Executive Summary & Statutory Authority
| Step / Compliance Requirement | Governing Section / Rule | Competent Authority | Fee / Fiscal Rate / Challan | Statutory Timeline |
|---|---|---|---|---|
| Application for Tax Exemption Certificate | Income Tax Act 2023, Sixth Schedule, Part A; Relevant SROs | National Board of Revenue (NBR) | Statutory application format; No government fee | Within 6 months from the date of commercial production |
| Customs Duty Exemption on Capital Machinery | Customs Act 2023, Sec 25; BEPZA Act 1980 / BEZA Act 2010 | Customs Wing, NBR / Customs House | 0% to 1% concessionary duty under relevant SRO | Prior to submission of Bill of Entry for clearance |
| Withholding Tax (TDS) Waiver on Royalties & Tech Fees | Income Tax Act 2023, Sec 119 read with Sixth Schedule | Taxes Circle / Commissioner of Taxes (NBR) | Exemption certificate upon application; Nil rate | At least 30 days prior to outward foreign remittance |
| Dividend Distribution Tax Exemption | Income Tax Act 2023, Sec 117; BEZA/BHTPA Statutory SROs | Authorized Dealer (AD) Bank / Taxes Zone | 0% WHT during holiday period (Non-residents) | Concurrently with dividend repatriation approval |
| Annual Statutory Corporate Return & Audit Filing | Income Tax Act 2023, Sec 166, 171 & 173 | Taxes Circle / Deputy Commissioner of Taxes | Standard filing compliance; Audited Accounts Form | Annually on or before the statutory Tax Day |
Featured Snippet: A tax holiday in Bangladesh is a statutory, time-bound exemption from corporate income tax granted under Section 76 and the Sixth Schedule of the Income Tax Act, 2023, activated through S.R.O.s issued for BEZA economic zones, BHTPA Hi-Tech Parks, and BEPZA EPZs, subject to strict procedural compliance and formal NBR confirmation.
Bangladesh's fiscal incentive regime is not a matter of administrative grace but a codified, multi-statute architecture requiring precise procedural navigation. The three principal enabling statutes are the Bangladesh Economic Zones Act, 2010 (Act No. 42 of 2010), the Bangladesh Hi-Tech Park Authority Act, 2010 (Act No. 8 of 2010), and the Bangladesh Export Processing Zones Authority Act, 1980 (Act No. XXXVI of 1980), each of which establishes a statutory authority — BEZA, BHTPA, and BEPZA respectively — empowered to allocate industrial land, issue operating licenses, and certify commercial operation dates that trigger downstream tax relief.
The substantive tax relief itself, however, does not flow automatically from zone membership. It is anchored in the Income Tax Act, 2023 (Act No. 12 of 2023), which repealed and replaced the Income Tax Act 2023. Section 76 of ITA 2023 preserves the National Board of Revenue's (NBR) statutory power, exercised with Government sanction, to grant full or partial exemptions from income tax. This power is operationalised through Statutory Regulatory Orders (S.R.O.s) — principally S.R.O. Nos. 227 to 230-AIN/IT/2015 — which remain in force under the savings provisions of Section 344 of ITA 2023 and the General Clauses Act, 1897. The Sixth Schedule of ITA 2023, particularly Paragraph 21 of Part A, codifies the IT/ITES exemption previously found in Paragraph 33 of the Sixth Schedule to the repealed 1984 Ordinance.
On the indirect tax side, the Customs Act, 2023 (Act No. 57 of 2023) and the Value Added Tax and Supplementary Duty Act, 2012 (Act No. 47 of 2012) furnish the statutory hooks for duty-free capital machinery imports and VAT relief on zone-based utility consumption, operationalised via S.R.O. Nos. 133–134-AIN/2015/Customs and 186–187-AIN/2019/Mushak.
This treatise dissects each layer of this architecture — direct tax holidays, indirect tax immunities, foreign exchange treatment, procedural mechanics, judicial doctrine, and compliance risk — for corporate counsel, CFOs, and investors structuring operations in Bangladesh's economic zones and technology parks.
1. The Statutory Architecture of Investment Incentives
1.1 Three Parallel Authorities, One Fiscal Gatekeeper
Bangladesh operates three distinct zone regimes with overlapping but non-identical fiscal treatment:
- BEZA administers general-purpose Economic Zones (public, private, and specialised) under the BEZA Act 2010, targeting manufacturing, agro-processing, and mixed-industry investment.
