They also sought 13 waiver percent on value added tax (VAT) imposed on ground handling services (GHS) charge. [break]
A delegation of Board of Airlines Representatives in Nepal (BARN), representing more than two dozen international airlines presently operating flights in Nepal, made those requests meeting with the Director General of the IRD Tanka Mani Sharma.
The IRD has been imposing VAT since last two years on GHS charge of Nepal Airlines Corporation (NAC) for ground handling services it provided to all foreign airlines, except for Air India and Thai International that have the rights to self-handle their aircraft in Nepal.
“Neither other SAARC countries nor developed countries have levied VAT on ground handling services,” said the delegation. They also referred that NAC, which at one time operated to 20 foreign destinations, have never been levied VAT by any of the countries on GHS Charge, and called for the earliest waiver of VAT on GHS.
Suresh Acharya, joint secretary at the Ministry of Tourism and Civil Aviation, who was also present at the meeting, agreed with BARN representatives.
As for their concerns on income tax, BARN representatives explained that the tax officials were presently accounting all amount received while selling a ticket or freight as their income, whereas the amount actually includes tax and service charges levied by governments of Nepal as well as destination countries or countries en-route.
“Tax on tax goes against the very principles of established tax laws globally,” the delegation members said.
Referring that the action of the tax office was probably due to the lack of clear definition of the term ´taxable income´, as cited in the Income Tax Act 2001, the delegation urged IRD to define it clearly so that tax is levied only on basic fares and freight charges and not on taxes and service charges collected on behalf of Nepali and other governments.
“As a matter of fact, very recently, IRD has already granted exemption on Passenger Service Tax and Tourism Service Fees levied by the Nepali government. Therefore, same rule should apply for similar charges levied by other governments as well,” said BARN members.
They said their request goes in line with the Section IV of International Civil Aviation Organization´s (ICAO´s) Policies on Taxation in the Field of International Air Transport.
Responding to their requests, DG Sharma said that their concerns on income tax was genuine and will be addressed soon.
As for the waiver of VAT, he said it can not be implemented till a full budget is announced. “Till then the International Airlines should exercise patience and continue to pay this amount,” he stated.
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