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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
FREIGHT MARKET - LOWEST FIXTURES REPORTED SINCE MID 2009 - CAPT. REDDY
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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- Metalloyd Limited - United Kingdom
- Australian Coal Association
- Electricity Authority, New Zealand
- Siam City Cement PLC, Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- Aboitiz Power Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- The Treasury - Australian Government
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Krishnapatnam Port Company Ltd. - India
- Kohat Cement Company Ltd. - Pakistan
- Sakthi Sugars Limited - India
- Sindya Power Generating Company Private Ltd
- Pendopo Energi Batubara - Indonesia
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Indian Energy Exchange, India
- PNOC Exploration Corporation - Philippines
- Australian Commodity Traders Exchange
- Bhushan Steel Limited - India
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Simpson Spence & Young - Indonesia
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Malabar Cements Ltd - India
- Standard Chartered Bank - UAE
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Georgia Ports Authority, United States
- Indonesian Coal Mining Association
- Indian Oil Corporation Limited
- Iligan Light & Power Inc, Philippines
- Wilmar Investment Holdings
- Kaltim Prima Coal - Indonesia
- IEA Clean Coal Centre - UK
- Maharashtra Electricity Regulatory Commission - India
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Cigading International Bulk Terminal - Indonesia
- Baramulti Group, Indonesia
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- Bangladesh Power Developement Board
- Price Waterhouse Coopers - Russia
- Rio Tinto Coal - Australia
- Sical Logistics Limited - India
- CIMB Investment Bank - Malaysia
- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- The University of Queensland
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- Toyota Tsusho Corporation, Japan
- Goldman Sachs - Singapore
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- Timah Investasi Mineral - Indoneisa
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
- Indogreen Group - Indonesia
- Indika Energy - Indonesia
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- Tata Chemicals Ltd - India
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Ministry of Transport, Egypt
- Energy Link Ltd, New Zealand
- The State Trading Corporation of India Ltd
- SN Aboitiz Power Inc, Philippines
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- Karbindo Abesyapradhi - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
- Leighton Contractors Pty Ltd - Australia
- VISA Power Limited - India
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Holcim Trading Pte Ltd - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- MS Steel International - UAE
- Directorate General of MIneral and Coal - Indonesia
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- Global Business Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- Aditya Birla Group - India
- New Zealand Coal & Carbon
- San Jose City I Power Corp, Philippines
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Carbofer General Trading SA - India
- Antam Resourcindo - Indonesia
- Tamil Nadu electricity Board
- Indo Tambangraya Megah - Indonesia
- PTC India Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- SMC Global Power, Philippines
- Interocean Group of Companies - India
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Global Coal Blending Company Limited - Australia
- Marubeni Corporation - India
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- Bhatia International Limited - India
- Thai Mozambique Logistica
- Mercuria Energy - Indonesia
- Ambuja Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- Power Finance Corporation Ltd., India
- Essar Steel Hazira Ltd - India
- Videocon Industries ltd - India
- Sarangani Energy Corporation, Philippines
- Minerals Council of Australia
- OPG Power Generation Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Vedanta Resources Plc - India
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Romanian Commodities Exchange
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- TeaM Sual Corporation - Philippines
- Orica Mining Services - Indonesia
- Siam City Cement - Thailand
- Global Green Power PLC Corporation, Philippines
- Trasteel International SA, Italy
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Madhucon Powers Ltd - India
- Sree Jayajothi Cements Limited - India
- Banpu Public Company Limited - Thailand
- Bukit Baiduri Energy - Indonesia
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Agrawal Coal Company - India
- Jorong Barutama Greston.PT - Indonesia
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- Chettinad Cement Corporation Ltd - India
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