- BHTPA (Bangladesh Hi-Tech Park Authority) administers dedicated Hi-Tech Parks and Software Technology Parks under the BHTPA Act 2010, targeting IT, ITES, electronics, and knowledge-based industries.
- BEPZA administers legacy Export Processing Zones under the 1980 Act, historically the earliest vehicle for export-oriented manufacturing incentives, with its own bonded warehousing and duty exemption framework predating BEZA/BHTPA.
Critically, none of these three authorities possesses independent power to grant tax exemption. Each functions as a licensing and infrastructure gatekeeper whose Commercial Operation Date (COD) certification is a necessary but not sufficient precondition for NBR-administered tax relief. This bifurcation — investment promotion authority versus revenue authority — is the single most litigated structural feature of the regime, as explored in Section 6 below.
1.2 The Transition from Income Tax Act 2023 to ITA 2023
The repeal of the Income Tax Act 2023 and its replacement by the Income Tax Act, 2023 did not extinguish the substantive tax holiday framework; it relocated it. The general industrial tax holiday previously governed by Sections 46B and 46C of Income Tax Act 2023 — covering qualifying industrial undertakings commencing commercial production between 1 July 2019 and 30 June 2026/2026 — is now housed in Chapter 6 and the Sixth Schedule (Parts A and B) of ITA 2023. The eligibility architecture (minimum paid-up capital, VAT registration, environmental clearance, non-resident shareholder disclosure) survives largely intact, but practitioners must map legacy assessment years carefully against the transitional savings clause in Section 344 of ITA 2023, which preserves the validity of S.R.O.s, notifications, and pending assessments issued under the repealed Ordinance.
1.3 Sovereign Fiscal Prerogative versus Investment Guarantees
The Foreign Private Investment (Promotion and Protection) Act, 1980 guarantees non-discriminatory treatment and repatriation rights to foreign investors but does not — and cannot — bind Parliament's fiscal sovereignty. As the Appellate Division held in Collector of Customs v. Dulamia Cotton Spinning Mills Ltd. (1997) 49 DLR (AD) 168, statutory tax measures may be amended or withdrawn notwithstanding prior administrative assurances. This principle underlies every subsequent Finance Act's power to curtail, taper, or sunset existing S.R.O.-based exemptions.
2. Corporate Income Tax Holidays: Hi-Tech Parks and the IT/ITES Ecosystem
2.1 The 10-Year Tiered Exemption Schedule for Hi-Tech Park Units
S.R.O. No. 230-AIN/IT/2015 establishes the descending-tier exemption applicable to industrial units physically located within a gazetted Hi-Tech Park or Software Technology Park:
| Year of Operation | Exemption Rate |
|---|---|
| Years 1–3 | 100% |
| Year 4 | 80% |
| Year 5 | 70% |
| Year 6 | 60% |
| Year 7 | 50% |
| Year 8 | 40% |
| Year 9 | 30% |
| Year 10 | 20% |
This tapering mechanism is deliberately designed to avoid a fiscal "cliff-edge" — the effective tax rate rises gradually rather than jumping instantly from 0% to the full 27.5% corporate rate at Year 11. Zone Developers (as distinct from unit investors) receive a materially more generous profile under S.R.O. No. 228-AIN/IT/2015: full 100% exemption for the first ten years, tapering to 70% in Year 11 and 30% in Year 12, reflecting the higher capital intensity and longer payback horizon of infrastructure development versus operating tenants.
2.2 The IT/ITES Blanket Exemption: Paragraph 21, Part A, Sixth Schedule
Distinct from the Hi-Tech Park physical-location incentive, Bangladesh maintains a sector-wide exemption for IT-Enabled Services regardless of physical situs, now codified at Paragraph 21, Part A of the Sixth Schedule to ITA 2023 (successor to Paragraph 33 of the Sixth Schedule under the 1984 Ordinance). The statutorily enumerated scope includes:
- Software development and software solutions delivery
- Cloud computing and hosting services
- Digital content development and management
- IT support and software maintenance services
- Website hosting
- Digital data analytics and artificial intelligence development
- Medical transcription
- Call centre services
- Search engine optimisation services
This exemption was originally scheduled to lapse on 30 June 2026. The Finance Act, 2026 extended the sunset to 30 June 2027, but attached a decisive new condition: the exemption is available only if all business transactions — receipts, disbursements, and settlements — are conducted through formal banking channels or regulated digital payment gateways. This "cashless mandate" transforms what was previously an unconditional sectoral exemption into a conditional one, and its practical implications for informal-economy-adjacent ITES operators (e.g., freelance aggregators, small BPOs) are substantial.
