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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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- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Ministry of Mines - Canada
- Jindal Steel & Power Ltd - India
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- Kaltim Prima Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Formosa Plastics Group - Taiwan
- Kumho Petrochemical, South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Ministry of Transport, Egypt
- White Energy Company Limited
- Mjunction Services Limited - India
- Deloitte Consulting - India
- Manunggal Multi Energi - Indonesia
- Thiess Contractors Indonesia
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Semirara Mining Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Wood Mackenzie - Singapore
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Bulk Trading Sa - Switzerland
- GN Power Mariveles Coal Plant, Philippines
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Energy Link Ltd, New Zealand
- VISA Power Limited - India
- TeaM Sual Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Latin American Coal - Colombia
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Merrill Lynch Commodities Europe
- Savvy Resources Ltd - HongKong
- Ministry of Finance - Indonesia
- The Treasury - Australian Government
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- The University of Queensland
- Sojitz Corporation - Japan
- Gujarat Mineral Development Corp Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Romanian Commodities Exchange
- Sakthi Sugars Limited - India
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Carbofer General Trading SA - India
- Miang Besar Coal Terminal - Indonesia
- Attock Cement Pakistan Limited
- Sinarmas Energy and Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Heidelberg Cement - Germany
- Star Paper Mills Limited - India
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- Sical Logistics Limited - India
- Chamber of Mines of South Africa
- Metalloyd Limited - United Kingdom
- Kepco SPC Power Corporation, Philippines
- India Bulls Power Limited - India
- Central Electricity Authority - India
- Bharathi Cement Corporation - India
- Coal and Oil Company - UAE
- Independent Power Producers Association of India
- Mercator Lines Limited - India
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Meralco Power Generation, Philippines
- Parliament of New Zealand
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- The State Trading Corporation of India Ltd
- ASAPP Information Group - India
- Madhucon Powers Ltd - India
- Lanco Infratech Ltd - India
- GMR Energy Limited - India
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- London Commodity Brokers - England
- Straits Asia Resources Limited - Singapore
- Maheswari Brothers Coal Limited - India
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Videocon Industries ltd - India
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- Riau Bara Harum - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Indonesian Coal Mining Association
- Indo Tambangraya Megah - Indonesia
- Coastal Gujarat Power Limited - India
- Petron Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Renaissance Capital - South Africa
- Australian Coal Association
- Intertek Mineral Services - Indonesia
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- Karaikal Port Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Samtan Co., Ltd - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement - Thailand
- Holcim Trading Pte Ltd - Singapore
- Electricity Generating Authority of Thailand
- Essar Steel Hazira Ltd - India
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- New Zealand Coal & Carbon
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Economic Council, Georgia
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- Dalmia Cement Bharat India
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Siam City Cement PLC, Thailand
- Indika Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Medco Energi Mining Internasional
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- CNBM International Corporation - China
- Sree Jayajothi Cements Limited - India
- PTC India Limited - India
- SMG Consultants - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- McConnell Dowell - Australia
- Altura Mining Limited, Indonesia
- IHS Mccloskey Coal Group - USA
- Posco Energy - South Korea
- Bangladesh Power Developement Board
- Binh Thuan Hamico - Vietnam
- Goldman Sachs - Singapore
- Aditya Birla Group - India
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Vedanta Resources Plc - India
- Vijayanagar Sugar Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- Cement Manufacturers Association - India
- Timah Investasi Mineral - Indoneisa
- CIMB Investment Bank - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Sidhee Cement - India
- Planning Commission, India
- Parry Sugars Refinery, India
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