Offshore procurement contractors of energy projects: 1.4pc minimum tax exemption under study

ISLAMABAD: The Federal Board of Revenue (FBR) is seriously considering granting exemption of 1.4 percent minimum tax for the offshore procurement contractors of the China-Pakistan Economic Corridor (CPEC) energy projects. Sources told Business Recorder here on Tuesday that the issue was discussed at the FBR during the last meeting of pending taxation issues of the CPEC energy projects.

FBR Member Policy Inland Revenue informed the meeting that the FBR was moving from fixed and final taxation regime to minimum tax regime followed by standard taxation regime. Tax authorities explained that the said withholding tax was applicable in the past as well but it was not collected due to some reasons.

It was explained that the FBR reduced the said seven percent fixed and final tax to 2.1 percent minimum tax as a first step and further reduced to 1.4 percent as a minimum tax on offshore procurement contractors.

The FBR has decided to evaluate the case exclusively for the CPEC projects.

The FBR will also share the copy of the letter with the CPEC projects, which was shared with government of the AJK for resolution of the said tax matter at the AJK end.

The first case was related to the 1124 MW Kohala HPP.

It was proposed to reduce the 1.4 percent minimum tax on offshore procurement contractors to one percent fixed and final tax. The FBR will examine the case exclusively for the CPEC project.

On the issue of 700 MW Azad Pattan HPP projects, the FBR reiterated that in the same context, the FBR has decided to evaluate the case exclusively for the CPEC projects.

Referring to the case of 660 KV Matiari Lahore Transmission Line, the FBR will evaluate the case of 10 years income tax exemption for further clarification and revert with the possible solution, the sources added.

The meeting also discussed the issue of exemption of withholding tax on payment of fee for long-term financing and Sinosure. MD Private Power Infrastructure Board (PPIB) explained that the said exemption has been given to HUBCO project in Karachi and Matiari Lahore Transmission Line Project in Lahore.

However, the said exemption is not extended to the projects in Islamabad. FBR Member IR Policy responded that the FBR will evaluate the case for further clarification and revert with possible solution to facilitate the CPEC projects.

Copyright Business Recorder, 2020