Chinese carriers are reportedly refusing to pay Nepal's value-added tax (VAT), according to Kathmandu-based magazine Epardafas.
Four airlines have accrued a combined debt of NPR4 billion rupees (USD29.5 million) and the Chinese Embassy in the city is allegedly lobbying the Nepalese government to waive the debt, saying the imposition of VAT on foreign carriers violates international norms.
Nepal began imposing VAT on international air services after it changed its Finance Act in the second quarter of 2023. To date, most foreign operators have complied and are paying the tax, but the four Chinese carriers that fly into the country - Air China, China Eastern Airlines, China Southern Airlines, and Sichuan Airlines - have not.
A finance ministry official told Epardafas that all foreign airlines operating in Nepal must comply with the nation’s tax laws. He added that Nepalese entities abide by local tax laws when operating abroad and reciprocity is expected. Despite this, the Chinese carriers are said to be lobbying against the paying the VAT through diplomatic channels.
"Special facilities cannot be provided to Chinese airlines alone,” the spokesperson said. “Nepal’s tax system applies to everyone equally.”
According to ch-aviation schedules data, Air China and Air Sichuan operate daily on the Kathmandu-Chengdu Tianfu city pair; China Eastern operates 3x weekly between Kathmandu and Kunming Changshui; China Southern flies Kathmandu-Guangzhou daily; and Air Sichuan also operates 4x weekly on the Kathmandu-Chengdu Shuangliu city pair.
Reportedly, the Chinese Embassy has warned of potential damage to inbound traffic flows and bilateral relations if the VAT bill is not waived. It argues that taxing international air tickets contradicts basic principles and laws. The Nepalese government levies VAT on all air ticket purchases made within Nepal.
