Guide to Obtaining a Tax Clearance Certificate for Business in Nepal

A Tax Clearance Certificate (TCC), known in Nepali as “Kar Chukta” (कर चुक्ता), is an official document issued by the Inland Revenue Department (IRD) of Nepal. It serves as legal proof that a business has fulfilled all its tax obligations, including outstanding tax liabilities, penalties, and interest, for a specific fiscal year.²

The TCC is often required for various business activities, such as:

• Bidding on government contracts or tenders.

• Renewing business licenses or registrations.

• Applying for bank loans or financial verifications.

• Processing visa applications for proprietors or employees.

• Dissolving or transferring ownership of a business.

Step-by-Step Process for Obtaining a TCC

The process involves ensuring complete tax compliance before applying to the Inland Revenue Office (IRO) where the business is registered.

Step 1: Ensure Tax Compliance and Dues Clearance

Before applying, a business must ensure it’s fully compliant with all tax regulations up to the relevant fiscal year.

• File All Returns: All mandatory tax returns must be filed, including:

  • Income Tax Returns (e.g., D-03 for businesses).

  • Value Added Tax (VAT) Returns (if registered).

  • Tax Deduction at Source (TDS) Returns (ETDS).

• Pay All Dues: All due taxes, including Income Tax, VAT, and any penalties or interest, must be paid in full.

• Prepare Audit Report: Companies and larger businesses must have their audited financial statements (Balance Sheet, Profit & Loss Account) ready for the fiscal year for which clearance is sought.

Step 2: Gather Required Documents

Gather all the necessary documentation to support the application.

• Completed Application Form: A filled-out application form for tax clearance (can often be obtained from the local tax office)

• Audited Financial Statements for the relevant fiscal year.

• Copies of Filed Tax Returns (Income Tax, VAT, TDS) for the clearance period.

• Proof of Tax Payments (Tax payment vouchers/receipts, bank statements showing tax payments.

• Board Resolution/Power of Attorney (if submitted by a representative).

Step 3: Application Submission

The application can typically be submitted to the local Inland Revenue Office (IRO) either online via the IRD’s portal or by visiting the office in person.

• Online Application (Applicable to Natural Person and Sole Proprietorship business only):

  1. Visit the IRD’s official website and log in to the taxpayer portal using the business’s PAN and password.

  2. Navigate to the tax clearance certificate application section.

  3. Fill out the online application form with accurate details.

  4. Review and submit the application.

• Offline Application:

  1. Obtain and fill out the application form from the local IRO.

  2. Attach all necessary supporting documents.

  3. Submit the completed application and documents to the tax office counter.

Step 4: Verification and Approval

IRD officials will review the submitted application and documents.

• Initial Review: The tax office conducts a preliminary check for completeness and accuracy.

• Record Verification: The tax officer verifies the business’s tax records against the submitted returns and payment receipts to ensure all tax liabilities have been cleared.

• Clarifications: If any discrepancies, unpaid taxes, or issues are identified, the applicant will be asked to provide clarifications or additional documents, or to clear any outstanding dues, penalties, or interest.

• Approval: Once the IRD is satisfied that the business is fully tax compliant, the application will be approved.

Step 5: Receive the Tax Clearance Certificate

Upon approval, the Tax Clearance Certificate is issued. This may take  1 to 5 working days on average, depending on the workload of the IRD office and the complexity of the business’s tax profile.

• The certificate can be downloaded digitally from the IRD portal (for online submissions).

• A physical copy can be collected from the local IRO (for offline submissions or if a hard copy is required).

Common Challenges and Solutions