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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.
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Saturday, 26 March 11
FLSMIDTH WINS MULTIMILLION DOLLAR MATERIAL HANDLING PROJECT IN INDONESIA
FLSmidth has signed a contract in Jakarta worth in excess of USD 135m (DKK 700m) with PT Adaro Indonesia, a subsidiary of PT Adaro Energy Tbk., to s ...
Saturday, 26 March 11
ADARO AIMS TO DOUBLE COAL PRODUCTION -THE JAKARTA POST
The Jakarta Post reported that, coal producer PT Adaro Indonesia is planning to soon boost its production capacity to 80 million tons annually, almo ...
Friday, 25 March 11
KNOWLEDGE INFRASTRUCTURE TO BAG 160,000 MT COAL SUPPLY ORDER FROM TNPL
COALspot.com - Delhi based Knowledge infrastructure Systems Pvt. Ltd offered lowest price of US$ 97.10 per metric ton for calorific value of 6000 GA ...
Friday, 25 March 11
THE CAPESIZE MARKET CONTINUED TO FALL - FEARNBULK
Handy
The Atlantic market remains stable with more activity from the Black Sea to Feast paying in the mid 20´s on supras.
The USG remain ...
Friday, 25 March 11
BORNEO ENERGI FY10 NET INCOME SOARS - INSIDER STORIES
Coking coal producer PT Borneo Lumbung Energi Tbk (BORN) booked a skyrocket net income by 499.72% from net loss position in 2009, as quoted by Insid ...
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- Carbofer General Trading SA - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Baramulti Group, Indonesia
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Wood Mackenzie - Singapore
- Maheswari Brothers Coal Limited - India
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Latin American Coal - Colombia
- LBH Netherlands Bv - Netherlands
- Indian Energy Exchange, India
- Eastern Coal Council - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- SMC Global Power, Philippines
- Attock Cement Pakistan Limited
- London Commodity Brokers - England
- Oldendorff Carriers - Singapore
- Bulk Trading Sa - Switzerland
- Renaissance Capital - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Interocean Group of Companies - India
- Global Coal Blending Company Limited - Australia
- Iligan Light & Power Inc, Philippines
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- South Luzon Thermal Energy Corporation
- International Coal Ventures Pvt Ltd - India
- Ministry of Mines - Canada
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Indika Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- Ministry of Finance - Indonesia
- PTC India Limited - India
- Bharathi Cement Corporation - India
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Directorate Of Revenue Intelligence - India
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Goldman Sachs - Singapore
- GMR Energy Limited - India
- Rashtriya Ispat Nigam Limited - India
- White Energy Company Limited
- GAC Shipping (India) Pvt Ltd
- Economic Council, Georgia
- Savvy Resources Ltd - HongKong
- Indogreen Group - Indonesia
- Essar Steel Hazira Ltd - India
- Romanian Commodities Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Edison Trading Spa - Italy
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Gujarat Sidhee Cement - India
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Central Java Power - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Borneo Indobara - Indonesia
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Coal and Oil Company - UAE
- Africa Commodities Group - South Africa
- Star Paper Mills Limited - India
- Heidelberg Cement - Germany
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- Karaikal Port Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- Australian Coal Association
- Energy Development Corp, Philippines
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Kartika Selabumi Mining - Indonesia
- Commonwealth Bank - Australia
- San Jose City I Power Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Thiess Contractors Indonesia
- PNOC Exploration Corporation - Philippines
- Sojitz Corporation - Japan
- Formosa Plastics Group - Taiwan
- Wilmar Investment Holdings
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- Bangladesh Power Developement Board
- Toyota Tsusho Corporation, Japan
- Simpson Spence & Young - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Madhucon Powers Ltd - India
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Banpu Public Company Limited - Thailand
- Meenaskhi Energy Private Limited - India
- Power Finance Corporation Ltd., India
- Kohat Cement Company Ltd. - Pakistan
- CNBM International Corporation - China
- Posco Energy - South Korea
- Port Waratah Coal Services - Australia
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- Ambuja Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Parry Sugars Refinery, India
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Grasim Industreis Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Ministry of Transport, Egypt
- Billiton Holdings Pty Ltd - Australia
- Independent Power Producers Association of India
- Jorong Barutama Greston.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Rio Tinto Coal - Australia
- SMG Consultants - Indonesia
- Xindia Steels Limited - India
- Tamil Nadu electricity Board
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Mintek Dendrill Indonesia
- Kaltim Prima Coal - Indonesia
- Vizag Seaport Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Neyveli Lignite Corporation Ltd, - India
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Chamber of Mines of South Africa
- Straits Asia Resources Limited - Singapore
- Tata Chemicals Ltd - India
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- Coalindo Energy - Indonesia
- Riau Bara Harum - Indonesia
- IEA Clean Coal Centre - UK
- Standard Chartered Bank - UAE
- The Treasury - Australian Government
- Indonesian Coal Mining Association
- New Zealand Coal & Carbon
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Planning Commission, India
- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Medco Energi Mining Internasional
- Aboitiz Power Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Kumho Petrochemical, South Korea
- Cement Manufacturers Association - India
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- Dalmia Cement Bharat India
- Central Electricity Authority - India
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Barasentosa Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- Eastern Energy - Thailand
- Ceylon Electricity Board - Sri Lanka
- Aditya Birla Group - India
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
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