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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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Thursday, 20 January 11
DRY BULK MARKETS FALL SEES NO END - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Pundits indicating that the dry bulk market’s sentiment remains weak were justified, as the industry’s benchmark, the Baltic Dry Index ( ...
Wednesday, 19 January 11
DRY BULK MARKET HAS BOTTOMED OUT, AS WEATHER IN AUSTRALIA DIALS DOWN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has finally halted its plunge, after a devastating week of yet more losses. The industry’s benchmark, the Baltic Dry Index ...
Tuesday, 18 January 11
MINISTRY SEEKS COAL FROM INDONESIA - SUNDAY OBSERVER
Sunday Observer reported that, Ministry of Power and Energy is to explore the possibilities of importing quality coal from Indonesia.
Minister Pa ...
Tuesday, 18 January 11
DRY BULK MARKET HAS BOTTOMED OUT, AS WEATHER IN AUSTRALIA DIALS DOWN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has finally halted its plunge, after a devastating week of yet more losses. The industry’s benchmark, the Baltic Dry Index ...
Sunday, 16 January 11
STANCHART GLOBAL RESEARCH SEES COAL PRICE RISING ON SUPPLY DISRUPTION - BURSA MALAYSIA MARKET NEWS
Bursa Malaysia Market News reported that, Standard Chartered Global Research has upgraded its 2011 forecasts for global thermal coal prices based on ...
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- Energy Link Ltd, New Zealand
- Ambuja Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Edison Trading Spa - Italy
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Attock Cement Pakistan Limited
- Bayan Resources Tbk. - Indonesia
- Trasteel International SA, Italy
- GMR Energy Limited - India
- Toyota Tsusho Corporation, Japan
- Bulk Trading Sa - Switzerland
- Bharathi Cement Corporation - India
- Vizag Seaport Private Limited - India
- Kumho Petrochemical, South Korea
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Generating Authority of Thailand
- Metalloyd Limited - United Kingdom
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Kaltim Prima Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- Central Java Power - Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Coastal Gujarat Power Limited - India
- Marubeni Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMC Global Power, Philippines
- Meralco Power Generation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Bhatia International Limited - India
- Borneo Indobara - Indonesia
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Oldendorff Carriers - Singapore
- Directorate Of Revenue Intelligence - India
- Global Business Power Corporation, Philippines
- Ministry of Mines - Canada
- The Treasury - Australian Government
- Kapuas Tunggal Persada - Indonesia
- Krishnapatnam Port Company Ltd. - India
- New Zealand Coal & Carbon
- Interocean Group of Companies - India
- Asmin Koalindo Tuhup - Indonesia
- Sree Jayajothi Cements Limited - India
- Semirara Mining and Power Corporation, Philippines
- McConnell Dowell - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parliament of New Zealand
- Kideco Jaya Agung - Indonesia
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Dalmia Cement Bharat India
- Eastern Coal Council - USA
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Simpson Spence & Young - Indonesia
- Madhucon Powers Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Alfred C Toepfer International GmbH - Germany
- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indika Energy - Indonesia
- Videocon Industries ltd - India
- Mercuria Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- ICICI Bank Limited - India
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Star Paper Mills Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- VISA Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Siam City Cement PLC, Thailand
- Mjunction Services Limited - India
- Carbofer General Trading SA - India
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Anglo American - United Kingdom
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- Iligan Light & Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Cement Manufacturers Association - India
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Intertek Mineral Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Siam City Cement - Thailand
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Power Finance Corporation Ltd., India
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Singapore Mercantile Exchange
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Sarangani Energy Corporation, Philippines
- CNBM International Corporation - China
- London Commodity Brokers - England
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- TeaM Sual Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Thiess Contractors Indonesia
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- European Bulk Services B.V. - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- GAC Shipping (India) Pvt Ltd
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- Indonesian Coal Mining Association
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Parry Sugars Refinery, India
- Merrill Lynch Commodities Europe
- South Luzon Thermal Energy Corporation
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Medco Energi Mining Internasional
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Tata Chemicals Ltd - India
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Planning Commission, India
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Aboitiz Power Corporation - Philippines
- The University of Queensland
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Semirara Mining Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Holcim Trading Pte Ltd - Singapore
- Global Green Power PLC Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- GVK Power & Infra Limited - India
- Grasim Industreis Ltd - India
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- SN Aboitiz Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Bhoruka Overseas - Indonesia
- Karaikal Port Pvt Ltd - India
- Vedanta Resources Plc - India
- Jaiprakash Power Ventures ltd
- Heidelberg Cement - Germany
- PTC India Limited - India
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Deloitte Consulting - India
- Renaissance Capital - South Africa
- Minerals Council of Australia
- Pendopo Energi Batubara - Indonesia
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Bukit Baiduri Energy - Indonesia
- India Bulls Power Limited - India
- Economic Council, Georgia
- ASAPP Information Group - India
- Australian Coal Association
- Petron Corporation, Philippines
- Coal and Oil Company - UAE
- Indian Energy Exchange, India
- Standard Chartered Bank - UAE
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