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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, 22 March 11
KRISHNAPATNAM PORT SETS ALL INDIA RECORD FOR COAL DISCHARGING
COALspot.com - "Krishnapatnam Port has set an all India record for discharging 71,587 tons of steam coal in just 24 hrs using the conventional ...
Sunday, 20 March 11
FREIGHT MARKETS COULD SOFTEN NEXT WEEK DUE TO JAPANESE PORTS CLOSURE AND LIBYAN CRISIS - VISTAAR
COALspot.com - The BDI was down by 1.98 pct (closing at 1531 points) mainly due to Cape index which was down by almost 11 pct and closed 1687 points ...
Friday, 18 March 11
FALL IN INDONESIAN COAL EXPORTS IN FEBRUARY 11
COALspot.com - Indonesian coal exports seen a fall of 10.76% during Feb 2011. The world’s largest coal exporter shipped 22.029 MMts of c ...
Thursday, 17 March 11
THE PACIFIC HANDY MARKET IS CURRENTLY STEADY - FEARNBULK
Handy
The Atlantic market is showing signs of recovery and does not seem to be affected by the Japan disaster. The market is very positional and i ...
Tuesday, 15 March 11
COAL PRODUCTION FORECAST TO SURGE ON RISING PRICES - THE JAKARTA GLOBE
The Jakarta Globe reported that, Indonesia’s coal production is forecast to increase by 20 percent this year as coal prices continue to ...
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- Central Electricity Authority - India
- The Treasury - Australian Government
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Indika Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Minerals Council of Australia
- Eastern Energy - Thailand
- AsiaOL BioFuels Corp., Philippines
- Miang Besar Coal Terminal - Indonesia
- Sakthi Sugars Limited - India
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- Meralco Power Generation, Philippines
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Global Coal Blending Company Limited - Australia
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- India Bulls Power Limited - India
- Salva Resources Pvt Ltd - India
- Indonesian Coal Mining Association
- Samtan Co., Ltd - South Korea
- Orica Mining Services - Indonesia
- Lanco Infratech Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thai Mozambique Logistica
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Straits Asia Resources Limited - Singapore
- South Luzon Thermal Energy Corporation
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- Bukit Makmur.PT - Indonesia
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kartika Selabumi Mining - Indonesia
- Cement Manufacturers Association - India
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Interocean Group of Companies - India
- GMR Energy Limited - India
- Intertek Mineral Services - Indonesia
- Marubeni Corporation - India
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Mercuria Energy - Indonesia
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- Grasim Industreis Ltd - India
- Essar Steel Hazira Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ASAPP Information Group - India
- Kapuas Tunggal Persada - Indonesia
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Gujarat Sidhee Cement - India
- Altura Mining Limited, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Merrill Lynch Commodities Europe
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Jindal Steel & Power Ltd - India
- SMC Global Power, Philippines
- Toyota Tsusho Corporation, Japan
- The State Trading Corporation of India Ltd
- San Jose City I Power Corp, Philippines
- Indian Energy Exchange, India
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- GVK Power & Infra Limited - India
- LBH Netherlands Bv - Netherlands
- CNBM International Corporation - China
- Vijayanagar Sugar Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- SMG Consultants - Indonesia
- Wood Mackenzie - Singapore
- International Coal Ventures Pvt Ltd - India
- Xindia Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- MS Steel International - UAE
- Cigading International Bulk Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- Carbofer General Trading SA - India
- Savvy Resources Ltd - HongKong
- ICICI Bank Limited - India
- Uttam Galva Steels Limited - India
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- Ministry of Mines - Canada
- Jorong Barutama Greston.PT - Indonesia
- Makarim & Taira - Indonesia
- Meenaskhi Energy Private Limited - India
- Therma Luzon, Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Medco Energi Mining Internasional
- Bukit Baiduri Energy - Indonesia
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
- Riau Bara Harum - Indonesia
- Aditya Birla Group - India
- Singapore Mercantile Exchange
- IEA Clean Coal Centre - UK
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- London Commodity Brokers - England
- Port Waratah Coal Services - Australia
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Billiton Holdings Pty Ltd - Australia
- Banpu Public Company Limited - Thailand
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Global Green Power PLC Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Bhoruka Overseas - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Globalindo Alam Lestari - Indonesia
- Tamil Nadu electricity Board
- Energy Development Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Standard Chartered Bank - UAE
- Baramulti Group, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Coalindo Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Larsen & Toubro Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- Parry Sugars Refinery, India
- Bharathi Cement Corporation - India
- SN Aboitiz Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Australian Coal Association
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- Mintek Dendrill Indonesia
- The University of Queensland
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sojitz Corporation - Japan
- PowerSource Philippines DevCo
- Commonwealth Bank - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Kobexindo Tractors - Indoneisa
- Sree Jayajothi Cements Limited - India
- Agrawal Coal Company - India
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Central Java Power - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Coastal Gujarat Power Limited - India
- Georgia Ports Authority, United States
- Vedanta Resources Plc - India
- Tata Chemicals Ltd - India
- Bayan Resources Tbk. - Indonesia
- Wilmar Investment Holdings
- Goldman Sachs - Singapore
- Edison Trading Spa - Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Dalmia Cement Bharat India
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
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