Nepal Begins Issuing Tax IDs at Local Level

Kerabari Rural Municipality in Morang district of Koshi Province on Wednesday, December 24, issued a permanent account number (PAN) to a local business and an individual taxpayer, marking the first time a local government has directly provided PAN registration services.

The rural municipality issued a business PAN to locally operated The Voice Cafe and Restro and an individual PAN to local resident Chitrakumar Tamang, following the federal government’s decision to transfer taxpayer service functions to the local level.

The move came after the federal government formally handed over the responsibilities of the Taxpayer Service Office to Kerabari Rural Municipality on Wednesday, allowing taxpayers to access tax-related services directly from their local government.

Launching the service in Kerabari, Finance Minister Rameshore Khanal described the development as a milestone in Nepal’s federal transition.

“This is a historic day for administrative federalism,” Khanal said. “While fiscal federalism had progressed earlier, administrative federalism remained weak. This step has been taken to strengthen administrative federalism by decentralising tax administration.”

The initiative is expected to make tax services more accessible, reduce the time and cost of compliance, and enhance local governments’ revenue capacity by broadening the tax base.

Although the Income Tax Act, 2002, stipulates that federal tax services be delivered through tax offices, it also allows service delivery points to be changed through government decisions and administrative arrangements. Citing this provision, a Cabinet meeting on November 3 decided to dissolve tax service offices nationwide and provide tax services through District Treasury Controller Offices as well as local governments.

According to the Inland Revenue Department (IRD), the government plans to expand tax services to 56 local units in the current fiscal year, 2025/26, ending mid-July 2026.

“The government has set a target of delivering tax services through all 753 local units within the next two years,” said Madan Dahal, Director General at IRD. He said services could be extended to 30 to 35 additional local units within the coming month.

More than a decade after Nepal adopted federalism, efforts are now underway to move tax administration — previously managed solely by the central government — to the grassroots level.

The Local Government Operation Act, 2017, grants local governments authority to administer taxes and deliver tax-related services. Clause 11(2) of the Act assigns responsibility for determining, collecting and administering local taxes, fees and charges to local levels, including business registration, record-keeping and service delivery.

Similarly, Schedule 8 of the Constitution of Nepal, 2015, lists local taxes, fees and administration under the exclusive powers of local governments, while Schedule 9 outlines concurrent powers among the federal, provincial and local governments.

Tax officials say the current focus is on promoting a decentralised, service-oriented tax administration by delivering taxpayer services directly through local governments.

Dahal said the federal government cannot achieve this goal without cooperation from local authorities. While the response from local governments has been positive, he said implementation could be slowed in some areas by the need for formal decisions from local councils.

“Some rural municipalities and municipalities have already passed proposals to provide tax services. Only a few technical tasks remain,” Dahal said. “Services will begin in another five to seven locations from next week and will gradually expand.”

Under the new arrangement, tasks previously handled by district-level tax service offices are being managed by the District Treasury Controller Offices, while local governments have also begun issuing services.

According to Dahal, both individual and business PAN registrations are now being issued at the local level. Initial applications for excise duty registration and other related services are also being accepted locally.

“For services that require legal amendments, applications submitted at the local level are forwarded through the system,” he said. “Once approved by the nearest tax office, certificates can be obtained from the local government using digital signatures.”