ECC approves 20-year tax break for modern oil refineries

Also exempts project sponsors from all duties and surcharges

ISLAMABAD: The government has announced a 20-year tax holiday and exemption from all duties and taxes for investors that will set up deep-conversion oil refineries, which will specifically facilitate consumers of central Punjab near Lahore.

Though the incentives have been offered to all investors, Pak-Arab Refinery Limited (Parco) and China will particularly benefit from the move.



This came after Pakistan and China signed a memorandum of understanding (MoU) in the second week of April for building the South-North gas pipeline, an upcountry deep-conversion oil refinery and a crude oil pipeline.

Another MoU was inked between Pakistan State Oil and Power China for construction of the upcountry deep-conversion oil refinery and laying the crude oil pipeline.

The tax break and duty exemption were approved in a meeting of the Economic Coordination Committee (ECC) of the cabinet, chaired by Abbasi, at the Prime Minister's Office on Friday.

In an effort to stimulate investment in the country, the ECC approved a landmark incentive package for setting up new state-of-the-art deep-conversion oil refineries anywhere in the country including the expansion of existing refineries by a minimum of 100,000 barrels per day. The package will also be applied to the Parco coastal refinery project.

The incentive package carries a 20-year income tax holiday, exemption from all duties, taxes, surcharges and levies on imports made by sponsors of a refinery project, their contactors or any other persons. The exemption also covered all machinery, vehicles, plant and equipment, other material and spares and consumables required for setting up, operating, maintaining and repair of the refinery.

The package includes exemption from withholding tax and all other duties, taxes, surcharges, levies on imports made by foreign contractors/sub-contractors and their personnel in connection with the engineering, procurement, construction, commissioning, operation, maintenance and repair of the refinery.



Sales tax and excise duty on the supply of locally manufactured building and construction material, equipment and services for setting up the refinery will also be removed.

According to the package, new refinery projects will be given a pricing mechanism that will be no less favourable than the prevailing mechanism.

New projects will also be facilitated through related infrastructure such as the single-point mooring (SPM) facility, jetties, sub-sea/land pipelines, etc.

The package waives the applicable development surcharge on exports under the EPZA Rules 1981 in case a refinery is set up in the Export Processing Zone.

This decision is expected to facilitate the establishment of new state-of-the-art refineries in 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 oil products.

Published in The Express Tribune, April 29^th, 2018.

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