Errant power companies get 3-year tax holiday extension 

The government has extended tax benefits, by three years, for private power generation companies that failed to go into commercial operation on time. 

Additionally, companies that begin production in the next three years will also receive the tax benefit. 

Ten power plants missed the deadline of December 31, 2019.

A total of 46 private power plants are now under construction and are scheduled to come into operation by 2024, according to the Power Development Board. 

The income tax wing of the National Board of Revenue issued a statutory order on Thursday, offering tax benefits – including an income tax holiday – till 2034. 

Earlier, the income tax holiday had been offered till 2031. 

The move came as the power division decided not to undertake any new power projects during its surplus production capacity.  

Experts claimed the decision is suicidal for the Bangladesh Power Development Board – as the state's lone electricity buyer has been incurring losses from its capital payments to private electricity producers.  

However, power development board officials think the tax holiday offered to the private power producers does not contradict its policy. 

"We want to attract foreign investment to the power sector. That is why the offer has been extended. We are not going to undertake any new projects," said Sayeed Ahmed, chairman of the Bangladesh Power Development Board. 

The income tax holiday and other tax benefits were applicable only to those power companies which came into commercial operation by December 31, 2019.

However, the newly-issued order offers tax benefits, for up to 15 years, to power generation companies which will go into commercial operation between January 1, 2020 and December 31, 2022.

The revenue board issued the order following a recommendation from the Power Division, said an official at the revenue board. 

In its letter sent on December 3, 2019 the power division requested the National Board of Revenue extend the benefits to private power generation companies which would go into commercial operation after December 31, 2019 – so that the power plants that are now in the pipeline could avail the tax holiday and the other benefits.

According to the SRO, the private power generation companies – which will come into operation by December 31, 2022 – will be exempted from paying income tax on their incomes derived from power plants up to December 31, 2034, on payable interest against foreign loans, on royalties, on technical know-how and technical assistance fees, plus on capital gains derived from share transfers.

Foreign employees at the companies will also enjoy income tax exemptions for three years from the date of their arrival in Bangladesh, the SRO said.

The officials said that there was another tax incentive package in place to exempt companies from 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 revenue board officials.