives returns, and carries out assessments.
NRBNepal Rastra Bank: The central bank. For foreign investors it matters because NRB records inward investment, and that record is what makes dividend repatriation possible later.More →
DOIDepartment of Industry: Approves foreign investment and registers industries. The first approval in the FDI sequence.More →
Ward registration: Registration with the local ward office where the business operates. A separate step from OCR registration, and often forgotten until a licence is needed.
MOA and AOAMemorandum and Articles of Association: The constitutional documents of a company. The MOA states what the company may do; the AOA sets out how it is run — shareholding, directors, meetings and how decisions get made. Worth drafting properly rather than copying a template.More →

PANPermanent Account Number: The tax identification number issued by the IRD. Every business and every employee needs one.
VATValue Added Tax: Charged at 13% on most goods and services. Registration is compulsory above the turnover threshold and from the start for certain businesses. Returns are monthly.More →
TDSTax Deducted at Source: Tax withheld by the payer when making certain payments — service fees, rent, contracts, interest, dividend. The liability for getting it wrong sits with the payer, not the recipient.More →
Final withholding: Where the TDS deducted is the whole tax. The recipient does not add that income to their return and pays nothing further on it. Dividend and house rent to an individual are common examples.
Advance tax: Income tax paid during the year in instalments — 40% by Poush, 70% by Chaitra and 100% by Ashadh. Falling short attracts interest.
Capital gains tax: Tax on the gain when you sell shares, land or a building. The rate depends on who is selling and how long the asset was held.More →
Section 11 exemption: The part of the Income Tax Act granting business tax exemptions and concessions — for agriculture, special industries, energy, IT, exports, SEZs and start-ups.More →
Fiscal year: Nepal's tax year runs mid-July to mid-July, from 1 Shrawan to 31 Ashadh, and is written in Bikram Sambat — FY 2083/84, for example.

SSFSocial Security Fund: The contribution-based social security scheme. The employer contributes 20% of basic salary and the employee 11%. Contributing also removes the 1% social security tax on the employee's first slab.More →
CITCitizen Investment Trust: A retirement savings scheme. Contributions are deductible from taxable income, within the overall retirement contribution cap.
EPFEmployees Provident Fund: Retirement fund with contributions from employer and employee, usually 10% each of basic salary where SSF does not apply.
Gratuity: A retirement benefit accruing at 8.33% of basic salary under the Labour Act, payable on leaving. A liability that builds whether or not it is recorded.

NFRSNepal Financial Reporting Standards: The accounting standards Nepali entities report under, based on IFRS. Which version applies — full NFRS or NFRS for SMEs — depends on the size and nature of the entity.More →
Statutory audit: The audit required by law, carried out by a licensed auditor who forms an independent opinion on the financial statements. Separate from, and incompatible with, preparing those statements.
Internal audit: A review of controls and processes carried out for management, not for statutory purposes. It answers 'are our controls working', not 'do the accounts show a true and fair view'.
Management accounts: Monthly financial information prepared for decisions rather than for filing. No statutory format — the point is that management can act on it.
Working capital: The money tied up in running the business — stock plus receivables less payables. The usual reason a profitable business has no cash.

FDIForeign Direct Investment: Investment into a Nepali company by a foreign person or entity. Requires Department of Industry approval and NRB recording, and the sector must not sit on the negative list.More →
Negative list: The schedule of sectors closed to foreign investment. The first thing to check before planning anything else.
Repatriation: Sending profits, dividends or sale proceeds out of Nepal. Possible where the original investment was properly recorded with NRB when it came in.
SEZSpecial Economic Zone: Designated industrial zones carrying significant tax exemptions — no income tax for five or ten years depending on location, then a 50% concession.More →