The international oil companies (IOCs) operating in Bangladesh are again granted VAT waiver as the government revives the fiscal incentive two and a half years after the scrapping of the provision.
The National Board of Revenue (NBR) has reinstated the VAT waiver that lapsed on implementation of a new VAT law on July 1, 2019.
In a Statutory Regulatory Order (SRO), the VAT (value-added tax) wing of the NBR allows the IOCs to enjoy again this tax holiday from December 13, 2021 on local production and supply of gas and import of services as per their production-sharing contract (PSC) with the state-owned corporation Petrobangla.
"As per the regulatory order, IOCs operating in Bangladesh, including oil majors Chevron, Tullow and ONGC, will be able to enjoy the VAT-exemption facility from now on," said a senior VAT official.
He said the VAT waiver had been in place in the VAT law of 1991 but the new VAT law scrapped it with other SROs.
The revenue official, however, wouldn't comment as to whether VAT would be charged for the period from July 1, 2019 to December 12, 2021, as the IOCs are entitled to the waiver as per PSC since 1993. Petrobangla pays the VAT on behalf of the foreign companies exploring and extracting hydrocarbons in Bangladesh.
As per terms of the SRO, companies engaged in exploration, extraction and production of mineral oils and gas in Block-9, 12, 13, 14, Block SS-04 and block SS-09 under PSCs would enjoy VAT exemption under certain conditions.
"VAT exemptions will be applicable to all types of imported services under PSC on those blocks for exploration, extraction and production activitities," says the order.
The VAT wing also tagged some compliance requirements on submission of testimonials and undertaking in a prescribed format after every six months to avail the exemption on import of services.
The production-sharing contract between the government and IOCs incorporates VAT exemption. The contract is scheduled to expire in 2029.
The VAT official said the Ministry of Power, Energy and Mineral Resources requested the tax authority to reinstate the previous order to avoid contradiction with the production-sharing contract.
Earlier, in a separate letter to Petrobangla, Chevron Bangladesh had sought the inclusion of VAT in its monthly gas bills from the corporation.
Petrobangla buys gas and condensates at government- fixed prices from the IOCs in the light of sales and purchase agreements.
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