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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, 27 April 11
DRY BULK MARKET LACKS ACTIVITY, RATES KEEP RETREATING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the Easter Holidays for a large of the world now behind, the dry bulk market kept lacking activity on Tuesday, which led the Baltic Dry Index ( ...
Tuesday, 26 April 11
NTPC CALLS TENDER FOR 4 MLN TON OF NON-COKING COAL
COALspot.com - NTPC Limited, incorporated in 1975 as a public sector company wholly owned by Government of India, is the largest thermal power gener ...
Monday, 25 April 11
THE FUTURES FOR THREE YEARS WAS AT AROUND PANAMAX/US$ 14,000 PER DAY & SUPRAMAX/US$ 14,000 PER DAY - VISTAAR
COALspot.com - The freight market continued to soften further with all segments down except for the handy size which was marginally up by 10 points. ...
Saturday, 23 April 11
GUPTA COAL TO BAG ONE MILLION TONS OF COAL SUPPLY ORDER FROM KPCL AT AROUND US$ 127.53 PMT
COALspot.com - Karnataka Power Corporation (KPCL), a state utility of Karnataka, India has secured its one million tons of thermal coal with c ...
Saturday, 23 April 11
STRAITS ASIA SETS 11.5 MIO TONS OUTPUT - INSIDER STORIES
Insider Stories reported that, Singapore-listed Straits Asia Resources Limited plans to jack up its coal output target of 8.5% to 11.5 million tons ...
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- Jindal Steel & Power Ltd - India
- Interocean Group of Companies - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMG Consultants - Indonesia
- Aditya Birla Group - India
- Ind-Barath Power Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Toyota Tsusho Corporation, Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indian Oil Corporation Limited
- Sree Jayajothi Cements Limited - India
- Mjunction Services Limited - India
- Malabar Cements Ltd - India
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Thiess Contractors Indonesia
- AsiaOL BioFuels Corp., Philippines
- Anglo American - United Kingdom
- Heidelberg Cement - Germany
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- London Commodity Brokers - England
- Larsen & Toubro Limited - India
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Agrawal Coal Company - India
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Gujarat Sidhee Cement - India
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Thai Mozambique Logistica
- Minerals Council of Australia
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- Mercuria Energy - Indonesia
- Mercator Lines Limited - India
- Leighton Contractors Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Commonwealth Bank - Australia
- Globalindo Alam Lestari - Indonesia
- CNBM International Corporation - China
- Grasim Industreis Ltd - India
- Africa Commodities Group - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Manunggal Multi Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kapuas Tunggal Persada - Indonesia
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Parry Sugars Refinery, India
- Kobexindo Tractors - Indoneisa
- The University of Queensland
- Metalloyd Limited - United Kingdom
- Australian Commodity Traders Exchange
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Bharathi Cement Corporation - India
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- Attock Cement Pakistan Limited
- Singapore Mercantile Exchange
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- Gujarat Mineral Development Corp Ltd - India
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- OPG Power Generation Pvt Ltd - India
- Independent Power Producers Association of India
- Bahari Cakrawala Sebuku - Indonesia
- San Jose City I Power Corp, Philippines
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Barasentosa Lestari - Indonesia
- Tamil Nadu electricity Board
- Kaltim Prima Coal - Indonesia
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bangladesh Power Developement Board
- White Energy Company Limited
- Bhushan Steel Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- McConnell Dowell - Australia
- Bukit Baiduri Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Bukit Makmur.PT - Indonesia
- Tata Chemicals Ltd - India
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- Power Finance Corporation Ltd., India
- New Zealand Coal & Carbon
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- ASAPP Information Group - India
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- Wood Mackenzie - Singapore
- Ceylon Electricity Board - Sri Lanka
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Romanian Commodities Exchange
- Formosa Plastics Group - Taiwan
- Meenaskhi Energy Private Limited - India
- Bhoruka Overseas - Indonesia
- India Bulls Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SN Aboitiz Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Energy Link Ltd, New Zealand
- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Sical Logistics Limited - India
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Indika Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- VISA Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Samtan Co., Ltd - South Korea
- CIMB Investment Bank - Malaysia
- Star Paper Mills Limited - India
- Port Waratah Coal Services - Australia
- Marubeni Corporation - India
- Kepco SPC Power Corporation, Philippines
- Parliament of New Zealand
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Maheswari Brothers Coal Limited - India
- Central Electricity Authority - India
- Semirara Mining Corp, Philippines
- Bulk Trading Sa - Switzerland
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Jorong Barutama Greston.PT - Indonesia
- Georgia Ports Authority, United States
- Sakthi Sugars Limited - India
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Coal and Oil Company - UAE
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Bayan Resources Tbk. - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- Planning Commission, India
- Goldman Sachs - Singapore
- Central Java Power - Indonesia
- Karaikal Port Pvt Ltd - India
- GMR Energy Limited - India
- Baramulti Group, Indonesia
- PTC India Limited - India
- Chamber of Mines of South Africa
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