ECC approves 20-year tax holiday for oil refineries

ISLAMABAD: Government on Friday approved a 20-year income tax holiday in addition to exemption of duties on machinery imports to attract investments in oil refineries.

The Economic Coordination Committee (ECC) of the cabinet approved incentives package for setting up new deep conversion oil refinery projects, anywhere in the country, including expansion of existing refineries of minimum 100,000 barrels/day capacity. This would also be applicable to Pakistan Arab Refinery Limited’s coastal refinery project.

Prime Minister Shahid Khaqan Abbasi headed the ECC meeting at the Prime Minister’s Office.

The incentive package includes 20 years income tax holiday, exemption from all duties, taxes, surcharges and levies on import – by the refinery project, its contactors or any other individuals – of all machinery, vehicles, plant and equipment, other materials and spares and consumables for setting up, operation, maintenance and repair of refinery, according to a statement.

New refineries would augur well with the country that meets 70 percent of petroleum products’ needs from imports, which account for around 20 percent of total imports. Currently, the country has five refineries having combined capacity of around 404,000 barrels per day.

Industry officials said state-run Pakistan State Oil (PSO) is in talks with Power China for a partnership in an estimated eight billion dollars worth of refining project in the country. The refinery would likely have a capacity of 250,000 barrels/day to 300,000 bpd/day.

The ECC’s package also includes exemption from withholding tax and all other duties, taxes, surcharges, levies and import relating to foreign contractors/subcontractors and their personnel in connection with engineering, procurement, construction, commissioning, operation, maintenance and repair of the refinery. Sales tax and excise duty on supply of locally manufactured building and construction of material, equipment and service for setting up of refinery would also be exempted. New refinery projects would be given a new pricing mechanism. The new projects would also be facilitated in project infrastructure such as single point mooring, jetties, subsea/land pipelines.

The package also grants waiver to applicable development surcharge on the value of exports under the Export Processing Zones Authority (EPZA) Rules 1981 if refinery project is set up at EPZA.

“This decision will facilitate establishment of new state-of-the-art refineries any part of Pakistan that will ensure sustained supply of petroleum products in various parts of the country at affordable prices and reduce the import bill of petroleum products,” the statement added.