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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 February 11
SUPRAMAX MARKET IS IMPROVING IN THE PACIFIC
BRS - A 10% rise in the BDI this week, mostly on the back of Panamax rates and improvements in the Supramax market in the Pacific. For the Capes, ra ...
Monday, 21 February 11
CHURCHILL MINING RECEIVES SIGNIFICANT INTEREST, PROPOSALS TO DEVELOP EAST KUTAI COAL PROJECT - PROACTIVE INVESTORS
Proactive Investors reported that, Churchill Mining has received a number of specific proposals to fund and develop its massive East Kutai coa ...
Monday, 21 February 11
ABOLISH 5% DUTY ON COAL IMPORTS: SHINDE
Indian Express reported that, with acute coal shortage of domestic coal threatening to destabilise its power generation plans, the power ministry ha ...
Saturday, 19 February 11
THE FREIGHT MARKET EXPECTED TO BE STEADY NEXT WEEK - VISTAAR
COALspot.com - The market was quite firm this week with freight rates in South east asia and India/Feast almost up by 30 pct.
However towards end ...
Thursday, 17 February 11
COAL-GEN EUROPE 2011 REAFFIRMS THE IMPORTANCE OF COAL
Press Release: The third COAL-GEN Europe conference and exhibition, kicked off on Tuesday 15 February, with leading experts, professionals and compa ...
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- Cement Manufacturers Association - India
- Electricity Generating Authority of Thailand
- Thiess Contractors Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Commonwealth Bank - Australia
- Coal and Oil Company - UAE
- Orica Mining Services - Indonesia
- The Treasury - Australian Government
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Interocean Group of Companies - India
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- Mercuria Energy - Indonesia
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Oldendorff Carriers - Singapore
- Binh Thuan Hamico - Vietnam
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vizag Seaport Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- South Luzon Thermal Energy Corporation
- Larsen & Toubro Limited - India
- Gujarat Sidhee Cement - India
- Essar Steel Hazira Ltd - India
- Minerals Council of Australia
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Georgia Ports Authority, United States
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- Holcim Trading Pte Ltd - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- India Bulls Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Indo Tambangraya Megah - Indonesia
- Global Business Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Authority, New Zealand
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Bukit Makmur.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Sojitz Corporation - Japan
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Global Coal Blending Company Limited - Australia
- Central Java Power - Indonesia
- Indian Oil Corporation Limited
- Mercator Lines Limited - India
- Salva Resources Pvt Ltd - India
- Goldman Sachs - Singapore
- Bharathi Cement Corporation - India
- Carbofer General Trading SA - India
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Savvy Resources Ltd - HongKong
- Petrochimia International Co. Ltd.- Taiwan
- Romanian Commodities Exchange
- Thai Mozambique Logistica
- Eastern Energy - Thailand
- Marubeni Corporation - India
- Planning Commission, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kumho Petrochemical, South Korea
- Kaltim Prima Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- Baramulti Group, Indonesia
- Samtan Co., Ltd - South Korea
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Metalloyd Limited - United Kingdom
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Malabar Cements Ltd - India
- Antam Resourcindo - Indonesia
- MS Steel International - UAE
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- VISA Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Coastal Gujarat Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Kepco SPC Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- ICICI Bank Limited - India
- Parry Sugars Refinery, India
- White Energy Company Limited
- Kohat Cement Company Ltd. - Pakistan
- Sical Logistics Limited - India
- Krishnapatnam Port Company Ltd. - India
- Chettinad Cement Corporation Ltd - India
- Sakthi Sugars Limited - India
- Chamber of Mines of South Africa
- Bukit Baiduri Energy - Indonesia
- Lanco Infratech Ltd - India
- Bhatia International Limited - India
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- SMC Global Power, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Independent Power Producers Association of India
- PetroVietnam Power Coal Import and Supply Company
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Finance - Indonesia
- CNBM International Corporation - China
- Indian Energy Exchange, India
- Simpson Spence & Young - Indonesia
- PNOC Exploration Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- Indika Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Standard Chartered Bank - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Heidelberg Cement - Germany
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Grasim Industreis Ltd - India
- Bayan Resources Tbk. - Indonesia
- Renaissance Capital - South Africa
- GAC Shipping (India) Pvt Ltd
- Sinarmas Energy and Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Sree Jayajothi Cements Limited - India
- Bulk Trading Sa - Switzerland
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- McConnell Dowell - Australia
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Power Finance Corporation Ltd., India
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- Aditya Birla Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Jaiprakash Power Ventures ltd
- Latin American Coal - Colombia
- Meenaskhi Energy Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- ASAPP Information Group - India
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