Lease tax can hit airlines’ flight to profit

Bangalore: After much turbulence, airlines seem to be flying towards profits as they trim costs, try to achieve economies of scale and rationalise fleet and routes.
But their flight to profit could hit a major air pocket if the government decides to remove the exemption on withholding tax on aircraft and engine lease in this budget, which expires on March 31, 2007.
The tax, which is levied on the value of the aircraft lease, ranges between 10% and 48%, depending on the country the lessor is registered in. Such a levy, says Deccan Aviation Ltd managing director Capt G R Gopinath, will make India less attractive for the leasing companies as they will to have file returns here.
Also, there are ways in which airlines can avoid the charge. That is, by signing lease agreement with lessors in countries with which India has double duty avoidance agreement.
New airlines that have drawn up major acquisition plans, could take a possible hit but they can escape from any impact of the levy by routing their acquisitions through tax havens.
27/02/07 Praveena Sharma/Daily News & Analysis

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Categories: General Aviation feb 2007