Finance Act 2026 broadens aviation tax exemption beyond PIA to all airlines registered in Pakistan from July 2026
ISLAMABAD: The federal government has expanded sales tax relief for Pakistan’s aviation sector by extending the exemption on the import and lease of aircraft and aircraft parts to all airlines registered in the country, replacing an earlier proposal that restricted the concession to the national flag carrier.
The measure has been introduced through the Finance Act, 2026, which amends the Sales Tax Act, 1990 and broadens the scope of tax relief across the aviation industry.
Under the original Finance Bill, 2026, the exemption was proposed exclusively for Pakistan International Airlines Corporation Limited (PIACL). However, the final legislation extends the concession to every airline company registered in Pakistan, ensuring equal tax treatment for all eligible operators.
According to the amended law, the exemption applies to the import or lease of aircraft and aircraft parts by any airline registered in Pakistan. The concession will take effect from July 1, 2026.
The Finance Act also retains the existing exemption for Pakistan International Airlines Corporation Limited (PIACL), allowing the national carrier to continue importing or leasing aircraft and related parts without the levy of sales tax.
To safeguard against misuse, the legislation requires customs authorities to ensure that imported aircraft parts, materials and articles are restricted to quantities reasonably required for the operation and maintenance of aircraft operated by the importing airline.
In addition, the law stipulates that ground handling equipment, service and operational vehicles, catering equipment and fuel trucks imported under the exemption—provided they are not manufactured locally—must be used exclusively within airport premises.
The expansion of the exemption is expected to lower the cost of fleet acquisition, maintenance and operational upgrades for Pakistan’s airlines, potentially encouraging investment in modern aircraft and supporting the long-term development of the country’s aviation industry.
The move forms part of the government’s broader fiscal measures under the Finance Act, 2026 aimed at promoting investment, improving competitiveness and facilitating growth in key sectors of the economy.