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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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Thursday, 24 February 11
DRY BULK MARKET KEEPS LOSING GROUND, CAPESIZES SUFFERING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market lost further ground yesterday, as the industry’s benchmark, the Baltic Dry Index was rapidly falling, ending the session d ...
Thursday, 24 February 11
SUPRAS ARE FIXED AT CLOSE TO 10K FOR TRIPS VIA INDONESIA TO INDIA WITH COAL - FEARNBULK
Handy
After a short lived surge in rates the Atlantic market has flattened out due to too many spot vessels. The USGulf has cooled down somewhat f ...
Wednesday, 23 February 11
LIMITED AVAILABILITY OF COAL COULD TRIP MEGA POWER PLANT - THE ECONOMIC TIMES
The Economic Times, an Indian leading news paper reported that, an acute shortage of domestic coal is threatening to destabilize new power generatio ...
Wednesday, 23 February 11
DRY BULK MARKET BACK ON RETREAT MODE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The two week rise of dry bulk freight rates seems to have come to a halt this week, with the industry’s benchmark, the Baltic Dry Index (BDI) lo ...
Wednesday, 23 February 11
INDONESIA NEEDS TO REVISE EXPORT BAN ON 5600 GAD COAL EXPORT - INDUSTRY
COALspot.com - The Indonesian government may be forced to revise its 2014 timeline for the proposed ban on all low quality coal exports, Patrick Han ...
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- The Treasury - Australian Government
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
- Coastal Gujarat Power Limited - India
- Bhushan Steel Limited - India
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Holcim Trading Pte Ltd - Singapore
- ASAPP Information Group - India
- Chettinad Cement Corporation Ltd - India
- IHS Mccloskey Coal Group - USA
- ICICI Bank Limited - India
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Cigading International Bulk Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Intertek Mineral Services - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Ministry of Mines - Canada
- Vijayanagar Sugar Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Karaikal Port Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- Malabar Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Sinarmas Energy and Mining - Indonesia
- GMR Energy Limited - India
- Antam Resourcindo - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Petron Corporation, Philippines
- Africa Commodities Group - South Africa
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Ambuja Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- CIMB Investment Bank - Malaysia
- IEA Clean Coal Centre - UK
- Latin American Coal - Colombia
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- Neyveli Lignite Corporation Ltd, - India
- Parry Sugars Refinery, India
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Therma Luzon, Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Minerals Council of Australia
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- Chamber of Mines of South Africa
- Planning Commission, India
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Simpson Spence & Young - Indonesia
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Mintek Dendrill Indonesia
- OPG Power Generation Pvt Ltd - India
- Goldman Sachs - Singapore
- LBH Netherlands Bv - Netherlands
- Global Green Power PLC Corporation, Philippines
- Vedanta Resources Plc - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Attock Cement Pakistan Limited
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Deloitte Consulting - India
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Thai Mozambique Logistica
- Sakthi Sugars Limited - India
- Riau Bara Harum - Indonesia
- PowerSource Philippines DevCo
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Kepco SPC Power Corporation, Philippines
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- Aditya Birla Group - India
- Tata Chemicals Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Eastern Coal Council - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Indogreen Group - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Anglo American - United Kingdom
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Videocon Industries ltd - India
- Billiton Holdings Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Larsen & Toubro Limited - India
- Central Java Power - Indonesia
- Essar Steel Hazira Ltd - India
- Eastern Energy - Thailand
- Edison Trading Spa - Italy
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Wilmar Investment Holdings
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining and Power Corporation, Philippines
- SMC Global Power, Philippines
- Oldendorff Carriers - Singapore
- Ceylon Electricity Board - Sri Lanka
- Power Finance Corporation Ltd., India
- Karbindo Abesyapradhi - Indoneisa
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Indian Energy Exchange, India
- Krishnapatnam Port Company Ltd. - India
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Orica Australia Pty. Ltd.
- Commonwealth Bank - Australia
- TeaM Sual Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- VISA Power Limited - India
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- Kalimantan Lumbung Energi - Indonesia
- Uttam Galva Steels Limited - India
- Banpu Public Company Limited - Thailand
- Tamil Nadu electricity Board
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- Central Electricity Authority - India
- Global Coal Blending Company Limited - Australia
- Kobexindo Tractors - Indoneisa
- The State Trading Corporation of India Ltd
- Directorate Of Revenue Intelligence - India
- Medco Energi Mining Internasional
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Business Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Australian Coal Association
- Bhoruka Overseas - Indonesia
- Toyota Tsusho Corporation, Japan
- Indo Tambangraya Megah - Indonesia
- Wood Mackenzie - Singapore
- Jaiprakash Power Ventures ltd
- Ministry of Finance - Indonesia
- Indian Oil Corporation Limited
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- Energy Development Corp, Philippines
- PTC India Limited - India
- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Barasentosa Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Gujarat Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- Interocean Group of Companies - India
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Cement Manufacturers Association - India
- Salva Resources Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Posco Energy - South Korea
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- Xindia Steels Limited - India
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