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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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Tuesday, 29 March 11
JAPAN FACTOR RIPPLING THROUGH THE SHIPPING MARKETS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the world watching the latest developments regarding the nuclear crisis in Japan and the devastating effects of the recent tragedy that struck ...
Tuesday, 29 March 11
DUTY EXEMPTION UNLIKELY TO IMPACT COKING COAL PRICES - PTI NEWS
Press Trust of India News reported that, the exemption to certain types of coking coal from customs duty is not likely to impact steel prices at pre ...
Monday, 28 March 11
HARUM ENERGY FY10 EARNING UP 7.23% - INSIDER STORIES
Thermal coal producer PT Harum Energy Tbk (HRUM), controlled by Indonesian businessman Kiki Barki through his son Lawrence Barki, posted a slight in ...
Monday, 28 March 11
IBT RAISES CAPACITY OF PULAU LAUT TERMINAL - THE JAKARTA POST
The Jakarta Post reported that, coal infrastructure and logistics firm PT Indonesia Bulk Terminal (IBT), a subsidiary of PT Adaro Energy Tbk, plans ...
Saturday, 26 March 11
THE FREIGHT MARKET REMAINED A BIT VOLATILE THIS WEEK - CAPT. REDDY
COALspot.com - "The freight market remained a bit volatile this week", says Capt. Reddy, director of Vistaar Shipping Singapore.
Howeve ...
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- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Larsen & Toubro Limited - India
- Toyota Tsusho Corporation, Japan
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- GN Power Mariveles Coal Plant, Philippines
- OPG Power Generation Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rio Tinto Coal - Australia
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Coalindo Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- Goldman Sachs - Singapore
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- Borneo Indobara - Indonesia
- Indonesian Coal Mining Association
- Georgia Ports Authority, United States
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- MS Steel International - UAE
- Carbofer General Trading SA - India
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- Meralco Power Generation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Kaltim Prima Coal - Indonesia
- The State Trading Corporation of India Ltd
- PowerSource Philippines DevCo
- SMG Consultants - Indonesia
- Heidelberg Cement - Germany
- Vijayanagar Sugar Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Mercator Lines Limited - India
- Global Green Power PLC Corporation, Philippines
- Thiess Contractors Indonesia
- Barasentosa Lestari - Indonesia
- Medco Energi Mining Internasional
- ICICI Bank Limited - India
- Kapuas Tunggal Persada - Indonesia
- Central Java Power - Indonesia
- Iligan Light & Power Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- European Bulk Services B.V. - Netherlands
- Global Coal Blending Company Limited - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Madhucon Powers Ltd - India
- McConnell Dowell - Australia
- Maheswari Brothers Coal Limited - India
- Dalmia Cement Bharat India
- New Zealand Coal & Carbon
- Meenaskhi Energy Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pendopo Energi Batubara - Indonesia
- Ministry of Finance - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
- Wood Mackenzie - Singapore
- Commonwealth Bank - Australia
- Minerals Council of Australia
- Asmin Koalindo Tuhup - Indonesia
- Bukit Baiduri Energy - Indonesia
- Baramulti Group, Indonesia
- Uttam Galva Steels Limited - India
- South Luzon Thermal Energy Corporation
- The University of Queensland
- Lanco Infratech Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Directorate Of Revenue Intelligence - India
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Sical Logistics Limited - India
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Africa Commodities Group - South Africa
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
- GMR Energy Limited - India
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- Gujarat Sidhee Cement - India
- Indo Tambangraya Megah - Indonesia
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sojitz Corporation - Japan
- Parry Sugars Refinery, India
- PTC India Limited - India
- Rashtriya Ispat Nigam Limited - India
- Mercuria Energy - Indonesia
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Mintek Dendrill Indonesia
- CNBM International Corporation - China
- Ambuja Cements Ltd - India
- Energy Link Ltd, New Zealand
- Trasteel International SA, Italy
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Intertek Mineral Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- White Energy Company Limited
- Directorate General of MIneral and Coal - Indonesia
- The Treasury - Australian Government
- Bukit Asam (Persero) Tbk - Indonesia
- Xindia Steels Limited - India
- Ind-Barath Power Infra Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Latin American Coal - Colombia
- Coastal Gujarat Power Limited - India
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Timah Investasi Mineral - Indoneisa
- Central Electricity Authority - India
- Marubeni Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Australian Coal Association
- Eastern Coal Council - USA
- Australian Commodity Traders Exchange
- Deloitte Consulting - India
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Holcim Trading Pte Ltd - Singapore
- Bhushan Steel Limited - India
- Orica Mining Services - Indonesia
- CIMB Investment Bank - Malaysia
- International Coal Ventures Pvt Ltd - India
- Bhatia International Limited - India
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Siam City Cement - Thailand
- GAC Shipping (India) Pvt Ltd
- San Jose City I Power Corp, Philippines
- Posco Energy - South Korea
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Vedanta Resources Plc - India
- Planning Commission, India
- India Bulls Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Economic Council, Georgia
- Sarangani Energy Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Chamber of Mines of South Africa
- Salva Resources Pvt Ltd - India
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jaiprakash Power Ventures ltd
- Formosa Plastics Group - Taiwan
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Romanian Commodities Exchange
- Riau Bara Harum - Indonesia
- Cement Manufacturers Association - India
- Ministry of Mines - Canada
- SMC Global Power, Philippines
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