The United Arab Emirates (UAE) has sought waiver of VAT (value-added tax) on three Emirati airlines retrospectively, alleging that such levy is against globally accepted standards.
Following assurances of considering this remission by the PM herself to a UAE diplomat, the UAE embassy recently relayed the fliers' plea to foreign ministry to this end, officials said.
Emirates, Flydubai and Etihad have urged the Bangladesh authorities to waive an estimated Tk 6.0-billion VAT on aeronautical and non-aeronautical charges for the period from 2008 to 2018.
The UAE embassy in Dhaka forwarded the letters, sent by Emirates, Etihad and the low-cost Flydubai, to the ministry concerned recently.
"Charging taxes like VAT with retrospective effect is not in accordance with internationally accepted standards as the airlines are unable to recover this (claimed) VAT from customers," reads the letter sent by the embassy.
"Thus, the VAT charged by the Bangladesh authorities will incur a significant financial loss for the UAE airlines," it says.
Mohamed Alhammadi, area manager of Emirates Bangladesh, Kumar Sankar, area finance manager of Etihad (Indian subcontinent, Asia-Pacific and Far East) and Arbind Kumar, senior vice-president (finance) of Flydubai wrote the letters addressing the NBR chairman.
The ministry has recently forwarded the letter for consideration of the National Board of Revenue (NBR).
However, a senior NBR official said the issues with a national priority or related to bilateral relations are usually actively considered by the board.
The official said the Civil Aviation Authority of Bangladesh (CAAB) did not charge the VAT that was in place on different services of those carriers.
The issue was under legal procedure as the aggrieved party filed a writ petition, challenging the VAT claims by the relevant authorities, the official added.
In July 2015, the VAT north zone imposed VAT with retroactive effect on those relevant charges from January 2009.
The NBR official said the unrealised VAT has been detected after scrutinising annual audited financial reports of chartered accountants of the CAB.
In August 2017, the Appellate Division of the Supreme Court issued a ruling that VAT is applicable to aeronautical charges.
The verdict was reviewed by the Chief Justice and it was given in favour of the NBR.
"Imposition of VAT on the relevant charges in Bangladesh by CAAB on international air transportation services of passenger or cargo is directly contradicting acceptable policies on taxation published by International Civil Aviation Organisation, a specified UN agency," said the letters.
Bangladesh is a signatory to the Convention on International Aviation (Chicago Convention) and has provided its notification of the Adherence to the Chicago Convention in December 1972.
"Based on international standards, international air transportation services are typically either zero-rated or exempted from VAT with the right of recovery of input VAT. As described above, the system is currently implemented by Bangladesh is not in line with this standard."
In the 2018-19 fiscal budget, some air transport-related services were removed from exemptions.
The CAAB started taxing aeronautical and non-aeronautical charges from July 2018 and Emirates, Flydubai, Etihad and other airliners are paying accordingly.
Three of the aviation companies are not able to recover this VAT from passengers as the charge is not directly related to the passenger costs, they said.
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