Chinese Airlines at Odds with Nepal Over VAT Dispute
Chinese airlines are refusing to pay Nepal’s newly imposed VAT on international flights, accumulating a significant debt. Despite diplomatic lobbying from the Chinese Embassy, Nepal’s finance ministry insists on enforcing the tax.
Photo Source: CGTN
A growing dispute is brewing between Chinese airlines and the Nepalese government as four major carriers refuse to pay the country’s newly imposed value-added tax (VAT). The accumulated debt from these carriers has reached NPR 4 billion (USD 29.5 million). The Chinese Embassy in Kathmandu is reportedly pressuring Nepal to waive the VAT, claiming that taxing foreign airlines violates international standards.
The VAT was introduced by Nepal in mid-2023 after updating its Finance Act, which applies to all international air services. While most foreign carriers have complied with the new tax, Chinese airlines—Air China, China Eastern Airlines, China Southern Airlines, and Sichuan Airlines—have not paid the dues.
Nepal’s finance ministry has maintained that all foreign airlines operating in the country must adhere to local tax laws. They emphasize that reciprocity is expected, noting that Nepalese businesses comply with foreign tax systems when operating abroad. The government’s stance is clear: there will be no exceptions for Chinese airlines.
The airlines in question serve vital routes between Nepal and China, including daily flights from Kathmandu to Chengdu, Guangzhou, and Kunming. The Chinese Embassy has warned that the continued refusal to pay the VAT could damage both the flow of passengers and the diplomatic relationship between the two nations.
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