2.3 Interaction with Corporate Rate Structure
Where the exemption is disallowed — whether through non-qualification, expiry, or breach of the cashless condition — the entity reverts to the standard corporate rate under the First Schedule of ITA 2023: 27.5% for non-listed companies and 20% for companies listed on a stock exchange (subject to conditions regarding public shareholding thresholds), plus applicable surcharge computations under the Finance Act of the relevant year.
2.4 Developer-Level Protections and Infrastructure Incentives
Zone and park developers additionally benefit from exemptions on dividend income distributed to shareholders during the exemption period and from customs relief on construction materials (discussed in Section 4), reflecting the state's policy priority of accelerating built infrastructure ahead of tenant onboarding.
3. The BEZA Fiscal Incentive Matrix for Industrial Undertakings
3.1 Unit Investor Holiday Profiles under S.R.O. 229-AIN/IT/2015
Industrial units established as investors within a BEZA-designated Economic Zone receive an identical descending 10-year tier to the BHTPA unit investor schedule (100% for Years 1–3, tapering to 20% by Year 10). This parity reflects a deliberate NBR policy of harmonising fiscal treatment across zone types to prevent regulatory arbitrage between BEZA and BHTPA jurisdictions. BEZA Zone Developers receive the same 12-year profile as BHTPA developers under S.R.O. No. 227-AIN/IT/2015 (100% for Years 1–10, 70% Year 11, 30% Year 12).
3.2 Ancillary Tax Treatment: Dividends, Capital Gains, and Expatriate Salaries
Beyond the headline corporate exemption, the BEZA/BHTPA incentive package extends to:
- Dividend income distributed by a zone enterprise during its exemption period, often granted parallel exemption in the hands of the recipient shareholder, subject to the specific conditions of the applicable S.R.O.
- Capital gains on transfer of shares in a zone-registered company, subject to structural conditions revised periodically through Finance Act amendments.
- Expatriate technician salaries — a targeted 50% income tax exemption for three years for foreign technical personnel employed in the zone enterprise, designed to reduce the effective cost of imported technical expertise during the ramp-up phase.
3.3 Minimum Tax Exposure During the Holiday Period
A frequently overlooked structural feature is that a tax holiday does not immunise an enterprise from minimum tax under Section 163 of ITA 2023. Section 163 imposes a gross-receipts-based minimum tax liability that can bite even where the entity's computed taxable income is nil or negative due to exemption. Certain categories of income — particularly cross-border service payments subject to final withholding tax under specific treaty or domestic provisions — are treated as final tax liabilities that override the baseline holiday exemption. Counsel must therefore conduct a bifurcated computation: (i) ordinary business income subject to the holiday exemption, and (ii) minimum tax/final tax liability computed independently, with the higher of the two figures (subject to statutory ordering rules) representing actual tax exposure.
3.4 Disallowance Risk under Section 55: Inadmissible Expenses
Section 55 of ITA 2023 (successor to Section 30 of Income Tax Act 2023) disallows deductions for payments made in breach of withholding tax obligations, payments exceeding prescribed digital transaction thresholds, or royalty/technical fee payments beyond authorised percentage caps (commonly capped around 6% of turnover for royalty and technical assistance fees under Bangladesh Bank remittance guidelines). Disallowed expenditure is added back to computed income, which — combined with Section 163 minimum tax exposure — can generate real tax liability notwithstanding an ostensibly "100% exempt" operating year.
4. Indirect Tax Immunities: Customs, VAT, and Border Controls
4.1 Duty-Free Capital Machinery Imports
S.R.O. No. 133-AIN/2015/Customs (BEZA) and S.R.O. No. 134-AIN/2015/Customs (Hi-Tech Parks) grant complete exemption from Customs Duty, Regulatory Duty, and Supplementary Duty under the Customs Act, 2023 (Sections 25 and 30, read with the First Schedule tariff classifications) on:
- Capital machinery and spare parts imported for initial plant setup
- Construction materials for factory buildings, data centres, and ancillary infrastructure
- Installation equipment directly incorporated into production or service delivery infrastructure
The exemption is conditional on end-use certification — machinery must be demonstrably installed within the licensed zone facility, and the Import Policy Order 2021–2026 imposes age restrictions on used/refurbished machinery, requiring international pre-shipment inspection certification for equipment beyond prescribed vintage thresholds.
