What is Tax (VAT) Refund in Nepal?

Tax refund in Nepal refers to reimbursement of excess VAT paid by businesses or individuals. Under the VAT system, taxpayers pay tax on purchases and collect tax on sales. If input tax exceeds output tax, the difference can be refunded. This typically applies to exporters who pay VAT on inputs but have zero-rated exports. Non-exporters can claim refunds if they remain in a credit position for four months. The refund system aims to prevent tax cascading and ensure VAT is a tax on final consumption only. Refunds are processed by the Inland Revenue Department after verifying claims.

How to apply for a tax refund in Nepal?

To apply for a tax refund in Nepal, follow these steps:

1. 1. File your VAT returns regularly and accurately.

1. 1. If you have excess input tax credit for four consecutive months, you become eligible for a refund.

1. 1. Submit a refund application through your VAT return form. No separate application is required.

1. 1. Provide supporting documents like purchase invoices, import documents, and export proof if applicable.

1. 1. The tax office will verify your claim and supporting documents.

1. 1. If approved, the refund amount will be credited to your bank account within 60 days (30 days for exporters).

1. 1. Follow up with the tax office if there are any delays beyond the stipulated timeframe.

Who is eligible for a tax refund?

Taxpayers eligible for VAT refunds in Nepal include:

1. 1. Exporters who have zero-rated sales but pay VAT on inputs

1. 1. Businesses with excess input tax credits for four consecutive months

1. 1. Entities with large capital purchases resulting in sustained input tax credits

1. 1. New businesses in initial stages with more purchases than sales

1. 1. Businesses with inventory buildup exceeding sales

1. 1. Diplomatic missions and international organizations as per agreements

1. 1. Taxpayers who have overpaid taxes due to errors or miscalculations

1. 1. Businesses closing operations with unused input tax credits

1. 1. Entities with tax-exempt outputs but taxable inputs

Proper documentation and compliance with tax regulations are necessary to qualify for refunds.

What documents are needed for a tax refund?

The documents required for a tax refund in Nepal include:

1. 1. Completed VAT return forms for the relevant periods

1. 1. Tax invoices for all purchases claiming input tax credit

1. 1. Import declaration forms and customs documents for imported goods

1. 1. Bank statements showing tax payments

1. 1. Export documents like shipping bills and foreign exchange receipts for exporters

1. 1. Contracts and project documents for exempt supplies with input tax credits

1. 1. Audited financial statements and tax audit report

1. 1. PAN/VAT registration certificate

1. 1. Letter explaining the reason for excess tax credit

1. 1. Bank account details for receiving the refund amount

1. 1. Power of attorney if someone else is filing on behalf of the taxpayer

1. 1. Any additional documents requested by tax authorities to verify the claim

The tax office may conduct further verification before approving the refund.

How long does a tax refund take?

A tax refund in Nepal typically takes:

1. 1. 30 days for exporters from the date of filing the refund claim

1. 1. 60 days for other taxpayers from the date of filing the refund claim

However, actual processing times may vary depending on the complexity of the case and the workload of the tax office. If the refund is not processed within these timeframes, the government is required to pay 15% interest on the pending amount. Taxpayers can follow up with the tax office if there are delays beyond the stipulated period. Simple and well-documented claims are usually processed faster.

Can I get a tax refund online?

Currently, Nepal does not have a fully online tax refund system. However, some steps of the process can be completed electronically:

1. 1. VAT returns can be filed online through the Inland Revenue Department’s web portal.

1. 1. Refund claims can be submitted as part of the online VAT return.

1. 1. Supporting documents may need to be submitted physically or via email to the tax office.

1. 1. Taxpayers can check the status of their refund application online.

1. 1. Approved refunds are typically transferred electronically to the taxpayer’s bank account.

The government is working on digitalizing more aspects of the tax system, including refunds. In the future, a fully online refund process may be implemented to improve efficiency and convenience for taxpayers.

