Photo: FILE
Kathmandu,Nepal: While most airlines operating in Nepal face fines and interest the moment they fail to comply with mandatory tax obligations, four Chinese airlines have been enjoying the opposite — receiving an undue advantage as reported by biznessnews.com.
Two years ago, the government made VAT registration compulsory for all airlines. Once registered, they must submit tax returns and deposit collected VAT into the government revenue account within the deadline. If they delay, the pending amount automatically attracts a 10% annual penalty and an additional 15% annual interest. Domestic and international airlines operating in Nepal have been strictly following this provision, often fearing penalties even for a single day of delay.
However, the four Chinese airlines flying to Nepal have not been complying. For the past two years, they have been keeping the VAT collected from passengers in their bank accounts and earning interest from it. Although they handed over the last fiscal year’s collected VAT only at the end of the year, such practice is illegal. Only unregistered entities receive such flexibility, and airlines are not eligible for it. They have also not paid any fines, penalties, or interest so far.
This fiscal year alone, the four Chinese carriers have already collected more than NPR 2 billion in VAT, which is still sitting in their own accounts, continuing to generate interest for them.
Earlier, the Inland Revenue Department had instructed these airlines to complete VAT registration, but they resisted, citing the Chinese government and the Chinese Embassy in Kathmandu as reasons. According to officials at the Ministry of Finance, diplomatic communication has been sent again, but no response has been received yet.
Secretary of the Ministry of Culture, Tourism and Civil Aviation, Hari Prasad Mainali, said that discussions on enforcing tax compliance are ongoing and that a solution will come soon. However, the Chinese side remains firm on its stance: they want a system where they can deposit VAT without undergoing registration, arguing that it would free them from Nepal’s administrative tax procedures.
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