IOCs get waiver of VAT on service import

April 29, 2014

The National Board of Revenue has exempted the international oil companies from paying value-added tax on import of services mainly consultancy services for exploration and production of oil and gas, NBR officials said. They said the facility was offered to facilitate the exploration and production activities by the IOCs in the country in line with the production sharing contracts signed between Petrobangla and the IOCs.
The NBR on April 21 issued a statutory regulatory order amending the previous SRO in this connection, the officials said.
According to the VAT law of the NBR, 15 per cent VAT is applicable on import of service and service charges.
The IOCs mainly hire international consultants and technical experts for the purpose of exploration and production of oil and gas and pay handsome amounts in honorarium to them.
Currently, the IOCs are enjoying exemption from duty and VAT on import of all types of machinery and equipments under the PSC.
The revenue board in 1995 offered the waiver for the import of machinery and equipments.
NBR officials said at that time there was no VAT on import of services but the VAT wing of the NBR imposed 15 per cent VAT on the sector in 2010 by amending the VAT Act-1991.
They said service import by the IOCs came under the purview of VAT due to the amendment though the government agreed to provide tax exemption to the companies.
The officials said that imposition of VAT on the service import was contradictory with the PSC conditions.
Taking the issue into consideration, the power and energy ministry in December last year had placed a proposal to the NBR seeking waiver of VAT on service import by the IOCs.
Petrobangla, however, pays all kinds of duties and taxes, mainly income taxes, for the IOCs.
In its proposal the power and energy ministry had observed that the IOCs needed foreign consultants in gas exploration and production activities but they (consultants) might be discouraged to give services in Bangladesh due to 15 per cent VAT on their service charges.

-with New Age input

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