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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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Monday, 27 December 10
RIO TINTO EYES AUSTRALIAN COAL MINER - RTE NEWS
Global resources giant Rio Tinto has made a $3.9 billion bid for Australian coal miner Riversdale.
RTE News reported that, Global resources giant ...
Sunday, 26 December 10
ANGLO SELLS AUSTRALIAN COAL ASSETS - BARCELONA NEWS
Barcelona News reported that, Anglo American has sold off undeveloped Australia coal assets for $577 million.
The global resources giant ha ...
Saturday, 25 December 10
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COALspot.com - We wish you a Merry Christmas and a Happy New Year 2011.
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Friday, 24 December 10
CIL SHORTLISTS 21 FIRMS TO IMPORT 250 MT COAL - THE HINDU
The Hindu reported that, Coal India plans to import about 250 million tonnes (mt) over the next 10 years to meet the country's growing requirement. ...
Friday, 24 December 10
DRY BULK OWNERS COULD SOON RECONSIDER SCRAPPING OLDER VESSELS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the dry bulk market close to its lowest levels in months and indeed close to 2010 lows, ship owners could be heading towards scrapyards in a bi ...
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- PTC India Limited - India
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- GVK Power & Infra Limited - India
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- ASAPP Information Group - India
- Savvy Resources Ltd - HongKong
- Billiton Holdings Pty Ltd - Australia
- Thai Mozambique Logistica
- Bukit Baiduri Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Oldendorff Carriers - Singapore
- Star Paper Mills Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Formosa Plastics Group - Taiwan
- Merrill Lynch Commodities Europe
- International Coal Ventures Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Central Java Power - Indonesia
- Kepco SPC Power Corporation, Philippines
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Planning Commission, India
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Anglo American - United Kingdom
- Thiess Contractors Indonesia
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Kumho Petrochemical, South Korea
- Orica Mining Services - Indonesia
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Toyota Tsusho Corporation, Japan
- Banpu Public Company Limited - Thailand
- Malabar Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- Commonwealth Bank - Australia
- Sarangani Energy Corporation, Philippines
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- Minerals Council of Australia
- Grasim Industreis Ltd - India
- Sree Jayajothi Cements Limited - India
- Directorate Of Revenue Intelligence - India
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Tata Chemicals Ltd - India
- Petron Corporation, Philippines
- Eastern Coal Council - USA
- Price Waterhouse Coopers - Russia
- Mercator Lines Limited - India
- Holcim Trading Pte Ltd - Singapore
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Cement Manufacturers Association - India
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- India Bulls Power Limited - India
- Energy Link Ltd, New Zealand
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bhatia International Limited - India
- Dalmia Cement Bharat India
- Baramulti Group, Indonesia
- Australian Commodity Traders Exchange
- Bulk Trading Sa - Switzerland
- Economic Council, Georgia
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
- Semirara Mining Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Ministry of Transport, Egypt
- Bangladesh Power Developement Board
- Australian Coal Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ICICI Bank Limited - India
- Vizag Seaport Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Parliament of New Zealand
- Kartika Selabumi Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Indian Oil Corporation Limited
- Simpson Spence & Young - Indonesia
- Meenaskhi Energy Private Limited - India
- Global Business Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Asmin Koalindo Tuhup - Indonesia
- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- Maharashtra Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Larsen & Toubro Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Siam City Cement PLC, Thailand
- Sinarmas Energy and Mining - Indonesia
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- Miang Besar Coal Terminal - Indonesia
- Attock Cement Pakistan Limited
- Bharathi Cement Corporation - India
- Mjunction Services Limited - India
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Barasentosa Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indogreen Group - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indonesian Coal Mining Association
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Tamil Nadu electricity Board
- Vedanta Resources Plc - India
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Global Green Power PLC Corporation, Philippines
- MS Steel International - UAE
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Heidelberg Cement - Germany
- Jindal Steel & Power Ltd - India
- Aditya Birla Group - India
- GAC Shipping (India) Pvt Ltd
- Bukit Makmur.PT - Indonesia
- Port Waratah Coal Services - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- TeaM Sual Corporation - Philippines
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Binh Thuan Hamico - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- Sojitz Corporation - Japan
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- Timah Investasi Mineral - Indoneisa
- Bayan Resources Tbk. - Indonesia
- VISA Power Limited - India
- Central Electricity Authority - India
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- SMG Consultants - Indonesia
- The State Trading Corporation of India Ltd
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Medco Energi Mining Internasional
- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- PetroVietnam Power Coal Import and Supply Company
- Bhushan Steel Limited - India
- Pendopo Energi Batubara - Indonesia
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- IHS Mccloskey Coal Group - USA
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- Orica Australia Pty. Ltd.
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