China Airlines, Eva Air play down tax reports

Asian Defense News: China Airlines and EVA Air yesterday played down reports that they have been asked to pay taxes to China for earnings made on the other side of the strait.
Airlines from both sides of the strait can enjoy mutual tax preferential treatments, a consensus reached at the second and third meetings of P. K. Chiang, chairman of the Taipei-based Straits Exchange Foundation, and Chen Yunlin, chairman of the Beijing-based Association for Relations Across the Taiwan Strait.
Based on that consensus, China has given Taiwan airlines tax preferential treatment, under which a three percent business tax and a 1.25 percent income tax are waived, as of December 2008.
However, Taiwan hasn't been able to reciprocate China's gesture, as a draft amendment to the Cross-Strait Relations Act, which gives legal ground to the preferential treatment, has not passed the Legislative Yuan. As such, Chinese air and sea operators are subject to a tax for earnings they make in Taiwan.
Dissatisfied, China has asked Taiwanese airlines, including China Airlines and EVA Air, to pay back taxes that accumulated starting in December 2008, the United Daily News reported, yesterday.
China Airlines has already applied for a deferment of the tax with Chinese authorities, it said, adding the company's financial operations have not been affected at this stage.
The company has also filed grievances with supervisory agencies on both sides of the strait to resolve the issue.
EVA Air, meanwhile, said it has not been asked to pay taxes to China. However, the airline said it has not received official documents on a waiving of the tax. Without those documents, EVA Air cannot wire earnings it has made in China back to Taiwan, it said, adding this will create inconveniences at its China operations.