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ISLAMABAD: The caretaker government is likely to announce new tax incentives/ concessions for the aviation sector to attract foreign investment.

Sources told Business Recorder that the government under the revised National Aviation Policy- 2023 shall consider granting industry status to the aviation sector.

The status of “industry” will give certain tax benefits to this sector. “Proposal of declaring aviation as an industry by federal government with proposed taxes, duties and other incentives” is under consideration of the caretaker government.

FBR issues tax expenditure report-2023: More exemptions, concessions given during 2021-22

The revised National Aviation Policy - 2023 contains certain tax incentives for the aviation industry, they said.

The excessive taxation is preventing growth in the aviation sector in Pakistan. Additionally, aeronautical and non-aeronautical charges levied by PCAA need to be rationalised to encourage growth.

At the same time, the government is also considering to provide a reduced taxation regime to attract investment in the sector that includes air service, airports, infrastructure development, flight catering services, aircraft manufacturing industry, maintenance and repair organisations, ground support equipment, and import of aircraft including aircraft engines, spare parts and supplies of all specifications.

The revised NAP 2023 proposed major amendments in the safety security and regulatory oversight, air traffic rights, guidelines on air service operators, aviation infrastructure development, guidelines for allied service providers.

Under NAP 2023, the government has made mandatory registration of all aircraft owned or operated by air service operators on Pakistan Aircraft Register.

Sources said that the government under NAP 2023 will not only offer incentives to aircraft maintenance organisations (AMOs) and maintenance repair and overhaul (MROs) in land lease and license but 100 percent Foreign Direct investment (FDI) shall be permitted by JV with local business entities.

Document states that the government has also permitted induction of foreign-registered aircraft on wet lease under special circumstances including aircraft accident, maintenance, market evaluation, and temporary expansion, etc. However, wet lease period shall be up to 120 days extendable to a maximum of 10 days starting from the induction date of aircraft.

Sources said that the Aircraft Accident Investigation Board (AAIB) shall carry out investigations pertaining to aircraft incidents and accidents involving any civil aircraft operating in Pakistan. If a Pakistan-registered aircraft encounters any incident or accident outside Pakistan, it may also be investigated by AAIB, on the authorisation of the Ministry of Aviation, if requested by the state where the incident or accident has occurred.

The investigations will be completed within a specific time-frame. Findings and recommendations of AAIB shall be shared with all stakeholders to help adopt a proactive approach to avoid future recurrence; implementation of these recommendations will be reviewed periodically by the Ministry of Aviation.

Under NAP 2023, the role of PCAA as a regulator shall be made independent of service provision with financial and administrative autonomy in line with ICAO requirements.

It is pertinent to note that PCAA’s operational segregation into Regulatory Authority and Airports Authority has already been achieved and the organizational structure shall be administratively segregated in accordance with corresponding Act of Parliament.

Copyright Business Recorder, 2023

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Muhammad Khurram Shabbir Nov 22, 2023 03:20pm
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