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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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- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- Medco Energi Mining Internasional
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bhatia International Limited - India
- European Bulk Services B.V. - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Minerals Council of Australia
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Electricity Authority, New Zealand
- Chettinad Cement Corporation Ltd - India
- Mintek Dendrill Indonesia
- Coal and Oil Company - UAE
- Posco Energy - South Korea
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Gujarat Sidhee Cement - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- Toyota Tsusho Corporation, Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Commonwealth Bank - Australia
- Ministry of Finance - Indonesia
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Indonesian Coal Mining Association
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ASAPP Information Group - India
- GMR Energy Limited - India
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- Ambuja Cements Ltd - India
- Dalmia Cement Bharat India
- Ind-Barath Power Infra Limited - India
- Bulk Trading Sa - Switzerland
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Makarim & Taira - Indonesia
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- Energy Development Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
- Thiess Contractors Indonesia
- Goldman Sachs - Singapore
- Wilmar Investment Holdings
- Central Electricity Authority - India
- Cigading International Bulk Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Central Java Power - Indonesia
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- Coastal Gujarat Power Limited - India
- Binh Thuan Hamico - Vietnam
- Star Paper Mills Limited - India
- Rio Tinto Coal - Australia
- PowerSource Philippines DevCo
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- Petrochimia International Co. Ltd.- Taiwan
- TeaM Sual Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Therma Luzon, Inc, Philippines
- Indian Energy Exchange, India
- Renaissance Capital - South Africa
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Simpson Spence & Young - Indonesia
- CIMB Investment Bank - Malaysia
- Chamber of Mines of South Africa
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Timah Investasi Mineral - Indoneisa
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Planning Commission, India
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Coalindo Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bhoruka Overseas - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- Sakthi Sugars Limited - India
- Aboitiz Power Corporation - Philippines
- PNOC Exploration Corporation - Philippines
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- AsiaOL BioFuels Corp., Philippines
- Leighton Contractors Pty Ltd - Australia
- Metalloyd Limited - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- GVK Power & Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Transport, Egypt
- Riau Bara Harum - Indonesia
- Kobexindo Tractors - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Sree Jayajothi Cements Limited - India
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Videocon Industries ltd - India
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- Interocean Group of Companies - India
- Oldendorff Carriers - Singapore
- India Bulls Power Limited - India
- Eastern Energy - Thailand
- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Jindal Steel & Power Ltd - India
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Vedanta Resources Plc - India
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Samtan Co., Ltd - South Korea
- Attock Cement Pakistan Limited
- Siam City Cement PLC, Thailand
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Formosa Plastics Group - Taiwan
- SMC Global Power, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Energy Link Ltd, New Zealand
- Kartika Selabumi Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Semirara Mining and Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Agrawal Coal Company - India
- PetroVietnam Power Coal Import and Supply Company
- Karbindo Abesyapradhi - Indoneisa
- Lanco Infratech Ltd - India
- London Commodity Brokers - England
- Kohat Cement Company Ltd. - Pakistan
- Independent Power Producers Association of India
- Sojitz Corporation - Japan
- Xindia Steels Limited - India
- Economic Council, Georgia
- CNBM International Corporation - China
- Ceylon Electricity Board - Sri Lanka
- The University of Queensland
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