Refineries to avail tax exemptions for up gradation projects
Aftab Ahmed
Islamabad: The government has decided to offer tax exemptions to the existing and new oil refineries for up-gradation projects in the new proposed refinery policy.
Up-gradation/Modernization /Expansion of Existing Refineries
All existing refineries are incentivized to upgrade and modernize their refineries. There is no restriction on the technology, equipment or process to qualify for such up-gradation, provided that it results in Motor Gasoline and Diesel being produced by them meeting the specification notified by Competent Authority for import of such products as on the date of effectiveness of this Policy.
This could include modernization, expansion, and bottom-of-barrel up-gradation, whether individually or jointly, by the existing refineries. If an existing refinery qualifies, the government will treat its upgrade/modernization/expansion program as a new project and shall be eligible for the following fiscal incentives, to the extent of such upgrade/modernization/expansion project.
Twenty (20) year income tax holiday from profits and gains as provided in Clause 126 of the Income Tax Ordinance, as on the effectiveness date of this Policy, from the date of commissioning of the upgrade/modernization/expansion project.
There will be exemption from general sales tax, or any other ad Valorem tax on the import of any equipment to use in the refinery without any precondition for certification by the Engineering Development Board.
Construction, Operations, and Engineering services performed in Pakistan, whether by local companies or foreign companies operating In Pakistan, as well as procurement of any local materials, shall remain subject to all applicable local taxes, whether provincial or federal.
The fiscal Incentives shall be available for existing refineries to the extent of upgrade/modernization/expansion under the policy. The existing refineries shall maintain segregated accounts to ensure the applicability of the same. Modalities to do such apportionment of existing versus upgrade/modernization/expansion business shall be as per Rule 13 of the Income Tax Ordinance,2001.
The government shall exempt from all customs duties, taxes, surcharges, and levies on temporary imports by contractors/sub-contractors of machinery, vehicles, plant and equipment, other materials, and spares in connection with setting-up, operation, maintenance, and repair.
The fiscal regime for New refineries
All new deep conversion oil refinery projects of a minimum of 100,000 bpd refining capacity shall be eligible for the following fiscal incentives, the Ministry of Energy {Petroleum Division) approves before December 31, 2021.
Twenty (20) year income tax holiday from profits and gains as provided in Clause 126 of the Income Tax Ordinance at the time of effectiveness of this Policy, from the date of commissioning of the project.
The petroleum division has also proposed exemption from customs duties, withholding taxes, or any other levies on import of any equipment that refineries will use to install.It has also suggested to remove any precondition for certification by Engineering Development Board.
Construction, Operations, and Engineering services performed in Pakistan, whether by local firms or foreign firms operating in Pakistan, as well as procurement of any local materials, shall remain subject to all applicable local taxes, whether provincial or federal.
Temporary imports by contractors/sub-contractors of all machinery, vehicles, plant and equipment, other materials, and spares in connection with setting-up, operation, maintenance, and repair, shall be exempted from all customs duties, taxes, surcharges, and levies on import. The customs authorities shall release on the provision of a bond by the importer, for the defined time period of use.
