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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.
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Tuesday, 04 January 11
BALI, INDONESIA HOST OF WORLD RENEWABLE ENERGY AND ENERGY EFFICIENCY CONFERENCE
Press Release - Indonesian Renewable Energy Society (METI – IRES) has launched the plan for organizing the international gathering ...
Tuesday, 04 January 11
DRY BULK MARKET TO RANGE BETWEEN 1,700 AND 2,600 POINTS IN THE FIRST QUARTER OF 2011, ANALYSTS SAY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
As we entered 2011, ship owners and analysts, as well as shipbrokers are looking into their “crystal balls” to try to decode the dry bul ...
Sunday, 02 January 11
JAISWAL TO SEEK COAL MINES IN AFRICA - HINDUSTAN TIMES
Coal Minister Sriprakash Jaiswal will talk with his counterparts in South Africa and Mozambique during his visit from January 5 to secure coal asset ...
Saturday, 01 January 11
COAL PRODUCTION EXPECTED TO EXCEED 340 MILLION TONS THIS YEAR - THE JAKARTA POST
The Jakarta Post reported that, Indonesian coal miners expect to produce 340 million tons of coal in 2011, an increase of 23 percent from 275 millio ...
Friday, 31 December 10
STC TO FINALIZE 12 MILLION MT OF COAL IMPORT CONTRACT TO TWO INDIAN AND A DUBAI BASED COAL TRADER - SOURCES
COALspot.com - World's single largest coal import tender floated by STC on behalf of state utility NTPC to finalize its suppliers or already finali ...
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- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Independent Power Producers Association of India
- Wilmar Investment Holdings
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Global Coal Blending Company Limited - Australia
- Kapuas Tunggal Persada - Indonesia
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- TeaM Sual Corporation - Philippines
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- Semirara Mining Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Sical Logistics Limited - India
- Parliament of New Zealand
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
- Africa Commodities Group - South Africa
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Lanco Infratech Ltd - India
- Meralco Power Generation, Philippines
- Straits Asia Resources Limited - Singapore
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Kideco Jaya Agung - Indonesia
- Bukit Baiduri Energy - Indonesia
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- Indika Energy - Indonesia
- PTC India Limited - India
- Intertek Mineral Services - Indonesia
- CIMB Investment Bank - Malaysia
- Kumho Petrochemical, South Korea
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- IHS Mccloskey Coal Group - USA
- Kohat Cement Company Ltd. - Pakistan
- Jindal Steel & Power Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Maheswari Brothers Coal Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Commonwealth Bank - Australia
- Karaikal Port Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Singapore Mercantile Exchange
- Chamber of Mines of South Africa
- New Zealand Coal & Carbon
- Marubeni Corporation - India
- Formosa Plastics Group - Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- ASAPP Information Group - India
- CNBM International Corporation - China
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Directorate Of Revenue Intelligence - India
- Aditya Birla Group - India
- MS Steel International - UAE
- Minerals Council of Australia
- Deloitte Consulting - India
- Parry Sugars Refinery, India
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Siam City Cement - Thailand
- GMR Energy Limited - India
- Economic Council, Georgia
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Indian Energy Exchange, India
- Goldman Sachs - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- India Bulls Power Limited - India
- Heidelberg Cement - Germany
- Xindia Steels Limited - India
- Therma Luzon, Inc, Philippines
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Ambuja Cements Ltd - India
- The University of Queensland
- Metalloyd Limited - United Kingdom
- Manunggal Multi Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Global Green Power PLC Corporation, Philippines
- Posco Energy - South Korea
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- Planning Commission, India
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Agrawal Coal Company - India
- SMG Consultants - Indonesia
- The State Trading Corporation of India Ltd
- Billiton Holdings Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Star Paper Mills Limited - India
- Bukit Makmur.PT - Indonesia
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Sakthi Sugars Limited - India
- White Energy Company Limited
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- South Luzon Thermal Energy Corporation
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Pendopo Energi Batubara - Indonesia
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Vizag Seaport Private Limited - India
- Petron Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Electricity Generating Authority of Thailand
- Australian Commodity Traders Exchange
- Riau Bara Harum - Indonesia
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Jaiprakash Power Ventures ltd
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- Mintek Dendrill Indonesia
- Banpu Public Company Limited - Thailand
- Borneo Indobara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Oil Corporation Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Bulk Trading Sa - Switzerland
- Timah Investasi Mineral - Indoneisa
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Indonesian Coal Mining Association
- Tamil Nadu electricity Board
- Binh Thuan Hamico - Vietnam
- Ind-Barath Power Infra Limited - India
- Energy Link Ltd, New Zealand
- Mercuria Energy - Indonesia
- Siam City Cement PLC, Thailand
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- AsiaOL BioFuels Corp., Philippines
- SMC Global Power, Philippines
- Wood Mackenzie - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- Ministry of Transport, Egypt
- Larsen & Toubro Limited - India
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- SN Aboitiz Power Inc, Philippines
- Orica Mining Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Power Finance Corporation Ltd., India
- Globalindo Alam Lestari - Indonesia
- GVK Power & Infra Limited - India
- Salva Resources Pvt Ltd - India
- Latin American Coal - Colombia
- Vedanta Resources Plc - India
- Interocean Group of Companies - India
- Attock Cement Pakistan Limited
- Kepco SPC Power Corporation, Philippines
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- London Commodity Brokers - England
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
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