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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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Wednesday, 26 January 11
DRY BULK MARKET TAKES YET ANOTHER NOSEDIVE, CAPESIZES LOOK RATHER UNATTRACTIVE AT THE MOMENT - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The downturn of the dry bulk market sees no boundariers, disproving even those who thought that at least for the capesize market, the worst had pass ...
Tuesday, 25 January 11
DRY BULK RATES CONTINUED TO TUMBLE LAST WEEK - BRS
With weather-related problems affecting the short-term outlook, and new building deliveries the longer-term picture, dry bulk rates continued to tum ...
Tuesday, 25 January 11
R-POWER TO INVEST $5BN IN INDONESIA - THE TIMES OF INDIA
The Times of India reported that, In what is being seen as one of the largest foreign investments in Indonesia, Reliance Power will infuse $5 billio ...
Monday, 24 January 11
GOVT PROMISES COAL FOR PLN DESPITE PRICE SPIKES - THE JAKARTA POST
The Jakarta Post reported that, the government says state electricity company PT PLN will receive enough coal to fire its power plants, despite pric ...
Monday, 24 January 11
DRY BULK MARKETS DOWNTURN SEES NO RELIEF - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has kept falling for yet another week, with the industry’s benchmark, the Baltic Dry Index (BDI) losing an additional 4.79 ...
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Thiess Contractors Indonesia
- Commonwealth Bank - Australia
- Uttam Galva Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- ICICI Bank Limited - India
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- SMG Consultants - Indonesia
- Electricity Generating Authority of Thailand
- SN Aboitiz Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Directorate General of MIneral and Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- Georgia Ports Authority, United States
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Vizag Seaport Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Semirara Mining Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Energy Link Ltd, New Zealand
- Toyota Tsusho Corporation, Japan
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- VISA Power Limited - India
- Wilmar Investment Holdings
- Mjunction Services Limited - India
- Kideco Jaya Agung - Indonesia
- Metalloyd Limited - United Kingdom
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Parliament of New Zealand
- Riau Bara Harum - Indonesia
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Coalindo Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Essar Steel Hazira Ltd - India
- Savvy Resources Ltd - HongKong
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Jindal Steel & Power Ltd - India
- Globalindo Alam Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- Aboitiz Power Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Banpu Public Company Limited - Thailand
- GMR Energy Limited - India
- Manunggal Multi Energi - Indonesia
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Goldman Sachs - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sinarmas Energy and Mining - Indonesia
- India Bulls Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Indogreen Group - Indonesia
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Carbofer General Trading SA - India
- Mintek Dendrill Indonesia
- Leighton Contractors Pty Ltd - Australia
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
- London Commodity Brokers - England
- Economic Council, Georgia
- Ceylon Electricity Board - Sri Lanka
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Tata Chemicals Ltd - India
- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Simpson Spence & Young - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- Cement Manufacturers Association - India
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- GAC Shipping (India) Pvt Ltd
- Bharathi Cement Corporation - India
- Thai Mozambique Logistica
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Deloitte Consulting - India
- Larsen & Toubro Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Malabar Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- The Treasury - Australian Government
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Xindia Steels Limited - India
- McConnell Dowell - Australia
- White Energy Company Limited
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Rashtriya Ispat Nigam Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- PowerSource Philippines DevCo
- Planning Commission, India
- Electricity Authority, New Zealand
- Minerals Council of Australia
- PNOC Exploration Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Tamil Nadu electricity Board
- The State Trading Corporation of India Ltd
- Barasentosa Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Dalmia Cement Bharat India
- Samtan Co., Ltd - South Korea
- Indonesian Coal Mining Association
- Central Java Power - Indonesia
- Mercuria Energy - Indonesia
- Attock Cement Pakistan Limited
- Grasim Industreis Ltd - India
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
- Star Paper Mills Limited - India
- Meenaskhi Energy Private Limited - India
- Meralco Power Generation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Sakthi Sugars Limited - India
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- Ministry of Finance - Indonesia
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Latin American Coal - Colombia
- Kartika Selabumi Mining - Indonesia
- Eastern Coal Council - USA
- Romanian Commodities Exchange
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Pendopo Energi Batubara - Indonesia
- New Zealand Coal & Carbon
- Petrochimia International Co. Ltd.- Taiwan
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Maheswari Brothers Coal Limited - India
- Australian Commodity Traders Exchange
- Singapore Mercantile Exchange
- Videocon Industries ltd - India
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- Ministry of Transport, Egypt
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Sojitz Corporation - Japan
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
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