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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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Friday, 11 February 11
DRY BULK MARKET HEATING UP ON FRESH CARGO DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market is on a high this week, with owners of smaller vessels turning their attention towards the spot market, in order to take advanta ...
Thursday, 10 February 11
SUPRA RATES IMPROVED A LITTLE OVER US$ 6K BSS N. CHINA DELIVERY FOR INDO-INDIA AND THAILAND ROUNDS - FEARNBULK
Handy
Atl is still weak with little fresh enquiry and an accumulation of spot tonnage.Owners are reluctant to send tonnage thru Suez due to uncert ...
Thursday, 10 February 11
BUKIT ASAM EXPECTS ABOVE RP 3 TRIO PROFIT
The state-owned coal miner PT Tambang Bukit Asam Tbk (PTBA) expects to reach 2011's net profit above Rp 3 trillion (US$ 336,322,568) from above Rp2 ...
Wednesday, 09 February 11
INDONESIA ALLOWED 60 COAL TRADING COMPANIES TO EXPORT COAL
COALspot.com - A temporary ban imposed on coal traders in January has lifted this week. As of today 60coal trading companies were allowed to resume ...
Tuesday, 08 February 11
INDIA'S SIMHAPURU TARGETS S.AFRICAN COAL - ECONOMIC TIMES
Economic Times reported that, India's Simhapuri Energy , a unit of the Madhucon Group , wants to buy new or existing collieries in South Africa fro ...
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- Jindal Steel & Power Ltd - India
- LBH Netherlands Bv - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- Timah Investasi Mineral - Indoneisa
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Kepco SPC Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Electricity Authority, New Zealand
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Finance - Indonesia
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- PNOC Exploration Corporation - Philippines
- Bharathi Cement Corporation - India
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- Vedanta Resources Plc - India
- Bahari Cakrawala Sebuku - Indonesia
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Heidelberg Cement - Germany
- Kumho Petrochemical, South Korea
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Planning Commission, India
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- MS Steel International - UAE
- Latin American Coal - Colombia
- Ambuja Cements Ltd - India
- Cement Manufacturers Association - India
- Coastal Gujarat Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Aditya Birla Group - India
- Parliament of New Zealand
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- PTC India Limited - India
- Minerals Council of Australia
- Makarim & Taira - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Thai Mozambique Logistica
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Xindia Steels Limited - India
- Bangladesh Power Developement Board
- Aboitiz Power Corporation - Philippines
- The University of Queensland
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Orica Mining Services - Indonesia
- Indian Energy Exchange, India
- The Treasury - Australian Government
- Kapuas Tunggal Persada - Indonesia
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Kobexindo Tractors - Indoneisa
- Energy Development Corp, Philippines
- Goldman Sachs - Singapore
- Malabar Cements Ltd - India
- Petron Corporation, Philippines
- Global Business Power Corporation, Philippines
- Interocean Group of Companies - India
- Semirara Mining Corp, Philippines
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement PLC, Thailand
- London Commodity Brokers - England
- Bhoruka Overseas - Indonesia
- ASAPP Information Group - India
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Therma Luzon, Inc, Philippines
- Posco Energy - South Korea
- Videocon Industries ltd - India
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Rio Tinto Coal - Australia
- ICICI Bank Limited - India
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- San Jose City I Power Corp, Philippines
- Deloitte Consulting - India
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Eastern Energy - Thailand
- Australian Coal Association
- Gujarat Mineral Development Corp Ltd - India
- Vizag Seaport Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sarangani Energy Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Riau Bara Harum - Indonesia
- Wood Mackenzie - Singapore
- Indika Energy - Indonesia
- White Energy Company Limited
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Carbofer General Trading SA - India
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Kideco Jaya Agung - Indonesia
- Meralco Power Generation, Philippines
- SN Aboitiz Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Medco Energi Mining Internasional
- Uttam Galva Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Mercator Lines Limited - India
- Energy Link Ltd, New Zealand
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Parry Sugars Refinery, India
- SMG Consultants - Indonesia
- Globalindo Alam Lestari - Indonesia
- Samtan Co., Ltd - South Korea
- Attock Cement Pakistan Limited
- Central Java Power - Indonesia
- Dalmia Cement Bharat India
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- McConnell Dowell - Australia
- Price Waterhouse Coopers - Russia
- Star Paper Mills Limited - India
- Singapore Mercantile Exchange
- Renaissance Capital - South Africa
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- Ministry of Transport, Egypt
- Directorate Of Revenue Intelligence - India
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Semirara Mining and Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- GMR Energy Limited - India
- International Coal Ventures Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- PowerSource Philippines DevCo
- Romanian Commodities Exchange
- Indonesian Coal Mining Association
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