Huge tax benefits in store for economic zones

The National Board of Revenue (NBR) is set to offer tax breaks to investors and developers of economic zones for a period of 10 years to encourage local and foreign investments, job creation and disciplined industrial expansion in Bangladesh.

“We are planning to offer the incentive with the objective to encourage local and foreign investment and generate employment. We expect the incentives will boost planned industrialisation,” said a senior official of the NBR.

The revenue authority has prepared to offer the benefits based on recommendations from the Bangladesh Economic Zones Authority (BEZA) to promote investment in the industrial areas.

The BEZA has so far approved the proposals for 22 economic zones, with construction set to begin at Mongla, Anwara, Mirsorai in Chittagong, Moulvibazar and Cox's Bazar. 

Investors in these industrial sites will be able manufacture goods to cater to both the domestic and foreign markets -- scope which is not present in the eight export processing zones (EPZs). EPZ firms have to pay customs duty before they can sell their products in the local market.

As per the NBR plan, investors in the economic zones will get a full tax waiver on incomes in the first three years, after which the benefits will progressively decline.

For instance, investors will get 80 percent tax waiver in the fourth year of commercial production, with the tax breaks declining by 10 percentage points each year to touch at 20 percent in the 10th year, said the official. The tax benefit will be phased out in the 11th year.

Apart from the benefits, the companies will also get tax exemptions from declared dividends since the beginning of commercial operation.

Foreign technicians to be appointed to the factories inside economic zones will get a 50 percent tax waiver on their incomes in the first three years of their arrival in Bangladesh.

Companies will also get tax breaks from capital gains from share transfer in the first ten years of commercial operation.

Royalties, technical know-how and technical assistance fees to be paid by the firms in the economic zones will also be exempt from tax in the first ten years.

Along with investors, the developers and co-developers will also enjoy full tax exemptions during the first ten years of commercial operation.

They will get a 70 percent tax waiver from incomes in the 11th year and 30 percent tax waiver in the 12th year, according to the NBR. The measures are likely to be announced through a gazette notification soon, said the official.

Apart from tax holidays, investors are also likely to get waivers from customs duty and value-added tax on various products and services, said BEZA Executive Chairman Paban Chowdhury.

He expects incentives to attract investors from home and abroad. “In some cases, the incentives that we will offer will be more attractive than EPZs.”

“There are interests among foreign investors to invest in the economic zones,” he said, adding that China and Japan have shown interests in developing two and three zones respectively.

The government aims to establish 100 economic zones in 15 years, which, once up and running, will create one crore jobs, according to BEZA.

Around 70,000-75,000 acres of land would be required to set up the zones.

In line with the aim, BEZA will also allow the private sector to establish the economic zones. So far, it has approved four private economic zones.

Of the sites, Meghna Group of Industries will build two economic zones and AK Khan and Abdul Monem one each, according to BEZA.