4.2 VAT Relief on Utilities and Services
Sections 26 and 126 of the VAT and Supplementary Duty Act, 2012 empower the Government to exempt or zero-rate specified categories of domestic supply. S.R.O. No. 186-AIN/2019/33-Mushak and S.R.O. No. 187-AIN/2019/34-Mushak operationalise this for zone developers and unit investors, zero-rating or exempting VAT on:
- Lease rental payments for zone land/space
- Electricity, water, and gas utility charges
- Security and facility management services procured within the zone
4.3 ASYCUDA World Protocols and CPC Coding
Practical customs clearance requires that the importing entity's Business Identification Number (BIN) be linked in the ASYCUDA World system to the correct Customs Procedure Code (CPC) reflecting its zone-specific concessional entitlement. Bills of Entry filed under incorrect or generic CPCs risk assessment at standard tariff rates, requiring subsequent refund claims — a materially more burdensome path than upfront correct classification. Clearing agents must reference the specific S.R.O. number and the BEZA/BHTPA import entitlement order on the customs declaration.
4.4 De-bonding and Domestic Tariff Area Sales
Where a zone enterprise seeks to sell finished goods into the Domestic Tariff Area (DTA) rather than exporting them, statutory duty becomes payable on the previously duty-free imported machinery/input content on a pro-rata or full basis, computed under Customs Act 2023 valuation rules at the depreciated value at the time of de-bonding. This is a frequent source of dispute where enterprises miscalculate the applicable duty base upon transitioning from export-oriented to domestic sales models.
5. Foreign Exchange Regulation and Repatriation Mechanics
5.1 Enterprise Classification under GFET
Bangladesh Bank's Guidelines for Foreign Exchange Transactions (GFET, Vol-1 & Vol-2) classify zone enterprises by capital structure, materially affecting repatriation and borrowing rights:
- Type A (100% Foreign-Owned): Unrestricted onshore/offshore FC accounts; dividends freely remittable through Authorized Dealers without prior Bangladesh Bank approval.
- Type B (Joint Venture): FC account access for operational settlement; dividend remittance capped at the certified non-resident shareholding percentage.
- Type C (100% Domestic): Standard Export Retention Quota constraints; dividends payable domestically in BDT; outward capital remittance restricted.
5.2 External Commercial Borrowing
Zone enterprises seeking foreign commercial loans must obtain clearance from the BIDA/BEZA Scrutiny Committee in addition to Bangladesh Bank validation, with pricing benchmarked to prevailing SOFR-linked margins.
5.3 Royalty and Technical Fee Remittance Caps
Royalty and technical assistance fee remittances are generally capped at approximately 6% of the preceding year's turnover for automated Authorized Dealer processing; amounts exceeding this threshold require case-specific BIDA/BEZA/BHTPA contract registration and central bank approval, failing which the excess is both non-remittable and disallowed as a deduction under Section 55 of ITA 2023.
6. Step-by-Step Compliance Roadmap
Phase 1: Zone Allocation
Applications are filed via the BHTPA OSS (oss.bhtpa.gov.bd) or BEZA OSS (pms.beza.gov.bd) portals, followed by Investment Promotion Committee review, issuance of a provisional Allotment Letter, and execution of a registered lease deed (typically 30–50 years) under the Registration Act, 1908.
Phase 2: Corporate and Fiscal Registration
- RJSC incorporation under the Companies Act, 1994
- e-TIN registration via
incometax.gov.bd - BIN registration via
vat.gov.bd - ASYCUDA World customs profile registration linked to the appropriate Commissionerate
Phase 3: The NBR Exemption Application — The 180-Day Rule
Following receipt of the Commercial Operation Date (COD) Certificate from BHTPA/BEZA, the enterprise must file a formal exemption application with the Member (Taxes Policy), National Board of Revenue, copied to the jurisdictional Commissioner of Taxes, within 180 days. This is not a directory timeline — NBR practice, reinforced by strict-construction jurisprudence (Section 7 below), treats late filings as presumptively fatal to first-year exemption entitlement.
