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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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Sunday, 23 January 11
THE AVERAGE CHARTER RATE FOR CAPE SIZE VESSELS WAS AT $ 8,859 PD ALMOST CLOSE TO 2008 LOWS - VISTAAR
COALspot.com - The BDI continues to drop and saw a drop of about 5 pct this week closing at 1,370 points. “ In May 2010 the BDI touched ...
Saturday, 22 January 11
POSSIBLE COAL EXPORT RESTRICTIONS ON INDONESIA UNLIKELY TO AFFECT CHURCHILL MINING - PROACTIVE INVESTORS
Proactive Investors reported that, Churchill Mining moved to reassure investors after a fall in its share price, stating that from talks with the au ...
Thursday, 20 January 11
INDONESIA MAY BAN LOW-QUALITY COAL EXPORTS FROM 2014 - BLOOMBERG
Bloomberg reported that, The Indonesian government plans to ban exports of coal with an energy value of less than 5,600 kilocalories a kilogram star ...
Thursday, 20 January 11
SUPRAS ARE DOING USD 7- 8K FOR INDONESIA-INDIA - FEARNBULK
Handy
Negative sentiment for forward positions in the Atlantic market due to lack of cargo availability and too many ballasters from the East. Con ...
Thursday, 20 January 11
ITMG TARGETS TO PRODUCE 25 MILLION TONS OF COAL THIS YEAR - BISNIS INDONESIA
Bisnis Indonesia reported that, Coal producer PT Indo Tambangraya Megah Tbk (ITMG) targets to produce 25 million tons of coal this year, a 13. ...
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- Merrill Lynch Commodities Europe
- Pendopo Energi Batubara - Indonesia
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- Indian Energy Exchange, India
- Miang Besar Coal Terminal - Indonesia
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Kideco Jaya Agung - Indonesia
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- LBH Netherlands Bv - Netherlands
- Wood Mackenzie - Singapore
- Port Waratah Coal Services - Australia
- OPG Power Generation Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- Independent Power Producers Association of India
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- SMG Consultants - Indonesia
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- ICICI Bank Limited - India
- Gujarat Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mjunction Services Limited - India
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Agrawal Coal Company - India
- Energy Link Ltd, New Zealand
- Kobexindo Tractors - Indoneisa
- Malabar Cements Ltd - India
- Ministry of Finance - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bangladesh Power Developement Board
- San Jose City I Power Corp, Philippines
- Georgia Ports Authority, United States
- Asmin Koalindo Tuhup - Indonesia
- Indo Tambangraya Megah - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Makarim & Taira - Indonesia
- SN Aboitiz Power Inc, Philippines
- Madhucon Powers Ltd - India
- IHS Mccloskey Coal Group - USA
- Antam Resourcindo - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bhatia International Limited - India
- Bukit Makmur.PT - Indonesia
- Eastern Energy - Thailand
- Australian Coal Association
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- South Luzon Thermal Energy Corporation
- Coal and Oil Company - UAE
- Jindal Steel & Power Ltd - India
- CNBM International Corporation - China
- Australian Commodity Traders Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Vizag Seaport Private Limited - India
- Ministry of Transport, Egypt
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Deloitte Consulting - India
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Chamber of Mines of South Africa
- Semirara Mining and Power Corporation, Philippines
- GMR Energy Limited - India
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- Kumho Petrochemical, South Korea
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Petron Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Bharathi Cement Corporation - India
- Videocon Industries ltd - India
- Central Java Power - Indonesia
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Singapore Mercantile Exchange
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Bulk Trading Sa - Switzerland
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Salva Resources Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Wilmar Investment Holdings
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- New Zealand Coal & Carbon
- Posco Energy - South Korea
- Standard Chartered Bank - UAE
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Directorate Of Revenue Intelligence - India
- Semirara Mining Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Larsen & Toubro Limited - India
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- ASAPP Information Group - India
- Alfred C Toepfer International GmbH - Germany
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement PLC, Thailand
- Kalimantan Lumbung Energi - Indonesia
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Borneo Indobara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Edison Trading Spa - Italy
- Siam City Cement - Thailand
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- Sical Logistics Limited - India
- White Energy Company Limited
- GN Power Mariveles Coal Plant, Philippines
- Aboitiz Power Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Africa Commodities Group - South Africa
- PTC India Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Planning Commission, India
- Electricity Generating Authority of Thailand
- Trasteel International SA, Italy
- Minerals Council of Australia
- Maharashtra Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- Jaiprakash Power Ventures ltd
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Goldman Sachs - Singapore
- Gujarat Mineral Development Corp Ltd - India
- CIMB Investment Bank - Malaysia
- Riau Bara Harum - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- VISA Power Limited - India
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Thai Mozambique Logistica
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- London Commodity Brokers - England
- The University of Queensland
- Mercuria Energy - Indonesia
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