Kathmandu-Diplomatic missions usually help resolve commercial disputes of companies from their country.

However, the Chinese Embassy in Nepal has supported Chinese airlines that are violating Nepal’s tax law.

Nepal made VAT registration mandatory for all airlines operating in the country. Every foreign airline and all Nepali airlines completed the process, but Chinese airlines did not. They continued to collect VAT from passengers and kept the money, earning interest for two years.

When the Internal Revenue Department asked them to register, the airlines cited the Embassy.

When tax offices sent notices, the airlines turned to the Chinese Embassy again. The Embassy had earlier warned that Chinese airlines would stop flights rather than register for VAT.

The Chinese Ambassador encouraged the airlines to avoid compliance, resulting in all other airlines following the law while Chinese airlines do not. The department issued reminders again this fiscal year, but no reply has arrived.

The Tourism Ministry has stayed silent, and Chinese airlines continue to receive full services despite refusing to follow mandatory tax rules. Other foreign airlines have begun to question the double standard.

The Embassy intervenes whenever the department issues notices, keeping Chinese airlines outside the tax system. The government has not restricted their services.

These airlines have also ignored the rule that requires all carriers to appoint a General Sales Agent in Nepal. Three Chinese airlines have no GSA.

Ambassador Chen Song has actively resisted VAT enforcement, with former officials saying the Embassy’s written response on VAT was aggressive.

Other airlines want equal rules for everyone, urging the government to either enforce the law for all or remove the requirement for all.

Finance Minister Rameshwor Khanal instructed the department to take action. New notices were sent, but no response has been received.

Director General Madan Dahal and Tourism Secretary Hari Prasad Mainali claim ongoing talks with the Chinese side, who have reportedly softened their stance. However, Chinese airlines remain firm in their position.

If this situation persists, the government may face scrutiny regarding its approach to other companies that may also disregard tax regulations.