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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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Tuesday, 08 February 11
PUSTAKA JAYA PALU POWER LOOKING FOR 5800 GAD COAL
COALspot.com - According to market information, PT Pustaka Jaya Palu Power, a power plant operator of the Mpanau plant, Palu, Sulawesi has invited c ...
Tuesday, 08 February 11
BAYAN, KANGAROO EXTEND DUE DILIGENCE
Coal miner controlled by businessman Dato' Low Tuck Kwong PT Bayan Resources Tbk (BYAN) and Australia-listed coal company Kangaroo Resources Limite ...
Tuesday, 08 February 11
DRY BULK: IS THE TIDE TURNING? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In what could be perceived as a change of market sentiment for the better, the dry bulk industry’s benchmark, the Baltic Dry Index (BDI) poste ...
Monday, 07 February 11
THE INDONESIAN COAL REFERENCE PRICE HAS JUMPED 13.03 PERCENT IN FEBRUARY 2011
COALspot.com - Indonesia’s Ministry of Energy and Mineral Resources has set the February 2011 Indonesian Coal Reference Price for therma ...
Monday, 07 February 11
COAL PRICES ON RISE: DEMAND FROM INDIA AND CHINA - ANALYZED SUNIL K KUMBHAT
INDONESIA IS HEART OF ASIAN COAL BOOM
COALspot.com - Rising demand of Coal from India and China, coupled with global financial recovery, is driv ...
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- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Gujarat Sidhee Cement - India
- Chettinad Cement Corporation Ltd - India
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Interocean Group of Companies - India
- Altura Mining Limited, Indonesia
- Maheswari Brothers Coal Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Commodity Traders Exchange
- Gujarat Mineral Development Corp Ltd - India
- Bangladesh Power Developement Board
- Wilmar Investment Holdings
- Baramulti Group, Indonesia
- Manunggal Multi Energi - Indonesia
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- Bulk Trading Sa - Switzerland
- PetroVietnam Power Coal Import and Supply Company
- Pipit Mutiara Jaya. PT, Indonesia
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- CIMB Investment Bank - Malaysia
- Bukit Makmur.PT - Indonesia
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Kepco SPC Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Ministry of Mines - Canada
- London Commodity Brokers - England
- IEA Clean Coal Centre - UK
- PTC India Limited - India
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cement Manufacturers Association - India
- Kumho Petrochemical, South Korea
- Formosa Plastics Group - Taiwan
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- VISA Power Limited - India
- The Treasury - Australian Government
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Electricity Authority, New Zealand
- Eastern Coal Council - USA
- Central Java Power - Indonesia
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Rashtriya Ispat Nigam Limited - India
- Energy Link Ltd, New Zealand
- Minerals Council of Australia
- Madhucon Powers Ltd - India
- Jindal Steel & Power Ltd - India
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- GMR Energy Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- San Jose City I Power Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Makarim & Taira - Indonesia
- Bhoruka Overseas - Indonesia
- Eastern Energy - Thailand
- Kobexindo Tractors - Indoneisa
- Parry Sugars Refinery, India
- Aboitiz Power Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Economic Council, Georgia
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Anglo American - United Kingdom
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Jaiprakash Power Ventures ltd
- Indo Tambangraya Megah - Indonesia
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- TNB Fuel Sdn Bhd - Malaysia
- MS Steel International - UAE
- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Attock Cement Pakistan Limited
- Sarangani Energy Corporation, Philippines
- Wood Mackenzie - Singapore
- Semirara Mining and Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Meenaskhi Energy Private Limited - India
- Price Waterhouse Coopers - Russia
- TeaM Sual Corporation - Philippines
- ASAPP Information Group - India
- Miang Besar Coal Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- Ministry of Finance - Indonesia
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- Vedanta Resources Plc - India
- Agrawal Coal Company - India
- White Energy Company Limited
- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Independent Power Producers Association of India
- Australian Coal Association
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Aditya Birla Group - India
- Romanian Commodities Exchange
- Goldman Sachs - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- Siam City Cement - Thailand
- The University of Queensland
- Essar Steel Hazira Ltd - India
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- GVK Power & Infra Limited - India
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- ICICI Bank Limited - India
- Bhatia International Limited - India
- European Bulk Services B.V. - Netherlands
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Bhushan Steel Limited - India
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Grasim Industreis Ltd - India
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Global Green Power PLC Corporation, Philippines
- Renaissance Capital - South Africa
- Energy Development Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Marubeni Corporation - India
- SMG Consultants - Indonesia
- Sojitz Corporation - Japan
- Bayan Resources Tbk. - Indonesia
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Planning Commission, India
- Commonwealth Bank - Australia
- Bukit Baiduri Energy - Indonesia
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Timah Investasi Mineral - Indoneisa
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Port Waratah Coal Services - Australia
- Indian Energy Exchange, India
- Indika Energy - Indonesia
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- India Bulls Power Limited - India
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- Chamber of Mines of South Africa
- Uttam Galva Steels Limited - India
- Barasentosa Lestari - Indonesia
- Borneo Indobara - Indonesia
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