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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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Saturday, 30 April 11
BUKIT ASAM PROFIT HAS JUMPS 108 PERCENT IN Q1, 2011
The Indonesian state-controlled coal miner PT Bukit Asam Tbk (PTBA) reported a 108.07 percent jump in net profit during the first three months of 20 ...
Saturday, 30 April 11
THE PANAMAX WAS THE BIGGEST GAINER
COALspot.com - The freight market appeared to recover slightly after the Easter holidays. However they market may not move up much and likely to mai ...
Friday, 29 April 11
KOMIPO ISSUES TENDER FOR 710,000 MT OF LCV & HCV COAL
COALspot.com - Korea Midland Power Co. Ltd (KOMIPO) has issued a spot supply tender for supply of total 710,000 MT of thermal coal for delivery betw ...
Friday, 29 April 11
HARUM EYES IDR 2.58 TRILLION COAL TAKEOVER
PT Harum Energy Tbk (HRUM), that is controlled by Indonesian tycoon Kiki Barki, is poised to spend Rp 2.58 trillion (approximately US$ 301.296 mln) ...
Friday, 29 April 11
CHINA'S IMPORTS 27 PERCENT LESS COAL IN Q1 2011 - ICAP SHIPPING
ICAP Shipping reported that, China's coal imports in the first quarter were some 27% down on a year ago at 32.3 Mt (2010: 44.4 Mt). Part of the rea ...
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- Wood Mackenzie - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Timah Investasi Mineral - Indoneisa
- London Commodity Brokers - England
- White Energy Company Limited
- Rio Tinto Coal - Australia
- Independent Power Producers Association of India
- Gujarat Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- Thiess Contractors Indonesia
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Bhatia International Limited - India
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Borneo Indobara - Indonesia
- Xindia Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Edison Trading Spa - Italy
- Bukit Makmur.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- Agrawal Coal Company - India
- Holcim Trading Pte Ltd - Singapore
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Global Green Power PLC Corporation, Philippines
- VISA Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Minerals Council of Australia
- ICICI Bank Limited - India
- Global Coal Blending Company Limited - Australia
- SN Aboitiz Power Inc, Philippines
- Thai Mozambique Logistica
- Directorate Of Revenue Intelligence - India
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bhushan Steel Limited - India
- GMR Energy Limited - India
- Star Paper Mills Limited - India
- Aditya Birla Group - India
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- Romanian Commodities Exchange
- Electricity Generating Authority of Thailand
- Electricity Authority, New Zealand
- Ministry of Finance - Indonesia
- Orica Australia Pty. Ltd.
- Petron Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Economic Council, Georgia
- Sinarmas Energy and Mining - Indonesia
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Formosa Plastics Group - Taiwan
- Kartika Selabumi Mining - Indonesia
- Parliament of New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Riau Bara Harum - Indonesia
- Toyota Tsusho Corporation, Japan
- CIMB Investment Bank - Malaysia
- Salva Resources Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Africa Commodities Group - South Africa
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Chettinad Cement Corporation Ltd - India
- Sarangani Energy Corporation, Philippines
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- Kapuas Tunggal Persada - Indonesia
- The State Trading Corporation of India Ltd
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- Port Waratah Coal Services - Australia
- Kepco SPC Power Corporation, Philippines
- Indika Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aboitiz Power Corporation - Philippines
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Posco Energy - South Korea
- Renaissance Capital - South Africa
- Australian Commodity Traders Exchange
- Kumho Petrochemical, South Korea
- Madhucon Powers Ltd - India
- Bangladesh Power Developement Board
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- Jindal Steel & Power Ltd - India
- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Interocean Group of Companies - India
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ambuja Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- Samtan Co., Ltd - South Korea
- PTC India Limited - India
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- GVK Power & Infra Limited - India
- Jaiprakash Power Ventures ltd
- Metalloyd Limited - United Kingdom
- Mjunction Services Limited - India
- Trasteel International SA, Italy
- Therma Luzon, Inc, Philippines
- Parry Sugars Refinery, India
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Commonwealth Bank - Australia
- Binh Thuan Hamico - Vietnam
- The Treasury - Australian Government
- Merrill Lynch Commodities Europe
- AsiaOL BioFuels Corp., Philippines
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Kideco Jaya Agung - Indonesia
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- GAC Shipping (India) Pvt Ltd
- PNOC Exploration Corporation - Philippines
- Standard Chartered Bank - UAE
- Lanco Infratech Ltd - India
- The University of Queensland
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- SMG Consultants - Indonesia
- Australian Coal Association
- Indian Oil Corporation Limited
- Iligan Light & Power Inc, Philippines
- Baramulti Group, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Maheswari Brothers Coal Limited - India
- Georgia Ports Authority, United States
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Mintek Dendrill Indonesia
- Bulk Trading Sa - Switzerland
- Sojitz Corporation - Japan
- Goldman Sachs - Singapore
- ASAPP Information Group - India
- OPG Power Generation Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Wilmar Investment Holdings
- Makarim & Taira - Indonesia
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Vizag Seaport Private Limited - India
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- Global Business Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- IHS Mccloskey Coal Group - USA
- Uttam Galva Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Mines - Canada
- Neyveli Lignite Corporation Ltd, - India
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- Mercuria Energy - Indonesia
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- South Luzon Thermal Energy Corporation
- Manunggal Multi Energi - Indonesia
- PowerSource Philippines DevCo
- Kobexindo Tractors - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- Coalindo Energy - Indonesia
- Sree Jayajothi Cements Limited - India
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