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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, 06 April 11
FORBES & MANHATTAN COAL ANNOUNCES SIGNIFICANT OFF TAKE AGREEMENT
Steady Cash Flow Will Fund Production Ramp Up
Forbes & Manhattan Coal Corp., ("Forbes Coal" or the "Company") is a produc ...
Tuesday, 05 April 11
DRY BULK MARKET DOWN ON FIRST DAY OF SECOND QUARTER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market began the second quarter on a downward pattern, with the industry’s benchmark, the Baltic Dry Index (BDI) shedding 1.45 pe ...
Monday, 04 April 11
INDONESIA INTERNATIONAL CONFERENCE FOCUS ON INDONESIA'S ECONOMY (IICFIE) 2011 MASTER PLAN TO ACCELERATE THE ECONOMIC DEVELOPMENT
Press Release - Since couple of years, Indonesia's economy show impressive growth. What is the Indonesia's Economic Corridor and the Master plan t ...
Saturday, 02 April 11
TNPL CALLS FOR 160KT OF NON-COKING COAL
COALspot.com - Tamil Nadu Newsprint and Papers Limited (TNPL), is seeking to procure another 160,000 MT +/- 5 percent of Non-Coking imported C ...
Saturday, 02 April 11
THE FREIGHT MARKETS LIKELY TO BE SOFT NEXT WEEK - VISTAAR SINGAPORE
COALspot.com - The freight market softened this week affecting all sectors with BDI down by 65 points (down by 4.10 pct) and closed at 1,520 points. ...
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- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- Energy Development Corp, Philippines
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- Independent Power Producers Association of India
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- The University of Queensland
- Riau Bara Harum - Indonesia
- Power Finance Corporation Ltd., India
- GVK Power & Infra Limited - India
- Parliament of New Zealand
- Meralco Power Generation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Bukit Baiduri Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- White Energy Company Limited
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Sarangani Energy Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- TeaM Sual Corporation - Philippines
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- Bhushan Steel Limited - India
- Semirara Mining and Power Corporation, Philippines
- The Treasury - Australian Government
- Star Paper Mills Limited - India
- Global Coal Blending Company Limited - Australia
- TNB Fuel Sdn Bhd - Malaysia
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Economic Council, Georgia
- Neyveli Lignite Corporation Ltd, - India
- McConnell Dowell - Australia
- Global Green Power PLC Corporation, Philippines
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Wood Mackenzie - Singapore
- Holcim Trading Pte Ltd - Singapore
- Singapore Mercantile Exchange
- Ceylon Electricity Board - Sri Lanka
- Sindya Power Generating Company Private Ltd
- Africa Commodities Group - South Africa
- Eastern Coal Council - USA
- Videocon Industries ltd - India
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Indika Energy - Indonesia
- Sical Logistics Limited - India
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Minerals Council of Australia
- Siam City Cement PLC, Thailand
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- New Zealand Coal & Carbon
- Borneo Indobara - Indonesia
- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Metalloyd Limited - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Orica Australia Pty. Ltd.
- San Jose City I Power Corp, Philippines
- Ambuja Cements Ltd - India
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- Oldendorff Carriers - Singapore
- Interocean Group of Companies - India
- South Luzon Thermal Energy Corporation
- Maharashtra Electricity Regulatory Commission - India
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- Samtan Co., Ltd - South Korea
- European Bulk Services B.V. - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Renaissance Capital - South Africa
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Formosa Plastics Group - Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- Posco Energy - South Korea
- Rio Tinto Coal - Australia
- Kepco SPC Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Madhucon Powers Ltd - India
- Electricity Authority, New Zealand
- Global Business Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Australian Coal Association
- Indian Oil Corporation Limited
- Sakthi Sugars Limited - India
- Central Electricity Authority - India
- Heidelberg Cement - Germany
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Kalimantan Lumbung Energi - Indonesia
- Malabar Cements Ltd - India
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Cement Manufacturers Association - India
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Central Java Power - Indonesia
- IEA Clean Coal Centre - UK
- Electricity Generating Authority of Thailand
- Aboitiz Power Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Australian Commodity Traders Exchange
- Vedanta Resources Plc - India
- Miang Besar Coal Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Dalmia Cement Bharat India
- Manunggal Multi Energi - Indonesia
- Essar Steel Hazira Ltd - India
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Karbindo Abesyapradhi - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Bukit Makmur.PT - Indonesia
- LBH Netherlands Bv - Netherlands
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- Indogreen Group - Indonesia
- Kaltim Prima Coal - Indonesia
- The State Trading Corporation of India Ltd
- Sinarmas Energy and Mining - Indonesia
- Wilmar Investment Holdings
- Xindia Steels Limited - India
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- Energy Link Ltd, New Zealand
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Goldman Sachs - Singapore
- Bayan Resources Tbk. - Indonesia
- Planning Commission, India
- Savvy Resources Ltd - HongKong
- Anglo American - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Toyota Tsusho Corporation, Japan
- PTC India Limited - India
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- Petron Corporation, Philippines
- Salva Resources Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Intertek Mineral Services - Indonesia
- Price Waterhouse Coopers - Russia
- Timah Investasi Mineral - Indoneisa
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