Tourism Info Nepal

Chinese Airlines Urge Nepal to Abolish VAT on Air Tickets to Ensure Smooth Operations

Chinese Airlines Urge Nepal to Abolish VAT on Air Tickets to Ensure Smooth Operations

Chinese airlines operating in Nepal have formally requested the Nepalese government to abolish the Value Added Tax (VAT) imposed on air tickets, warning that failure to remove this tax could impact their flight operations. The Chinese Embassy in Kathmandu conveyed these concerns to the Prime Minister’s Office, the Cabinet Secretariat, the Ministry of Home Affairs, and the Civil Aviation Authority through a formal letter urging the elimination of the VAT system.

Sources at the Civil Aviation Authority disclosed that the Chinese Embassy submitted this request two weeks ago, emphasizing that the continuation of the VAT regime could adversely affect flights between China and Nepal.

“This issue was extensively discussed today in a meeting attended by representatives from the Ministry of Foreign Affairs, Ministry of Finance, Inland Revenue Department, Nepal Rastra Bank, and the Civil Aviation Authority,” informed Gyanendra Bhul, spokesperson of the Civil Aviation Authority. He expressed confidence that the matter would be resolved amicably following the discussions.

Bhul clarified that currently, only Chinese airlines have formally raised concerns about the VAT regime. He underscored that while bilateral air service agreements exist between Nepal and various countries, including China, foreign airlines are required to comply with the local tax laws of the host country.

“Notably, Nepal has a ‘double taxation avoidance’ agreement with China, stipulating that Chinese companies are exempt from paying VAT in Nepal. Additionally, Chinese airlines are not liable to pay income tax in Nepal,” Bhul added.

As of now, Air China, China Southern Airlines, China Eastern Airlines, and Sichuan Airlines operate daily flights to Nepal, facilitating significant air traffic between the two nations.

The Nepalese government had initially announced the imposition of VAT on air tickets in the budget for the fiscal year 2080/2081 BS (corresponding to 2023/2024 AD) with implementation starting in Ashwin.

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