The United Arab Emirates (UAE) has retrospectively demanded that three UAE airlines be exempted from value-added tax (VAT), saying the tax violates globally accepted standards.
The UAE embassy recently relayed the request for the leaflet to the foreign ministry after the prime minister personally assured UAE diplomats that the exemption would be considered, officials said.
Emirates, flydubai and Etihad have urged Bangladeshi authorities to waive about Tk 6 billion in VAT on aeronautical and non-aeronautical charges from 2008 to 2018.
The UAE embassy in Dhaka recently forwarded letters from Emirates, Etihad and low-cost carrier Flydubai to authorities.
Imposing taxes such as VAT with retroactive effect is not in line with internationally accepted standards as airlines cannot recover this (alleged) VAT from customers, read the letter sent by the embassy.
The ministry recently forwarded the letter for consideration by the National Bureau of Revenue (NBR).
In July 2015, VAT was levied on relevant fees in the North District since January 2009.
In August 2017, the Supreme Court Appellate Division ruled that VAT applies to air charges.
The Chief Justice reviewed the judgment and ruled in favor of NBR.
The letter stated that the Civil Aviation Authority’s imposition of value-added tax on charges related to passenger or cargo international air transport services in Bangladesh directly contradicts the acceptable taxation policy announced by the International Civil Aviation Organization, a United Nations designated agency.
Bangladesh is a signatory to the Convention on International Aviation (Chicago Convention) and submitted its notification of accession to the Chicago Convention in December 1972.
According to international standards, international air transport services are usually zero-rated or exempt from value-added tax, and have the right to recover input tax. As noted above, the system currently in place in Bangladesh does not meet this criterion.
Some air transport-related services were excluded in the FY2019 budget.
CAAB has been taxing aeronautical and non-aeronautical charges since July 2018, and Emirates, Flydubai, Etihad and other airlines are paying accordingly.
Three of the airlines were unable to recover the VAT from passengers because the charge was not directly related to passenger costs, they said.