Read More:

• Tax Office Near Me
• Tax Office Koteshwor
• Corporate Taxation in Nepal

What is the tax refund process?

The tax refund process in Nepal involves the following steps:

1. 1. File regular VAT returns accurately.

1. 1. Accumulate excess input tax credits for four consecutive months (for non-exporters).

1. 1. Submit a refund claim through the VAT return form.

1. 1. Provide all necessary supporting documents to the tax office.

1. 1. The tax office reviews the claim and verifies documents.

1. 1. If needed, the tax office may conduct further investigation or request additional information.

1. 1. Once verified, the refund claim is approved.

1. 1. The approved amount is transferred to the taxpayer’s bank account.

1. 1. Exporters receive refunds within 30 days, while others receive within 60 days.

1. 1. If there are delays, taxpayers can follow up with the tax office.

1. 1. Interest is payable on delayed refunds beyond the stipulated timeframe.

How to claim a VAT refund?

To claim a VAT refund in Nepal:

1. 1. Ensure you’re eligible – typically exporters or those with excess credits for 4 months.

1. 1. File your regular VAT returns accurately and on time.

1. 1. Include the refund claim in your VAT return form for the relevant period.

1. 1. Compile all supporting documents like purchase invoices and export proofs.

1. 1. Submit the claim and documents to your local tax office.

1. 1. Provide any additional information if requested by tax authorities.

1. 1. Follow up on the status of your claim if necessary.

1. 1. Once approved, the refund will be credited to your bank account.

1. 1. For exporters, expect refunds within 30 days; for others, within 60 days.

1. 1. If there are delays, you can claim interest on the pending amount.

Can businesses get tax refunds?

Yes, businesses in Nepal can get tax refunds under certain conditions:

1. 1. Exporters can claim immediate refunds on input VAT paid.

1. 1. Businesses with excess input tax credits for four consecutive months are eligible.

1. 1. Companies making large capital investments often qualify due to high input taxes.

1. 1. New businesses in start-up phase may get refunds if purchases exceed sales.

1. 1. Businesses with inventory buildup can claim refunds on excess input tax.

1. 1. Entities providing exempt supplies but paying VAT on inputs may qualify.

1. 1. Businesses closing operations can claim refunds on unused input tax credits.

1. 1. Companies in Special Economic Zones may be eligible for certain tax refunds.

1. 1. Businesses overpaying taxes due to errors can claim refunds after correction.

1. 1. Refund claims must be properly documented and verified by tax authorities.

How to calculate a tax refund?

To calculate a tax refund in Nepal:

1. 1. Sum up all input VAT paid on purchases and imports for the period.

1. 1. Calculate the output VAT collected on sales for the same period.

1. 1. Subtract output VAT from input VAT to find the difference.

1. 1. If input VAT exceeds output VAT, the difference is your potential refund.

1. 1. For non-exporters, ensure this excess credit persists for four consecutive months.

1. 1. Exporters can claim the full excess amount immediately.

1. 1. Deduct any adjustments or corrections from previous periods.

1. 1. Consider any penalties or interest that may offset the refund amount.

1. 1. Verify all calculations using purchase invoices and sales records.

1. 1. Use the IRD’s online calculators or consult a tax professional for complex cases.

Tax VAT Refund in Nepal

Q1: What is a VAT refund in Nepal?

A1: A VAT refund is the reimbursement of value-added tax paid on eligible purchases in Nepal.

Q2: Who is eligible for VAT refunds in Nepal?

A2: Tourists leaving Nepal and businesses exporting goods are typically eligible for VAT refunds.

Q3: How can tourists claim VAT refunds in Nepal?

A3: Tourists can claim VAT refunds at the airport by presenting receipts and completed forms.

Q4: What is the minimum purchase amount for VAT refunds?

A4: The minimum purchase amount for VAT refunds in Nepal is typically NPR 25,000.

Q5: How long does it take to process a VAT refund?

A5: VAT refunds for tourists are usually processed immediately at the airport. Business refunds may take longer.