10-year tax holiday for PPP projects

The tax administration has offered a 10-year tax exemption on income from Public Private Partnership (PPP) schemes in 14 areas, mostly related to large public infrastructures, beginning July this year.

The tax break will be effective from the day the commercial operations of PPP projects begin, said the National Board of Revenue in a notification last week.

PPP schemes to build national highways or expressways and related service roads, flyovers, elevated and at grade expressways, river bridges, tunnels, river ports, sea ports, airports, subways, monorails, railways, bus terminals, bus depots and elderly care homes would be eligible for the tax break.

Companies must have taxpayer identification number and submit income tax returns to avail the waiver, according to the NBR.

Tax officials said the benefit has been offered based on recommendations from the Bangladesh Public Private Partnership Authority.

The tax incentive comes at a time when 45 PPP projects are being implemented. The share of private investment in the projects is about $14 billion, according to the budget speech of Finance Minister AMA Muhith.

Of the projects, loan agreements have been signed for nine projects while 13 projects are at the procurement stage, said Muhith on June 1.

He said state-run Bangladesh Infrastructure Finance Fund Ltd (BIFFL), established in 2011 to bankroll PPP infrastructure projects, has so far provided Tk 2,113 crore to 26 PPP projects.

“We have plans to invest about Tk 3,809 crore from BIFFL in 20 more projects in 2017 and 2018,” he said.

The minister said the government has created necessary legal and institutional framework to mobilise private investment in the construction of public infrastructure under PPP arrangement.

The government has also formulated the procurement guidelines for PPP projects 2016 and the guidelines for Unsolicited Proposal 2016, which has infused dynamism in PPP activities, said Muhith.

Companies will also enjoy tax waiver on capital gains arising out of transfer of share capital.

The decade-long tax break will also be applicable in case of payment of royalty, technical know-how and technical assistance fees, according to another notification of the NBR.

In addition, foreign technicians appointed under the PPP schemes will enjoy 50 percent tax cuts on their incomes in the first three years of their engagement.

But they will not get the benefit after five years of commencement of commercial operations by the companies, according to the NBR.