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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, 05 January 11
HIGHER COAL PRICES LIFT UP COAL STOCKS
Thermal coal price this month has gone up 5.63% to US$127.70 per ton today from mid last month at US$120.89 per ton.
Thermal coal price for next ...
Wednesday, 05 January 11
BUKIT ASAM TARGETS 20% BUY TO GROW COAL TRANSPORT CAPACITY - THE JAKARTA GLOBE
The Jakarta Globe reported that, Indonesian coal producer Tambang Batubara Bukit Asam is considering buying an additional 20 percent stake in Bukit ...
Wednesday, 05 January 11
FLOODING IN AUSTRALIA WILL CAUSE COAL PRICES TO SPIKE AT LEAST 20 PERCENT
Rising coal prices are set to spike at least 20 per cent higher because of supply shortages due to severe flooding in Australia, adding cost pressur ...
Wednesday, 05 January 11
DRY BULK MARKET BEGINS NEW YEAR ON SOUR NOTE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Seasonal factors like the worst flooding in Australia’s Queensland in half a century, coupled with thin trade activity has put the dry bulk ma ...
Tuesday, 04 January 11
THE WCI-CHINA ROUTE WAS TRADED IN THE MID US$ 10,000S - BRS DRY BULK
As reported by BRS Dry Bulk, after a stronger than expected performance in 2010, rates finished on a sombre note in December with the BDI at1,773 po ...
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- Parliament of New Zealand
- SMG Consultants - Indonesia
- Bangladesh Power Developement Board
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Medco Energi Mining Internasional
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- GMR Energy Limited - India
- Indika Energy - Indonesia
- Siam City Cement - Thailand
- Africa Commodities Group - South Africa
- MS Steel International - UAE
- VISA Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Barasentosa Lestari - Indonesia
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- CNBM International Corporation - China
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Orica Australia Pty. Ltd.
- Xindia Steels Limited - India
- European Bulk Services B.V. - Netherlands
- Ceylon Electricity Board - Sri Lanka
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Malabar Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- Cement Manufacturers Association - India
- Australian Coal Association
- Tamil Nadu electricity Board
- Ind-Barath Power Infra Limited - India
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Jindal Steel & Power Ltd - India
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Goldman Sachs - Singapore
- Sree Jayajothi Cements Limited - India
- Energy Link Ltd, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Coalindo Energy - Indonesia
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- White Energy Company Limited
- Bhoruka Overseas - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- Ministry of Transport, Egypt
- Minerals Council of Australia
- Kepco SPC Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Ambuja Cements Ltd - India
- Electricity Generating Authority of Thailand
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Dalmia Cement Bharat India
- TeaM Sual Corporation - Philippines
- London Commodity Brokers - England
- Wilmar Investment Holdings
- Rashtriya Ispat Nigam Limited - India
- Latin American Coal - Colombia
- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
- Directorate Of Revenue Intelligence - India
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- South Luzon Thermal Energy Corporation
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Intertek Mineral Services - Indonesia
- Antam Resourcindo - Indonesia
- Kaltim Prima Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Edison Trading Spa - Italy
- Simpson Spence & Young - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Karaikal Port Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Aboitiz Power Corporation - Philippines
- Thai Mozambique Logistica
- Carbofer General Trading SA - India
- IEA Clean Coal Centre - UK
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Aditya Birla Group - India
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- Standard Chartered Bank - UAE
- Salva Resources Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Billiton Holdings Pty Ltd - Australia
- Romanian Commodities Exchange
- Eastern Energy - Thailand
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- Merrill Lynch Commodities Europe
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petron Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Heidelberg Cement - Germany
- Georgia Ports Authority, United States
- Parry Sugars Refinery, India
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Kartika Selabumi Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- Uttam Galva Steels Limited - India
- Price Waterhouse Coopers - Russia
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- Ministry of Mines - Canada
- Sical Logistics Limited - India
- Bharathi Cement Corporation - India
- Kideco Jaya Agung - Indonesia
- Toyota Tsusho Corporation, Japan
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- CIMB Investment Bank - Malaysia
- Rio Tinto Coal - Australia
- SN Aboitiz Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- The Treasury - Australian Government
- Mintek Dendrill Indonesia
- Tata Chemicals Ltd - India
- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Formosa Plastics Group - Taiwan
- Riau Bara Harum - Indonesia
- PTC India Limited - India
- Posco Energy - South Korea
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- GVK Power & Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Orica Mining Services - Indonesia
- Coal and Oil Company - UAE
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
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