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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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Sunday, 17 April 11
THE FREIGHT MARKET APPEARS WILL CONTINUE TO BE SOFT NEXT WEEK - CAPT. REDDY
COALspot.com - "The freight market continued to soften further with all segments down except for the handy size which was marginally up by 10 p ...
Sunday, 17 April 11
ADARO TO PROPOSE US$75 MILLION DIVIDEND
COALspot.com - One of Indonesia's largest coal miner PT Adaro Energy Tbk (ADRO) is keen to propose a final dividend of US$75 million or Rp 20.17 (U ...
Saturday, 16 April 11
TNPL RECEIVES 1.6MT OF COAL OFFERS - SOURCES
COALspot.com - Tamil Nadu Newsprint and Papers Ltd. has closed its 160,000 MT coal inquiry today.
More than a half a dozen of Indian coal t ...
Friday, 15 April 11
DRY BULK MARKET KEEPS ON FALLING, ON LOW DEMAND AND HIGH SUPPLY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has kept its falling patern this week, with the industry’s benchmark, the Baltic Dry Index (BDI) retreating again yesterda ...
Thursday, 14 April 11
SUPRAS IN N.CHINA GET CLOSE TO $12000 FOR TRIPS VIA INDONESIA TO INDIA - FEARNBULK
Handy
The Atlantic market remains flat - very little new/fresh business and slow activity. Considerable prompt tonnage remains unfixed. The USG pa ...
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- Petrochimia International Co. Ltd.- Taiwan
- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
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- Directorate General of MIneral and Coal - Indonesia
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- GN Power Mariveles Coal Plant, Philippines
- Iligan Light & Power Inc, Philippines
- Latin American Coal - Colombia
- IEA Clean Coal Centre - UK
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- The University of Queensland
- Ceylon Electricity Board - Sri Lanka
- Carbofer General Trading SA - India
- Tamil Nadu electricity Board
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Merrill Lynch Commodities Europe
- GVK Power & Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- Samtan Co., Ltd - South Korea
- Africa Commodities Group - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Indo Tambangraya Megah - Indonesia
- CNBM International Corporation - China
- Simpson Spence & Young - Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Kapuas Tunggal Persada - Indonesia
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Posco Energy - South Korea
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Deloitte Consulting - India
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Interocean Group of Companies - India
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Kaltim Prima Coal - Indonesia
- Commonwealth Bank - Australia
- Mintek Dendrill Indonesia
- Georgia Ports Authority, United States
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- Electricity Authority, New Zealand
- GMR Energy Limited - India
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- Coalindo Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
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- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Anglo American - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ASAPP Information Group - India
- Independent Power Producers Association of India
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- Orica Mining Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Energy Development Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Ministry of Transport, Egypt
- IHS Mccloskey Coal Group - USA
- Gujarat Sidhee Cement - India
- Bhoruka Overseas - Indonesia
- Manunggal Multi Energi - Indonesia
- Standard Chartered Bank - UAE
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Planning Commission, India
- Bangladesh Power Developement Board
- New Zealand Coal & Carbon
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- LBH Netherlands Bv - Netherlands
- Wood Mackenzie - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Borneo Indobara - Indonesia
- Salva Resources Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- Energy Link Ltd, New Zealand
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- Chettinad Cement Corporation Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Medco Energi Mining Internasional
- Indian Oil Corporation Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sical Logistics Limited - India
- Semirara Mining Corp, Philippines
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- Toyota Tsusho Corporation, Japan
- Singapore Mercantile Exchange
- Kohat Cement Company Ltd. - Pakistan
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- Australian Coal Association
- Bahari Cakrawala Sebuku - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aboitiz Power Corporation - Philippines
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Pendopo Energi Batubara - Indonesia
- Jaiprakash Power Ventures ltd
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
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- Ambuja Cements Ltd - India
- Central Electricity Authority - India
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Gujarat Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- India Bulls Power Limited - India
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- Bhatia International Limited - India
- SN Aboitiz Power Inc, Philippines
- Bharathi Cement Corporation - India
- Kartika Selabumi Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Goldman Sachs - Singapore
- Barasentosa Lestari - Indonesia
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Global Coal Blending Company Limited - Australia
- Miang Besar Coal Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Agrawal Coal Company - India
- McConnell Dowell - Australia
- Coal and Oil Company - UAE
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- VISA Power Limited - India
- Eastern Energy - Thailand
- Sree Jayajothi Cements Limited - India
- Central Java Power - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Marubeni Corporation - India
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- SMG Consultants - Indonesia
- The State Trading Corporation of India Ltd
- Minerals Council of Australia
- The Treasury - Australian Government
- Siam City Cement - Thailand
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
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- PTC India Limited - India
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- Indogreen Group - Indonesia
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