Phase 4: Ongoing Filings
- Monthly: VAT return (Mushak-9.1) via VAT Online
- Per-shipment: ASYCUDA Bill of Entry under concessional CPC
- Annually: Corporate return under Section 166 of ITA 2023 by Tax Day (15th day of the seventh month following income year close), accompanied by ICAB Document Verification System (DVS)-certified audited accounts. A return lacking a valid DVS code is treated as invalid and assessed at regular rates.
7. Supreme Court Jurisprudence on Tax Incentives
7.1 Strict Construction Against the Claimant
M/S Sonali Steels Enterprise v. National Board of Revenue, 53 DLR (HCD) 371 (2001): The High Court Division held that tax exemption provisions represent a departure from the general rule of uniform taxation and must therefore be strictly construed against the taxpayer. Facts involved a manufacturer's claim to duty exemption on imported inputs where the notification's precise scope was disputed; the Court held that any ambiguity as to whether the assessee satisfied the operational conditions must be resolved in favour of the Revenue, not the claimant. This remains the controlling interpretive canon for all zone-based exemption disputes.
7.2 Promissory Estoppel Cannot Defeat Sovereign Fiscal Power
Collector of Customs v. Dulamia Cotton Spinning Mills Ltd., 49 DLR (AD) 168 (1997): The Appellate Division confirmed that the doctrine of promissory estoppel — ordinarily available to hold administrative bodies to prior representations — has no application against an express statutory provision or a sovereign fiscal measure. Where Parliament, through a Finance Act, curtails or amends a previously available exemption (as occurred with periodic tapering of SEZ/EPZ tax holidays), an investor cannot resist the amendment merely by pointing to earlier administrative assurances of continued benefit.
7.3 Statutory Mechanics Override Investment Agreements
Karnaphuli Fertilizer Co. Ltd. (KAFCO) v. National Board of Revenue, 57 DLR (HCD) 201 (2005): The High Court Division held that fiscal concessions embedded in an agreement between a foreign investor and an executive ministry or promotional authority are unenforceable against the tax administration unless a corresponding S.R.O. has actually been promulgated and the statutory application procedure satisfied. Investment promotion body assurances — including BEZA/BHTPA sanction letters — do not, by themselves, bind the NBR.
7.4 Administrative Circulars Cannot Narrow Statutory S.R.O.s
BSRM Steels Ltd. v. Commissioner of Customs, 68 DLR (HCD) 346 (2016): The Court held that once an enterprise satisfies the conditions specified in a duly published exemption S.R.O., customs officials cannot rely on internal operational circulars or administrative manuals lacking statutory force to deny or narrow the benefit. This precedent is frequently invoked where field-level Customs Houses attempt to impose additional documentary conditions not found in S.R.O. 133/134-AIN/2015.
7.5 Constitutional Remedy for Arbitrary Decertification
Where the NBR or a Customs formation arbitrarily revokes or refuses an exemption in defiance of an unambiguous S.R.O., the High Court Division's writ jurisdiction under Article 102 of the Constitution remains available, though courts require the petitioner to first exhaust the statutory condonation and appellate remedies under Sections 173 and 328 of ITA 2023 save in cases of manifest procedural impossibility (lex non cogit ad impossibilia).
