PAN vs VAT: Which Does Your Business Need?

Many first-time business owners in Nepal are confused about whether they need a PAN, a VAT registration, or both. This article clears up the difference.

What Is a PAN?

A Permanent Account Number (PAN) is a unique tax identification number issued by the Inland Revenue Department (IRD). Every registered business and individual earning taxable income must have a PAN. It is required for opening a bank account, issuing official invoices, and filing tax returns.

What Is VAT?

Value Added Tax (VAT) is a consumption tax levied on the sale of goods and services. VAT registration is mandatory once your annual taxable turnover exceeds the threshold set by the IRD. Businesses below the threshold can register voluntarily to claim input tax credits on purchases.

Key Differences

• PAN is mandatory for all businesses; VAT is mandatory only above the turnover threshold
• PAN is for tax identification; VAT is for collecting and remitting consumption tax
• VAT-registered businesses must file monthly VAT returns; PAN-only businesses do not

Which Do You Need?

If you run a registered company, you need a PAN regardless of size. You need VAT registration if your turnover crosses the threshold or if you want to claim input credits. We can assess your situation and handle both registrations with the IRD.