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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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Monday, 07 February 11
RICHARDS BAY COAL TERMINAL EXPORTS SURGE, BUOYED BY ECONOMIC DEVELOPMENT IN CHINA AND INDIA
COALspot.com - Richards Bay Coal Terminal (RBCT) announced today that 2010 exports have exceeded the last two years’ performance, said in a re ...
Monday, 07 February 11
RBCT SHIPPED 28.67 PERCENT LESS COAL IN JANUARY
COALspot.com - Richards Bay Coal Terminal (RBCT) is the single largest export coal terminal in the world, shipped 4,389,925 MT of coal in January 20 ...
Sunday, 06 February 11
THE PANAMAX & SUPRAMAX FUTURES FOR 2011-2013 WAS AT AROUND US$ 16,500 & US$ 15,000 PER DAY RESPECTIVELY
COALspot.com - With the Chinese new year holidays this week, the market has been fairly quite as expected.
The BDI saw a bigger drop compared to ...
Saturday, 05 February 11
INDONESIAN ENERGY MINISTER HAS SIGNED A DECREE FOR COAL TRANSPORTATION PERMITS ON FRIDAY
COALspot.com - Minister of Energy, Darwin Minister Saleh said, that, he had signed a decree for transportation and sale of coal, which was the ...
Saturday, 05 February 11
ANCHORAGE LOADING POINT MOVED TO MUARA JAWA
COALspot.com - The Ministry of Transportation Republic Indonesia has announced that, the loading point at Muara Berau, East kalimantan h ...
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- Ceylon Electricity Board - Sri Lanka
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- ICICI Bank Limited - India
- Lanco Infratech Ltd - India
- Latin American Coal - Colombia
- Pipit Mutiara Jaya. PT, Indonesia
- Attock Cement Pakistan Limited
- Semirara Mining Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Parry Sugars Refinery, India
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Banpu Public Company Limited - Thailand
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Commonwealth Bank - Australia
- Anglo American - United Kingdom
- India Bulls Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Kaltim Prima Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Australian Commodity Traders Exchange
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Jindal Steel & Power Ltd - India
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Bangladesh Power Developement Board
- Energy Link Ltd, New Zealand
- Salva Resources Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Gujarat Mineral Development Corp Ltd - India
- Meralco Power Generation, Philippines
- San Jose City I Power Corp, Philippines
- Barasentosa Lestari - Indonesia
- Antam Resourcindo - Indonesia
- Georgia Ports Authority, United States
- Ambuja Cements Ltd - India
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- Wood Mackenzie - Singapore
- Goldman Sachs - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- VISA Power Limited - India
- Central Electricity Authority - India
- PowerSource Philippines DevCo
- The Treasury - Australian Government
- Electricity Generating Authority of Thailand
- Altura Mining Limited, Indonesia
- Samtan Co., Ltd - South Korea
- South Luzon Thermal Energy Corporation
- Aditya Birla Group - India
- Merrill Lynch Commodities Europe
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- Coalindo Energy - Indonesia
- The University of Queensland
- Ministry of Transport, Egypt
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Simpson Spence & Young - Indonesia
- Medco Energi Mining Internasional
- Interocean Group of Companies - India
- Planning Commission, India
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Carbofer General Trading SA - India
- Directorate General of MIneral and Coal - Indonesia
- Energy Development Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Coastal Gujarat Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- ASAPP Information Group - India
- Posco Energy - South Korea
- Chettinad Cement Corporation Ltd - India
- Mercuria Energy - Indonesia
- Bharathi Cement Corporation - India
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- SMC Global Power, Philippines
- Riau Bara Harum - Indonesia
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Borneo Indobara - Indonesia
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- GN Power Mariveles Coal Plant, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Ministry of Mines - Canada
- Maheswari Brothers Coal Limited - India
- Kumho Petrochemical, South Korea
- SMG Consultants - Indonesia
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Deloitte Consulting - India
- McConnell Dowell - Australia
- Gujarat Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- IEA Clean Coal Centre - UK
- Jorong Barutama Greston.PT - Indonesia
- Mjunction Services Limited - India
- Coal and Oil Company - UAE
- Meenaskhi Energy Private Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Baramulti Group, Indonesia
- CNBM International Corporation - China
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rashtriya Ispat Nigam Limited - India
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- Thiess Contractors Indonesia
- Globalindo Alam Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Formosa Plastics Group - Taiwan
- Port Waratah Coal Services - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Finance - Indonesia
- Sojitz Corporation - Japan
- Indian Oil Corporation Limited
- Australian Coal Association
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Indogreen Group - Indonesia
- Therma Luzon, Inc, Philippines
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- Dalmia Cement Bharat India
- Standard Chartered Bank - UAE
- Sical Logistics Limited - India
- Bukit Makmur.PT - Indonesia
- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Agrawal Coal Company - India
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Jaiprakash Power Ventures ltd
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Madhucon Powers Ltd - India
- Bulk Trading Sa - Switzerland
- Manunggal Multi Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- Singapore Mercantile Exchange
- Vijayanagar Sugar Pvt Ltd - India
- Thai Mozambique Logistica
- Intertek Mineral Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Central Java Power - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Authority, New Zealand
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