Special tax regime for aviation sector on the card 

aviation sector

By Shahzad Paracha

ISLAMABAD: The federal government is contemplating a reduction in the taxation regime to encourage investment in the aviation sector.

Sources indicate that, under the recently approved revised National Aviation Policy-2023, the government is exploring the possibility of granting industry status to the aviation sector.

Additionally, there are plans to introduce a reduced taxation regime to attract investment across various facets of the sector, including air services, airports, infrastructure development, flight catering services, aircraft manufacturing, maintenance and repair organizations, ground support equipment, and the import of aircraft, including engines, spare parts, and supplies of all specifications.

The revised NAP 2023 proposes significant amendments to Safety Security and Regulatory Oversight, Air Traffic Rights, Guidelines on Air Service Operators, Aviation Infrastructure Development, Guidelines for Allied Service Providers, and the NAP-2023 implementation and Revision.

According to NAP 2023, the government has mandated the registration of all aircraft owned or operated by air service operators on the Pakistan Aircraft Register. Furthermore, there are specified aircraft age and life limitations for air service operators, and the conversion of aircraft from cargo to passenger operations is prohibited.

Requests for variation in the induction or retirement criteria for an aircraft will be evaluated by a technical committee constituted by the DGCAA, with the committee’s recommendations subject to approval by the licensing authority.

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Government documents reveal plans to encourage brownfield airports through investment models in alignment with Pakistan’s investment policy. Additionally, the government aims to develop airports under Greenfield in locations without existing facilities. PCAA and PAA will strategize to attract investment for both Greenfield and Brownfield airports.

Under NAP 2023, incentives, including land lease and licenses, will be offered to Aircraft Maintenance Organizations (AMOs) and Maintenance Repair and Overhaul (MROs), and 100 percent Foreign Direct Investment (FDI) will be permitted through joint ventures with local business entities.

The document also outlines the conditions under which foreign-registered aircraft can be inducted on wet lease, including aircraft accidents, maintenance, market evaluation, temporary expansion, and Hajj, Umrah, or Ziarat operations. The wet lease period shall be up to 120 days, extendable to a maximum of 10 days from the induction date.

According to the document, the Aircraft Accident Investigation Board (AAIB) will investigate incidents and accidents involving civil aircraft operating in Pakistan. If a Pakistan-registered aircraft encounters an incident or accident outside Pakistan, AAIB may investigate on the authorization of the Ministry of Aviation. Investigations will have a specific time frame, and findings and recommendations will be shared with stakeholders for proactive measures to avoid future occurrences. The Ministry of Aviation will periodically review the implementation of these recommendations.

Under NAP 2023, the role of PCAA as a regulator will be made independent of service provision, with financial and administrative autonomy in line with ICAO requirements. PCAA’s operational segregation into Regulatory Authority and Airports Authority has already been achieved, and the organizational structure will be administratively segregated in accordance with the corresponding Act of Parliament.

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