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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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Thursday, 28 April 11
BALTIC DRY INDEX NUDGES UP AFTER DAYS OF LOSSES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
After consecutive falls, the dry bulk freight market, as followed through the Baltic Dry Index, finally caught a breather yesterday, with the BDI ma ...
Wednesday, 27 April 11
KEWESPO CALLS FOR 765KT OF THERMAL COAL
COALspot.com - South Korea's East-West Power Co's (KEWESPO) has issued a tender to buy total 765,000 tonnes of thermal coal for delivery between J ...
Wednesday, 27 April 11
HARUM ENERGY TO PAY RP 659.1B IN DIVIDENDS - THE JAKARTA POST
The Jakarta Post reported that, Indonesian coal miner Harum Energy is planning to pay out Rp 659.1 billion (US$76.46 million) in dividends this year ...
Wednesday, 27 April 11
TSIS $5 MILLION PLANT TO START PRODUCING UPGRADED COAL - THE JAKARTA POST
The Jakartapost reported that, PT Total Sinergy International (TSI), in association with Agritrade Resources Limited of Hong Kong, will upgrade its ...
Wednesday, 27 April 11
RAIN CONSIDERS COAL MINES TAKEOVER - INSIDER STORIES
Indonesian's tenth largest coal miner in term of coal concession, PT Resource Alam Indonesia Tbk (KKGI), is considering to acquire several coalmine ...
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- Bayan Resources Tbk. - Indonesia
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- The State Trading Corporation of India Ltd
- Madhucon Powers Ltd - India
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- Chamber of Mines of South Africa
- Eastern Coal Council - USA
- Kaltim Prima Coal - Indonesia
- Semirara Mining Corp, Philippines
- Interocean Group of Companies - India
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Deloitte Consulting - India
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- White Energy Company Limited
- Ambuja Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Kepco SPC Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Rashtriya Ispat Nigam Limited - India
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ministry of Mines - Canada
- Standard Chartered Bank - UAE
- Romanian Commodities Exchange
- Leighton Contractors Pty Ltd - Australia
- Indonesian Coal Mining Association
- Planning Commission, India
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Commonwealth Bank - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Altura Mining Limited, Indonesia
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Coal and Oil Company - UAE
- Antam Resourcindo - Indonesia
- Cement Manufacturers Association - India
- GMR Energy Limited - India
- Uttam Galva Steels Limited - India
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- Directorate Of Revenue Intelligence - India
- Sree Jayajothi Cements Limited - India
- TeaM Sual Corporation - Philippines
- McConnell Dowell - Australia
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Medco Energi Mining Internasional
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
- Bukit Baiduri Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Wilmar Investment Holdings
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bhushan Steel Limited - India
- South Luzon Thermal Energy Corporation
- Xindia Steels Limited - India
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Development Corp, Philippines
- Star Paper Mills Limited - India
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- Samtan Co., Ltd - South Korea
- Videocon Industries ltd - India
- Kobexindo Tractors - Indoneisa
- Lanco Infratech Ltd - India
- Siam City Cement PLC, Thailand
- Salva Resources Pvt Ltd - India
- ASAPP Information Group - India
- Kohat Cement Company Ltd. - Pakistan
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Holcim Trading Pte Ltd - Singapore
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Malabar Cements Ltd - India
- Electricity Authority, New Zealand
- Australian Coal Association
- MS Steel International - UAE
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- Kalimantan Lumbung Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Simpson Spence & Young - Indonesia
- Sical Logistics Limited - India
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- Global Business Power Corporation, Philippines
- Vedanta Resources Plc - India
- Karaikal Port Pvt Ltd - India
- The Treasury - Australian Government
- OPG Power Generation Pvt Ltd - India
- VISA Power Limited - India
- Tata Chemicals Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Alfred C Toepfer International GmbH - Germany
- Neyveli Lignite Corporation Ltd, - India
- PTC India Limited - India
- Coastal Gujarat Power Limited - India
- Essar Steel Hazira Ltd - India
- Mjunction Services Limited - India
- Indian Oil Corporation Limited
- Directorate General of MIneral and Coal - Indonesia
- Central Java Power - Indonesia
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Straits Asia Resources Limited - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Globalindo Alam Lestari - Indonesia
- Petron Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Tamil Nadu electricity Board
- New Zealand Coal & Carbon
- Aboitiz Power Corporation - Philippines
- Electricity Generating Authority of Thailand
- Grasim Industreis Ltd - India
- Siam City Cement - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Heidelberg Cement - Germany
- Economic Council, Georgia
- Merrill Lynch Commodities Europe
- Renaissance Capital - South Africa
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Commodity Traders Exchange
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- Minerals Council of Australia
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- India Bulls Power Limited - India
- Global Coal Blending Company Limited - Australia
- Sindya Power Generating Company Private Ltd
- The University of Queensland
- Oldendorff Carriers - Singapore
- Attock Cement Pakistan Limited
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
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