Kathmandu- Chinese airlines that ignore Nepal’s tax laws continue to avoid penalties that other carriers must face.  Surprisingly, these Chinese airlines  have instead gained financially.

The government made Value Added Tax (VAT) registration compulsory for airlines two years ago. Registered carriers must file VAT details and pay the tax on time. VAT collected from passengers must go to the government account. Filing and payment become mandatory only after registration.

Any delay triggers fines and interest.

All airlines operating in Nepal follow this rule, and even a one day delay exposes them to penalties.  However, four Chinese airlines have avoided these charges for two years.

VAT filers must pay within 25 days after the tax period ends. Missing the deadline adds a 10 percent fee and 15 percent annual interest. All carriers except the Chinese ones have been paying these costs.

Chinese airlines have kept VAT collected from passengers in their own bank accounts and earned interest.

They handed only the principal amount to the government at the end of the fiscal year. This is illegal because unregistered airlines cannot deposit VAT. And they  have not paid fines or interest.

These four airlines have already collected more than two billion rupees in VAT this fiscal year. The money remains in their accounts and continues to earn interest.

The Inland Revenue Department has instructed them to register. The airlines resisted, citing the pressure from the Chinese government and the embassy.

The Ministry of Finance said it has again sent a diplomatic note to the embassy. Officials said they warned that Nepal’s tax laws cannot be ignored. There has been no response.

Tourism Secretary Hari Prasad Mainali said discussions are ongoing and expects progress soon. He believes the airlines will register.

The Chinese side still refuses to register. They want a system that allows them to pay VAT without registration. They argue this would free them from what they call complex administrative procedures.
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