The National Board of Revenue has extended tax benefits, including income tax holiday till 2034, to private sector power generation companies which will go into commercial operation by the next three years.
The income tax wing of the revenue board on Thursday issued a statutory regulatory order offering five types of tax benefits for up to 15 years to the power companies, except for coal-based ones, which would go into commercial operation between January 1, 2020 and December 31, 2022.
The income tax holiday and other tax benefits were applicable only for those power companies which came into commercial operation by December 31, 2019.
According to the SRO, the private power generation companies, which will come into operation by December 31, 2022, will be exempted from payment of income tax on their incomes derived from power plants up to December 31, 2034, on payable interest against foreign loans, on royalties, technical know-how and technical assistance fee and capital gain to be derived from transfer of shares.
Foreign employees at the companies will also enjoy income tax exemption for three years from the date of their arrival in Bangladesh, the SRO said.
Officials said that the NBR extended the benefits following recommendation of the Power Division.
The division requested the NBR to extend the benefits for the private power generation companies which would go into commercial operation after December 31, 2019 so that the power plants which are now in the pipeline could avail the tax holiday and the other benefits.
In its latest letter sent on December 3, the division said that the deadline should be extended to check the price hike of electricity by the Power Development Board as the benefit would facilitate the board to purchase electricity from the private power plants at a lower price.
A total of 32 private power plants are now under implementation and are scheduled to come into operation by 2027, according to the PDB.
According to the initial plan, most of the plants were supposed to go commercial operation by 2019.
The PDB is also working on contracts and biddings for another 21 private power plants.
The officials said that there was another tax incentive package in place to exempt income tax gradually reducing rates for 10 years for power plants which would come into commercial operation between January 1, 2020 and December 31, 2024.
The power plants, however, were reluctant to avail the tax benefit at reduced rates, said NBR officials.
In a separate SRO issued on Thursday, the revenue board said that the tax benefits for 10 years at gradually reduced rates would be applicable for power plants that would come into operation from January 1, 2023.
The officials said that the power plants, which would miss the deadline set for December 31, 2022 would be able to avail tax benefits at reduced rates.
The power plants would enjoy full exemption from payment of income tax in the first five years of commercial operation, 50 per cent in the sixth, seventh and eighth year and 25 per cent in the ninth and 10th year, they said.
The revenue board first offered the tax holiday benefits for the private power plants, except for coal-based ones, in 2013 on condition that they would begin commercial operation by December 31, 2014, and the 10 years’ tax exemption at reduced rates for plants who would begin commercial operation from January, 2015 and afterwards.
Since then, the NBR has extended the deadline for the start of commercial operation several times.
Another SRO issued in July 2013 stated that companies which would enter into agreement for setting up coal-based power plants by June 30, 2020, would enjoy a number of tax incentives, including tax holiday for 15 years.
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