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Monday, 03 January 11
TAXATION FOR COAL MINING COMPANIES IN INDONESIA - A TAX EXPERTS VIEW
 COALspot.com - Mrs. Sri Wahyuni Sujono, managing partner of SF Consulting has wrote an exclusive report regarding taxation for coal mining companies in Indonesia for COALspot.com subscribers.
Currently, the conduct of Coal exploration, development and production in Indonesia is regulated by:
1.The Izin Usaha Pertambangan (IUP)/Mining Business License; and
2. The Perjanjian Karya Pengusahaan Pertambangan Batubara(PKP2B)/Coal Contract of Work (CCoW).
Tax Regime for a Coal Mining Company
The IUP company is subject to prevailing Indonesian tax laws. Unlike the CCoW, the IUP regulatory regime does not specify distinct tax rules. A CCoW company taxation terms in the Contract is lex specialis– that is, the terms in the contract override the general tax laws. For example, when certain specific tax rules are set out in a Contract, these tax rules take precedence over the prevailing tax laws. Generally, the tax rules in a Contract reflect those that are in force at the time the contract were signed, although there may be some exceptions. Typically, a Contract fixes the tax rules for the duration of the contract (with the exception of second generation CCAs where they generally follow the prevailing tax regulations).
Income Tax Rate
Under the prevailing Tax Law Regulations, a company is subject to corporate income tax on its net taxable profit. Net taxable profit is calculated based on gross income minus deductible expenses. The prevailing corporate tax rate for 2010 and onward is a flat rate of 25% of net taxable profit. If a Contract stipulates a specific corporate income tax rate, the Contract company may not be entitled to 25% corporate tax.
Income
Gross income usually represents sales of mining products and any other income earned by the mining company.
General Expenses
In general, deductible expenses are expenditures incurred to generate, maintain and collect taxable income and generally include an amount paid or accrued for all expenditures attributable to the company’s operations in a year which typically have a useful life of less than one year. Certain expenditures may not be tax deductible under the prevailing Income Tax law, e.g. donations and benefits-in-kind provided to employees. Some types of benefits-in-kind provided at the mining site may be deductible if the mine is located in a remote area (which is usually the case) and an approval from the DGT is obtained.
Exploration and Development Expenses
Exploration and development expenses may include camp construction, drilling, access road, project communication facilities, etc. On-site exploration expenses are generally deductible in the year the expenses are incurred provided the expenses meet the general deductibility criteria required. Exploration and mine development expenses should generally be capitalized and amortized upon spending rather than production.
Depreciation of Fixed Assets
Fixed assets are categorized into four categories, depending on the nature of the asset and its expected useful life. The rate at which the asset can be depreciated will depend upon the category of the asset. Assets are generally depreciated over 4, 8, 16 or 20 years and taxpayers may apply a diminishing balance or straight line approach to depreciation.
Amortization of Intangible Assets
Intangible assets may include pre-operating costs, patents, rights, licenses, etc. Costs incurred in the acquisition of mining rights with a beneficial life of more than one year should be amortized based on a production unit method, not exceeding 20% per annum.
Tax Losses Carried Forward
Tax losses can be carried forward for up to five years under the Tax Law and are utilized on a first-in-first-out basis. Tax losses cannot be carried back.
Reclamation Reserve
For accounting purposes, a mining company is usually required to maintain a reclamation reserve for environmental management and reclamation work during the contract period and at the end of the life of the mine. The reclamation reserve amount should be tax deductible provided that it is calculated in accordance with the prevailing energy/mineral resources sector laws/regulations. If the actual cost exceeds the reserve, the balance is generally tax deductible.
VAT
Under VAT Law No. 42/2009, coal is not subject to VAT. As a consequence, the input VAT paid to the company’s suppliers are not creditable. Some Contracts may adopt a VAT regime different than the prevailing VAT regulations. For example, there may be provision that Input VAT may be creditable/refundable despite the fact that the coal being produced is not subject to VAT. During the pre-production stage of the Contract, the company shall not have any Output VAT due to there being no delivery of mining product at that point. Therefore, VAT overpayment is likely as the company should pay its Input VAT to vendors for purchases of taxable goods/services. Some Contract companies should collect and pay VAT charged by its vendors (i.e. Output VAT) directly to the State Treasury (act as a VAT collector) as required by the relevant Contract.
Withholding Tax
The Contract company is obliged to withhold income tax from payments of dividends, interest, royalties and most types of services. The Withholding tax rate will depend on the type of service and whether the service provider is a resident or non-resident that stipulated in the tax rules Contract. The general withholding tax rate for services is 2%. The Withholding tax on dividends, interest, royalty paid to Indonesia tax resident is at 15% while for non-resident is set at 20%, though this rate is reduced by most of Indonesia’s double tax avoidance agreements. Some Contracts may provide a reduced Withholding tax rate into nil or 7.5%.
