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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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Friday, 01 April 11
SUPRAS EX RICHARDS BAY COAL TERMINAL TO INDIA HOVERING AT $ 25 - 27.00 PMT - FEARNBULK
Handy
Atlantic markets remain stable with more activity from the Black Sea to FEast paying in the mid 20´s on Supras. The USG remains firm p ...
Friday, 01 April 11
DRY BULK MARKET WEAKENS ON SLOWER DEMAND, HOPES FOR MID-TERM REBOUND ON JAPANS RECONSTRUCTION - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market, as reflected in the Baltic Dry Index (BDI) retreated for a third day yesterday, after staying flat on Monday, to end at 1,530 p ...
Wednesday, 30 March 11
CHALLENGER SIGNS OPTION AGREEMENTS TO PURCHASE FOUR COAL PROJECTS IN INDONESIA
Challenger Signs Three Exclusive Option Agreements to Purchase Four Coal Projects in East Kalimantan, Indonesia
Challenger Deep Resources Corp.ha ...
Wednesday, 30 March 11
KPCL TO IMPORT ONE MILLION TONS OF 6300 GAD COAL
COALspot.com - Karnataka Power Corporation a state utility of Karnataka, India called for open tender for supply of one million tons of 6300 Kcal/kg ...
Wednesday, 30 March 11
WIKA GRABS PROJECT FROM ADARO INDONESIA - INSIDER STORIES
One of Indonesia's largest thermal coal PT Adaro Indonesia has finally mandated PT Wijaya Karya Tbk (WIKA) as a contractor to install and manage ov ...
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- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- Iligan Light & Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Kideco Jaya Agung - Indonesia
- Tamil Nadu electricity Board
- Sical Logistics Limited - India
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- Wilmar Investment Holdings
- GAC Shipping (India) Pvt Ltd
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- Siam City Cement - Thailand
- Goldman Sachs - Singapore
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- Jaiprakash Power Ventures ltd
- Vizag Seaport Private Limited - India
- Riau Bara Harum - Indonesia
- Manunggal Multi Energi - Indonesia
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- MS Steel International - UAE
- Siam City Cement PLC, Thailand
- GN Power Mariveles Coal Plant, Philippines
- PTC India Limited - India
- Jindal Steel & Power Ltd - India
- Romanian Commodities Exchange
- Bhushan Steel Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Central Electricity Authority - India
- Alfred C Toepfer International GmbH - Germany
- Indika Energy - Indonesia
- Australian Coal Association
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Mercator Lines Limited - India
- Samtan Co., Ltd - South Korea
- GVK Power & Infra Limited - India
- Indonesian Coal Mining Association
- Formosa Plastics Group - Taiwan
- Energy Development Corp, Philippines
- Carbofer General Trading SA - India
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Essar Steel Hazira Ltd - India
- Energy Link Ltd, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sinarmas Energy and Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- Dalmia Cement Bharat India
- Mintek Dendrill Indonesia
- Pendopo Energi Batubara - Indonesia
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Makarim & Taira - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Parry Sugars Refinery, India
- Videocon Industries ltd - India
- International Coal Ventures Pvt Ltd - India
- Indian Energy Exchange, India
- The University of Queensland
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Vijayanagar Sugar Pvt Ltd - India
- The Treasury - Australian Government
- Wood Mackenzie - Singapore
- PNOC Exploration Corporation - Philippines
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- White Energy Company Limited
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- SMG Consultants - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Electricity Generating Authority of Thailand
- Neyveli Lignite Corporation Ltd, - India
- Aboitiz Power Corporation - Philippines
- Tata Chemicals Ltd - India
- Global Coal Blending Company Limited - Australia
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Australian Commodity Traders Exchange
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- Ministry of Mines - Canada
- Jorong Barutama Greston.PT - Indonesia
- Minerals Council of Australia
- Salva Resources Pvt Ltd - India
- Central Java Power - Indonesia
- Commonwealth Bank - Australia
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- Ministry of Transport, Egypt
- Xindia Steels Limited - India
- Deloitte Consulting - India
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Lanco Infratech Ltd - India
- Baramulti Group, Indonesia
- Price Waterhouse Coopers - Russia
- Ambuja Cements Ltd - India
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- Timah Investasi Mineral - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- Bangladesh Power Developement Board
- Cement Manufacturers Association - India
- TeaM Sual Corporation - Philippines
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Petron Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Borneo Indobara - Indonesia
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Coalindo Energy - Indonesia
- Trasteel International SA, Italy
- CIMB Investment Bank - Malaysia
- Indo Tambangraya Megah - Indonesia
- Independent Power Producers Association of India
- Kaltim Prima Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Uttam Galva Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Sojitz Corporation - Japan
- ASAPP Information Group - India
- Planning Commission, India
- Leighton Contractors Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- OPG Power Generation Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- Bukit Makmur.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- CNBM International Corporation - China
- Rio Tinto Coal - Australia
- Asmin Koalindo Tuhup - Indonesia
- Sakthi Sugars Limited - India
- Bukit Baiduri Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Heidelberg Cement - Germany
- European Bulk Services B.V. - Netherlands
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- Kumho Petrochemical, South Korea
- Medco Energi Mining Internasional
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Chamber of Mines of South Africa
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- The State Trading Corporation of India Ltd
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Vedanta Resources Plc - India
- Latin American Coal - Colombia
- Africa Commodities Group - South Africa
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