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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, 13 April 11
CAPESIZE VESSELS ARE DELIVERED AT A PACE OF ONE NEW VESSEL EVERY SECOND DAY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In a clear sign that it will take a significant rise in global seaborne dry bulk trade in order to be able to absorb the flurry of new building tonn ...
Sunday, 10 April 11
SOFT FREIGHT MARKET TREND LIKELY TO BE CONTINUED - VISTAAR SHIPPING
COALspot.com - The freight market continued to soften further with the BDI breaking the 1,500 points and closing at 1376 points down by almost 10 pc ...
Thursday, 07 April 11
HANDY RATES SLIDING NOW - FEARNBULK
Handy
Slowly softening rates as more tonnage is accumulating in the Atlantic basin.The trans-Atlantic round is around $15k pd with trips to ...
Thursday, 07 April 11
DRY BULK MARKET PLUNGING EVEN FURTHER ON LOW CARGO DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has continued its falling pattern this week, with every day proving to be painful for ship owners, especially those of the large ...
Thursday, 07 April 11
INDIKA BUYS MITRABAHTERA AT US$ 0.183
PT Indika Energy Tbk (INDY), integrated energy company, today has exercised an option agreement to acquire 51% shareholding in newly listed coal tug ...
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Showing 5311 to 5315 news of total 6871 |
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- Iligan Light & Power Inc, Philippines
- Coalindo Energy - Indonesia
- Barasentosa Lestari - Indonesia
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- Marubeni Corporation - India
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- Thai Mozambique Logistica
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- Kalimantan Lumbung Energi - Indonesia
- Central Electricity Authority - India
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Directorate Of Revenue Intelligence - India
- Singapore Mercantile Exchange
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- OPG Power Generation Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Rashtriya Ispat Nigam Limited - India
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Kartika Selabumi Mining - Indonesia
- Vizag Seaport Private Limited - India
- VISA Power Limited - India
- Pendopo Energi Batubara - Indonesia
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- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Cigading International Bulk Terminal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Vedanta Resources Plc - India
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate General of MIneral and Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Indogreen Group - Indonesia
- Thiess Contractors Indonesia
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- IEA Clean Coal Centre - UK
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Economic Council, Georgia
- McConnell Dowell - Australia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- South Luzon Thermal Energy Corporation
- CIMB Investment Bank - Malaysia
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Mercuria Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- The University of Queensland
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- GVK Power & Infra Limited - India
- Global Business Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- MS Steel International - UAE
- Sakthi Sugars Limited - India
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Transport, Egypt
- Renaissance Capital - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
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- PowerSource Philippines DevCo
- Semirara Mining Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- Energy Development Corp, Philippines
- Aditya Birla Group - India
- Antam Resourcindo - Indonesia
- Larsen & Toubro Limited - India
- Salva Resources Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Tata Chemicals Ltd - India
- Wood Mackenzie - Singapore
- Globalindo Alam Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Banpu Public Company Limited - Thailand
- Borneo Indobara - Indonesia
- Mercator Lines Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bukit Makmur.PT - Indonesia
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Baramulti Group, Indonesia
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement PLC, Thailand
- Miang Besar Coal Terminal - Indonesia
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Indonesian Coal Mining Association
- Sojitz Corporation - Japan
- Metalloyd Limited - United Kingdom
- Meralco Power Generation, Philippines
- Parry Sugars Refinery, India
- PetroVietnam Power Coal Import and Supply Company
- Kumho Petrochemical, South Korea
- Agrawal Coal Company - India
- Essar Steel Hazira Ltd - India
- Videocon Industries ltd - India
- PTC India Limited - India
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Intertek Mineral Services - Indonesia
- Wilmar Investment Holdings
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Minerals Council of Australia
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- Planning Commission, India
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- Coastal Gujarat Power Limited - India
- Georgia Ports Authority, United States
- SMG Consultants - Indonesia
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining and Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Binh Thuan Hamico - Vietnam
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Electricity Generating Authority of Thailand
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Attock Cement Pakistan Limited
- Bayan Resources Tbk. - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- Lanco Infratech Ltd - India
- London Commodity Brokers - England
- Trasteel International SA, Italy
- Mjunction Services Limited - India
- Malabar Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Chettinad Cement Corporation Ltd - India
- Cement Manufacturers Association - India
- GAC Shipping (India) Pvt Ltd
- Simpson Spence & Young - Indonesia
- Power Finance Corporation Ltd., India
- India Bulls Power Limited - India
- Jindal Steel & Power Ltd - India
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Bulk Trading Sa - Switzerland
- Karaikal Port Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Medco Energi Mining Internasional
- Petron Corporation, Philippines
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