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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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Saturday, 29 January 11
ANTAM ACQUIRES SAROLANGUN COAL MINING
According to Insider Stories, Nickel and gold miner PT Aneka Tambang Tbk (Antam) of Indonesia via its subsidiary PT Indonesia Coal Resources (ICR) h ...
Friday, 28 January 11
MPM SEEKS 40K TONS OF INDONESIAN COAL
An Indian paper producer Mysore Paper Mills Ltd., based in Bangalore is looking for 40,000 metric tons of non-coking coal of Indonesian o ...
Friday, 28 January 11
TRADING PERMIT DELAYS THREATEN EXPORTS - THE JAKARTA GLOBE
The Jakarta Globe reported that, an ongoing wrangle over licenses for mining traders could hurt investment, a coal mining association chief said on ...
Friday, 28 January 11
DRY BULK MARKET CLOSING IN TOWARDS CRISIS LEVELS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The trials and tribulations of the dry bulk market seem to have no end during the first month of 2011, as the industry’s benchmark, the Baltic ...
Wednesday, 26 January 11
ADANI TO SET-UP RAIL, PORT AND POWER PROJECTS IN INDONESIA - MONEYCONTROL
Moneycontrol reported that, Adani Enterprises, the flagship company of India’s infrastructure conglomerate the Adani Group, today announced th ...
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- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Planning Commission, India
- Madhucon Powers Ltd - India
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Siam City Cement - Thailand
- Central Java Power - Indonesia
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- Kepco SPC Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Altura Mining Limited, Indonesia
- Interocean Group of Companies - India
- Gujarat Mineral Development Corp Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Sakthi Sugars Limited - India
- OPG Power Generation Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- PowerSource Philippines DevCo
- Kumho Petrochemical, South Korea
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Maheswari Brothers Coal Limited - India
- Merrill Lynch Commodities Europe
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Bukit Makmur.PT - Indonesia
- Attock Cement Pakistan Limited
- McConnell Dowell - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Renaissance Capital - South Africa
- South Luzon Thermal Energy Corporation
- Neyveli Lignite Corporation Ltd, - India
- Riau Bara Harum - Indonesia
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sojitz Corporation - Japan
- MS Steel International - UAE
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Energy Development Corp, Philippines
- ASAPP Information Group - India
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- IHS Mccloskey Coal Group - USA
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- Cement Manufacturers Association - India
- Uttam Galva Steels Limited - India
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- Economic Council, Georgia
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- Indo Tambangraya Megah - Indonesia
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Carbofer General Trading SA - India
- Siam City Cement PLC, Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Billiton Holdings Pty Ltd - Australia
- Rio Tinto Coal - Australia
- Manunggal Multi Energi - Indonesia
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Edison Trading Spa - Italy
- Port Waratah Coal Services - Australia
- Commonwealth Bank - Australia
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Romanian Commodities Exchange
- Parry Sugars Refinery, India
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
- CNBM International Corporation - China
- Malabar Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Thai Mozambique Logistica
- Mjunction Services Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Banpu Public Company Limited - Thailand
- Metalloyd Limited - United Kingdom
- Ministry of Mines - Canada
- London Commodity Brokers - England
- Indika Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Aditya Birla Group - India
- Semirara Mining Corp, Philippines
- Indian Oil Corporation Limited
- Marubeni Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- Aboitiz Power Corporation - Philippines
- Bharathi Cement Corporation - India
- Videocon Industries ltd - India
- Bangladesh Power Developement Board
- Singapore Mercantile Exchange
- Directorate General of MIneral and Coal - Indonesia
- Lanco Infratech Ltd - India
- Sical Logistics Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- Electricity Authority, New Zealand
- Binh Thuan Hamico - Vietnam
- Australian Commodity Traders Exchange
- LBH Netherlands Bv - Netherlands
- Mintek Dendrill Indonesia
- Iligan Light & Power Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Agrawal Coal Company - India
- Global Coal Blending Company Limited - Australia
- Semirara Mining and Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Jaiprakash Power Ventures ltd
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- Borneo Indobara - Indonesia
- Intertek Mineral Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Independent Power Producers Association of India
- Power Finance Corporation Ltd., India
- Antam Resourcindo - Indonesia
- Coastal Gujarat Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Indogreen Group - Indonesia
- Posco Energy - South Korea
- PTC India Limited - India
- Chamber of Mines of South Africa
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Savvy Resources Ltd - HongKong
- Bukit Asam (Persero) Tbk - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bayan Resources Tbk. - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The Treasury - Australian Government
- Wood Mackenzie - Singapore
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Toyota Tsusho Corporation, Japan
- Orica Mining Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- India Bulls Power Limited - India
- Deloitte Consulting - India
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Central Electricity Authority - India
- Sindya Power Generating Company Private Ltd
- Eastern Coal Council - USA
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- Bhatia International Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Kartika Selabumi Mining - Indonesia
- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
- The University of Queensland
- Makarim & Taira - Indonesia
- Grasim Industreis Ltd - India
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
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