ISLAMABAD: Federal Board of Revenue (FBR) has granted an exemption from income tax to the tune of Rs27 billion during tax year 2020 to power generation companies.
During the tax year 2020, around 73 companies were beneficiary of the income tax exemption. The power generation companies are availing tax exemption from total income since 2001 and there is no sunset clause attached to this exemption.
The exemption is available under Clause 132 of Part 1 of Second Schedule of Income Tax Ordinance, 2001.
The FBR explains the exemption regime as:
Profits and gains derived by a taxpayer from an electric power generation project set up in Pakistan on or after the 1st day of July, 1988, subject to following conditions:
(a) owned and managed by a company formed for operating the said project and registered under the Companies Ordinance, 1984, and having its registered office in Pakistan;
(b) not formed by the splitting up, or the reconstruction or reconstitution, of a business already in existence or by transfer to a new business of any machinery or plant used in a business which was being carried on in Pakistan at any time before the commencement of the new business; and(c) owned by a company fifty per cent of whose shares are not held by the Federal Government or Provincial Government or a Local Government or which is not controlled by the Federal Government or a Provincial Government or a Local Government
Provided further that exemption under this clause shall also be available to the expansion projects of the existing Independent Power Projects already in operation.