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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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Sunday, 06 March 11
THE S6 ROUTE MAY CONTINUE TO BE FIRM - VISTAAR
COALspot.com - The freight market was firm this week with all indices up. The BDI , Cape Index and Panamax index was up by almost 9 pct where as Sup ...
Friday, 04 March 11
IRON ORE FROM INDIA HAS BEEN QUIET
Handy
Activity has been gradually rising in the Atlantic but it is mostly confined to the USG market. Short period basis redelivery Atlantic has b ...
Thursday, 03 March 11
TNPL INDIA LOOKING FOR 160,000 MT OF NON-COKING COAL
COALspot.com - Tamil Nadu Newsprint and Papers Ltd. is seeking to import 160,000 plus minus 5 percent metric tons of non-coking coal with Gross Calo ...
Wednesday, 02 March 11
MIXED FORTUNES FOR DRY BULK OWNERS THIS WEEK - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Although the dry bulk market has been on the positive side this week, things still look quite uncertain in the near term, with most owners puzzled a ...
Wednesday, 02 March 11
INDIA, 2ND LARGEST IMPORTER OF INDONESIAN COAL IN 2010
COALspot.com: Indonesia, the world largest coal exporter, shipped 24.68 million tons of coal in January 2011, which was 1.19 percent higher Y-o- ...
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- Karbindo Abesyapradhi - Indoneisa
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Parry Sugars Refinery, India
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Eastern Energy - Thailand
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Jindal Steel & Power Ltd - India
- Medco Energi Mining Internasional
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- Wilmar Investment Holdings
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- Jorong Barutama Greston.PT - Indonesia
- Aditya Birla Group - India
- Pendopo Energi Batubara - Indonesia
- Kaltim Prima Coal - Indonesia
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- Indian Energy Exchange, India
- Bahari Cakrawala Sebuku - Indonesia
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Kideco Jaya Agung - Indonesia
- Independent Power Producers Association of India
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Tata Chemicals Ltd - India
- New Zealand Coal & Carbon
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- Coal and Oil Company - UAE
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- Savvy Resources Ltd - HongKong
- Jaiprakash Power Ventures ltd
- European Bulk Services B.V. - Netherlands
- Madhucon Powers Ltd - India
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
- Coastal Gujarat Power Limited - India
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- Kapuas Tunggal Persada - Indonesia
- Renaissance Capital - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Xindia Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- The Treasury - Australian Government
- Formosa Plastics Group - Taiwan
- Sree Jayajothi Cements Limited - India
- Indonesian Coal Mining Association
- Posco Energy - South Korea
- Latin American Coal - Colombia
- Barasentosa Lestari - Indonesia
- Central Electricity Authority - India
- Baramulti Group, Indonesia
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Anglo American - United Kingdom
- Heidelberg Cement - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
- Ministry of Finance - Indonesia
- Attock Cement Pakistan Limited
- Krishnapatnam Port Company Ltd. - India
- Altura Mining Limited, Indonesia
- Economic Council, Georgia
- Indogreen Group - Indonesia
- IEA Clean Coal Centre - UK
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Metalloyd Limited - United Kingdom
- Grasim Industreis Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Bukit Makmur.PT - Indonesia
- TeaM Sual Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Power Finance Corporation Ltd., India
- Kalimantan Lumbung Energi - Indonesia
- Mjunction Services Limited - India
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Riau Bara Harum - Indonesia
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Salva Resources Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meralco Power Generation, Philippines
- Merrill Lynch Commodities Europe
- Semirara Mining Corp, Philippines
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Central Java Power - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- GMR Energy Limited - India
- ASAPP Information Group - India
- Global Coal Blending Company Limited - Australia
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- The State Trading Corporation of India Ltd
- PTC India Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhushan Steel Limited - India
- Australian Coal Association
- Gujarat Sidhee Cement - India
- Maharashtra Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Georgia Ports Authority, United States
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Iligan Light & Power Inc, Philippines
- White Energy Company Limited
- Africa Commodities Group - South Africa
- Star Paper Mills Limited - India
- PNOC Exploration Corporation - Philippines
- Thiess Contractors Indonesia
- Straits Asia Resources Limited - Singapore
- Orica Australia Pty. Ltd.
- Karaikal Port Pvt Ltd - India
- Mercator Lines Limited - India
- Bhoruka Overseas - Indonesia
- PowerSource Philippines DevCo
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vedanta Resources Plc - India
- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Ministry of Mines - Canada
- Romanian Commodities Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- Carbofer General Trading SA - India
- London Commodity Brokers - England
- Kartika Selabumi Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- Sinarmas Energy and Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Therma Luzon, Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Electricity Authority, New Zealand
- Maheswari Brothers Coal Limited - India
- Indo Tambangraya Megah - Indonesia
- Price Waterhouse Coopers - Russia
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Samtan Co., Ltd - South Korea
- Oldendorff Carriers - Singapore
- SMC Global Power, Philippines
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Singapore Mercantile Exchange
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