The Bangladesh government is offering tax relief to encourage investment in renewable energy. A new directive, S.R.O. No. 400-Law/Income Tax-54/2024 dated November 26, 2024, provides substantial tax exemptions for individuals and companies involved in renewable energy projects. This new order replaces an earlier one (S.R.O. No. 375-Law/Income Tax-50/2024 from October 2024) and offers even better terms. Both S.R.O.s are issued by the National Board of Revenue under the Income Tax Act, 2023. The new, more favorable rules will take effect from July 1, 2025.
This initiative is designed to make investing in green power like solar and wind more financially attractive, helping Bangladesh increase its renewable energy production.
Key Benefits Under the New Rules (S.R.O. 400)#
For individuals or companies whose renewable energy projects or power plants begin commercial production between July 1, 2025, and June 30, 2030, the following tax exemptions will apply:
- 100% Tax Exemption: For the first ten (10) years from the start of commercial production, you will pay no income tax. This is a significant improvement from the 5-year 100% exemption offered in the now-repealed S.R.O. 375.
- 50% Tax Exemption: For the next three (3) years (years 11 to 13), the tax payable will be reduced by half.
- 25% Tax Exemption: For the subsequent two (2) years (years 14 and 15), you will receive a 25% reduction in payable tax.
This provides a total tax relief period of 15 years, helping investors recoup their investments and improve project profitability. The previous S.R.O. 375 had a 10-year benefit period.
Who Can Benefit?#
The new S.R.O. 400 applies to “any individuals or companies” undertaking renewable energy projects or establishing power plants. This is broader than the earlier S.R.O. 375, which was more specific to companies operating under the Private Sector Power Generation Policy on a Build Own Operate (BOO) basis.
Conditions to Avail the Exemption#
To benefit from these tax cuts, investors must meet two main conditions:
- Comply with all provisions of the Income Tax Act, 2023.
- Obtain a No Objection Certificate (NOC) from the Power Division of the Ministry of Power, Energy and Mineral Resources for each renewable energy project or power plant. This replaces the previous requirement in S.R.O. 375 to adhere to the Private Sector Power Generation Policy of Bangladesh.
Why This Matters#
This enhanced tax exemption is great news for the renewable energy sector in Bangladesh. It:
- Reduces financial risk and makes green energy projects more profitable.
- Shows clear government commitment to promoting renewable energy.
- Encourages diverse investors (both individuals and companies) to participate in the sector.
By making renewable energy investments more attractive, Bangladesh aims to accelerate its transition to cleaner power sources, contributing to environmental sustainability and energy security. Stakeholders looking to invest in Bangladesh’s renewable energy sector should carefully review S.R.O. 400 to understand the full scope of benefits and requirements.