Statutory Document Checklist
Zone Allocation Stage - Enterprise Sanction/Allotment Letter (BEZA/BHTPA OSS) - Registered Lease Deed (Sub-Registry, per Registration Act 1908) - Project Profile and Feasibility Study, certified by project directors
Corporate Formation Stage - Certificate of Incorporation, Memorandum & Articles of Association (RJSC) - 12-digit e-TIN Certificate (NBR) - 9-digit VAT BIN Certificate (NBR)
NBR Exemption Application Stage - Formal Statutory Exemption Application addressed to Member (Taxes Policy) - Commercial Operation Date (COD) Certificate from BHTPA/BEZA Monitoring Cell - Environmental Clearance Certificate (Department of Environment) - Fire Safety and Civil Clearance License - ICAB DVS-certified audited financial statements and tax computation
**
Frequently Asked Questions
◆ Related Statutory Guides & Practice Insights
<li style="margin-bottom:12px; line-height:1.5;">
<a href="/en/mra-microcredit-license-ngo-governance-bangladesh/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• Microfinance Institution (MRA) Regulatory Licensing & NGO Governance Handbook: Master-Class Guide for Bangladesh</a>
</li>
<li style="margin-bottom:12px; line-height:1.5;">
<a href="/en/how-to-get-e-tin-and-file-personal-income-tax-e-return-in-bangladesh-online/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• How to Get e-TIN and File Personal Income Tax e-Return in Bangladesh Online</a>
</li>
<li style="margin-bottom:12px; line-height:1.5;">
<a href="/en/beza-economic-zones-tax-holiday-one-stop-service-bangladesh/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• BEZA Economic Zones & Hi-Tech Parks: 10-Year Tax Holidays & OSS Directives</a>
</li>
<li style="margin-bottom:12px; line-height:1.5;">
<a href="/en/how-to-obtain-a-succession-certificate-in-bangladesh-civil-court-process-necessary-documents-bank-payouts/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• How to Obtain a Succession Certificate in Bangladesh: Civil Court Process, Necessary Documents & Bank Payouts</a>
</li>How did the Income Tax Act 2023 alter the tax holiday framework compared to the repealed 1984 Ordinance?
The Income Tax Act 2023 reorganized tax exemptions primarily under the Sixth Schedule, Part A. While retaining industrial incentives, the 2023 Act tightens compliance prerequisites: full tax exemption is strictly conditioned on filing timely returns under Section 166, maintaining audited financial statements according to IFRS/IAS, and adhering strictly to statutory withholding tax (TDS) obligations. Failure to comply with these procedural mandates invalidates the holiday for that assessment year, triggering full taxation at standard corporate rates.
What are the graduated fiscal tax incentives available to industrial units operating within BEZA Economic Zones?
Industrial units established in Bangladesh Economic Zones (BEZA) enjoy a 10-year tiered corporate income tax exemption under specific NBR Statutory Regulatory Orders (SROs). Typically, this entails a 100% exemption for the first three years, 80% in the fourth year, 70% in the fifth year, down to 20% in the tenth year. Investors also receive duty-free import of capital machinery, zero-rated local procurement of specified construction inputs, and full tax exemption on foreign dividend remittances for designated periods.
What specific fiscal incentives apply to IT and IT-enabled Services (ITES) within Bangladesh Hi-Tech Parks?
Units operating within Hi-Tech Parks under the Bangladesh Hi-Tech Park Authority Act 2010 receive up to a 10-year scaled corporate tax exemption on business income derived from qualifying hardware manufacturing or IT/ITES development. Additionally, non-resident technical personnel benefit from personal income tax relief for initial periods, import duty exemptions apply to research and production equipment, and dividend distribution taxes are completely waived for non-resident investors throughout the active holiday cycle.
Are companies enjoying tax holidays exempt from complying with Withholding Tax (TDS) regulations?
No. Tax holiday status exempts only the company's net corporate earnings from income tax. Under the Income Tax Act 2023, the entity remains a statutory 'deducting authority'. It must mandatorily withhold applicable tax (TDS) and VAT (VDS) from employee salaries, contractor payments, legal fees, vendor invoices, and lease payments, and deposit them into the national exchequer via treasury challans within statutory deadlines. Non-compliance can invalidate the holiday and incur penal interest.
What tax holiday incentives remain available for manufacturing businesses outside specialized economic zones?
Under the Sixth Schedule, Part A of the Income Tax Act 2023, newly established industrial undertakings outside EPZ/SEZ/Hi-Tech parks can qualify for reduced or exempt tax treatment if they operate in priority manufacturing sectors such as active pharmaceutical ingredients (API), electrical hardware, agro-processing, and automobile manufacturing. These incentives require minimum paid-up capital thresholds and operational certification, providing tiered relief over a 5 to 10-year operational lifespan depending on geographical location.
How are business losses and depreciation treated during the tax holiday period under the Income Tax Act 2023?
Depreciation during the tax holiday period is deemed to have been allowed at the standard statutory rates, effectively reducing the written-down value (WDV) of assets automatically. Business losses incurred during the tax holiday cannot be carried forward to set off against income arising after the holiday expires. Normal carry-forward provisions under Section 70 apply strictly within taxable streams, preventing post-holiday profit dilution from artificial tax-sheltered loss carry-forwards.