25-year tax exemption for Indian coal power project in Sampoor

Minister of Economic Development Basil Rajapaksa has made new regulations under the Strategic Development Projects Act to give tax exemptions to the Indian company that will establish the Coal Based Power Station of 500 MW capacity, on Build-Own-Operate (BOO) basis at Sampoor in the Trincomalee District

The coal power project is a joint venture project between the Ceylon Electricity Board (CEB) and the National Thermal Power Corporation (NTPC) Ltd, India.

Among the exemptions are a 25-year Corporate Income tax holiday period under the Inland Revenue Act, commencing from either the first year in which the Company makes taxable profit or, two years after commencement of commercial operations, whichever is first.

The Project Company shall be exempted from the payment of Withholding tax, on interest paid on foreign loans obtained for capital expenditure, and on technical fees paid to consultants employed in the project.
The tax on dividend distributed to shareholders out of profits, will also be exempted from Income tax during the said 25-year tax exemption period.

A five-year tax exemption from PAYE tax shall be applicable for a maximum number of eight expatriate staff of the Project Company.

There will also be an exemption of the payment of Value Added Tax (VAT) for five years on the importation of project related goods and the local purchases of project related goods and services, including payments payable to contractors and sub-contractors approved by the Project Company, while the import of coal, raw material and spare parts shall be exempted from the VAT payment for a period of 25 years from the date of commencement of commercial operation.

Other tax exemptions are for the Port and Airport Development Levy and the Nation Building tax for five years. However, for the import of coal, raw material and spare parts, the company will get an exemption from these taxes as well as the Economic Service Charge and customs duties for a period of 25 years from the date of commencement of commercial operation.

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