NBR grants 15-year tax exemption for new renewable plants

With the objective of facilitating clean energy generation, the National Board of Revenue (NBR) has granted a 15-year tax benefit for investments to establish renewable energy-based power facilities.

The revenue authority issued a circular in this regard on November 27, saying it would exempt all taxes on income from renewable energy projects if the plants start commercial production between July 1 next year and June 30, 2030.

A full tax exemption will be applicable for the first 10 years after starting production, according to the circular.

Half of the income will be tax-exempt for the following three years while 25 percent will be exempt for two years thereafter, the circular added.

The producer or the company will require a no-objection certificate from the Ministry of Power, Energy and Mineral Resources to avail of the benefit, it added.

Officials said the tax benefit was offered in line with a request from the Power Division to encourage private investment in clean energy ventures and cut dependence on fossil fuel-based electricity.

The NBR has previously offered tax breaks for privately-run power plants, except for coal-fired ones.

In June 2023, it provided a 12-year extension to a tax holiday on the income of private power plants, except for coal-fired ones, that started electricity generation before June 30, 2024.

On August 27 this year, the interim government cancelled 42 power plant projects, including 37 renewable facilities, with a combined capacity of around 3,102 megawatts (MW).

It announced that it would float tenders against all of those power plants, aiming to reduce tariffs.

Currently, the country has 893 MW of power generation capacity from renewable sources, accounting for about 3 percent of total capacity.