Tax break to stay till 2036 for private power producers

The National Board of Revenue (NBR) has extended a tax holiday by 12 years on the income privately-run power plants, except for coal-fired ones, that will start generation of electricity anytime before June 30 next year. 

This means the tax exemption can be enjoyed until June 30, 2036, according to an NBR notification issued on June 19.

The tax break is being offered since 2011 to support the government's goal to expand the country's energy production capacity to support the economy, which has been growing annually by around 6 per cent over the last two decades.

Until January 2023, Bangladesh's total installed capacity was of 23,482 megawatts (MW), of which the private sector accounts for 44 per cent, according to Bangladesh Economic Review 2023.

There are another 20 projects of private power producers under construction having a production capacity of 5,047 MW, according to the review.

A senior NBR official said the tax department received applications from around 10 private power companies informing that a number of them could not start production before December 31, 2022 to avail an initial tax exemption, which was to run till December 2034.

"Renewable power producers will also be able to avail the benefit," he said.

A number of gas-based private sector power projects could not launch commercial operations for a lack of gas and delay in construction of transmission lines, said Imran Karim, immediate past president of Bangladesh Independent Power Producers' Association (BIPPA).

So, the NBR has extended the benefit, he said.

Foreigners who will work at the power plants will enjoy a tax exemption on their income for three years from the day they begin their service in Bangladesh, said the tax authority.

Private power producers will not need to pay tax on interest on foreign loans, royalties, technical know-how and technical assistance fee and on capital gains from transfer of shares, said the NBR.

However, private producers who will begin commercial operation within June 30, 2025 will not get a full exemption for the period until June 30, 2036.

The tax administration said these producers would get full exemption for the first five years on their income.

The tax benefit will decline to half in the sixth and seventh year. In the remaining three years, the amount of tax exemption will be 25 per cent, according to the notification.

Karim said the tax administration should make it clear what it would do for power projects that would start generation after June 30, 2025.