OTHER TAXES
Royalties
Royalties are payable quarterly to the Government based on the actual volume of production according to details set out in the IUP/CCoW. The royalty is tax deductible.
Land and Building Tax
The company is required to pay land and building tax as set out in the IUP/CCoW. Dead rent is an annual charge based on the number of hectares in the Mining Area. The land and building taxes are deductible for income tax.
To download this report click here.
Writer’s Profile :
Mrs. Sri Wahyuni Sujono, graduated with a Business Administration degree from the University of Wisconsin-Madison, USA. She is a certified Tax Attorney, Tax Consultant and holds a Brevet C – the highest working license qualification, and is the managing partner of SF Consulting. Sri also has expertise outside tax consultancy; she is a Chartered Financial Consultant (ChFC) and a qualified lawyer, giving a more holistic outlook and approach to her services.
Sri has had over fifteen years of experience of tax consulting with Arthur Andersen and Ernst and Young Indonesia; three years of which she was a Tax and Business Partner. She is the Vice Chairman of the Taxation Committee at the Indonesian Chamber of Commerce (KADIN), the Head of Foreign Affairs in the Indonesian Tax Consultant Association (IKPI) and sits in the Board of Experts in the Indonesian Chinese Association (INTI).
Disclaimer: This report has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this report without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this report, and, to extent permitted by law. SF Consulting and COALspot.com, its directors, members, employees, agents do not accept or assume any liability, responsibility or duty of care of any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it.
If you believe an article violates your rights or the rights of others, please contact us.
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Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
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Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
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Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
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- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
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- Chamber of Mines of South Africa
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- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
- Bangladesh Power Developement Board
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- Attock Cement Pakistan Limited
- Minerals Council of Australia
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- Posco Energy - South Korea
- Latin American Coal - Colombia
- Uttam Galva Steels Limited - India
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
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- Indian Energy Exchange, India
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Global Green Power PLC Corporation, Philippines
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- Asia Pacific Energy Resources Ventures Inc, Philippines
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- CNBM International Corporation - China
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- CIMB Investment Bank - Malaysia
- Pendopo Energi Batubara - Indonesia
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- Standard Chartered Bank - UAE
- Indonesian Coal Mining Association
- Meralco Power Generation, Philippines
- London Commodity Brokers - England
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Wilmar Investment Holdings
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- Siam City Cement - Thailand
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- International Coal Ventures Pvt Ltd - India
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- Sarangani Energy Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Videocon Industries ltd - India
- Dalmia Cement Bharat India
- Tata Chemicals Ltd - India
- Georgia Ports Authority, United States
- Alfred C Toepfer International GmbH - Germany
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- Central Electricity Authority - India
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- The Treasury - Australian Government
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- Australian Commodity Traders Exchange
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Eastern Energy - Thailand
- Billiton Holdings Pty Ltd - Australia
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Anglo American - United Kingdom
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- India Bulls Power Limited - India
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- Jindal Steel & Power Ltd - India
- Xindia Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- Jaiprakash Power Ventures ltd
- Heidelberg Cement - Germany
- Kumho Petrochemical, South Korea
- Banpu Public Company Limited - Thailand
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
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- Bayan Resources Tbk. - Indonesia
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- Agrawal Coal Company - India
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- Ministry of Transport, Egypt
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- Electricity Authority, New Zealand
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- The State Trading Corporation of India Ltd
- Aboitiz Power Corporation - Philippines
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- ASAPP Information Group - India
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- Bukit Asam (Persero) Tbk - Indonesia
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
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- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- TNB Fuel Sdn Bhd - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mjunction Services Limited - India
- Marubeni Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Goldman Sachs - Singapore
- Price Waterhouse Coopers - Russia
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Straits Asia Resources Limited - Singapore
- Savvy Resources Ltd - HongKong
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- The University of Queensland
- Coal and Oil Company - UAE
- Semirara Mining Corp, Philippines
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- MS Steel International - UAE
- Mercuria Energy - Indonesia
- PTC India Limited - India
- Ministry of Finance - Indonesia
- New Zealand Coal & Carbon
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- SMG Consultants - Indonesia
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- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Bhatia International Limited - India
- Madhucon Powers Ltd - India
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- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
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- Planning Commission, India
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- Independent Power Producers Association of India
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- Thai Mozambique Logistica
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- Kobexindo Tractors - Indoneisa
- LBH Netherlands Bv - Netherlands
- White Energy Company Limited
- Sree Jayajothi Cements Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bhoruka Overseas - Indonesia
- Altura Mining Limited, Indonesia
- Metalloyd Limited - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Tamil Nadu electricity Board
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