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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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Thursday, 23 December 10
SOUTHGOBI RESOURCES CLOSES STRATEGIC INVESTMENT IN ASPIRE MINING LIMITED
Press Release – SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878), announced today that it has completed the private placement with Aspire Mining ...
Thursday, 23 December 10
CESC EYES COAL MINES IN INDONESIA, S AFRICA - TEHELKA
Company has already set a target of adding 6,000 MW power generation by the end of the 12th Plan in 2017
Tehelka reported that, CESC Ltd, the fla ...
Thursday, 23 December 10
SANTA CLAUSE DID NOT COME EARLY THIS YEAR - FEARNBULK
Handy
Not much fresh enquiry this week and quite dead in Bl.Sea/Med. Nevertheless ...
Thursday, 23 December 10
STERLITE ENERGY LIMITED TO BUY 0.6 MLN MT OF COAL FOR 2011
COALspot.com - Sterlite Energy Limited (SEL) is a part of Vedanta Resources plc , a London listed FTSE 100 diversified metals and mining major with ...
Wednesday, 22 December 10
PEABODY ENERGY TO SOURCE INDONESIAN COAL FROM PT SUPRA BARA ENERGI (SBE) - COAL GEOLOGY
Coal Geology reported that, Peabody Energy has entered into an agreement to source coal from PT Supra Bara Energi (SBE), which will be sold on the e ...
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- ICICI Bank Limited - India
- Manunggal Multi Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- SMG Consultants - Indonesia
- Riau Bara Harum - Indonesia
- Heidelberg Cement - Germany
- Larsen & Toubro Limited - India
- Orica Australia Pty. Ltd.
- LBH Netherlands Bv - Netherlands
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
- The Treasury - Australian Government
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- The State Trading Corporation of India Ltd
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Miang Besar Coal Terminal - Indonesia
- Kaltim Prima Coal - Indonesia
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- CIMB Investment Bank - Malaysia
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- Thai Mozambique Logistica
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- Sree Jayajothi Cements Limited - India
- Africa Commodities Group - South Africa
- Rio Tinto Coal - Australia
- Jorong Barutama Greston.PT - Indonesia
- Romanian Commodities Exchange
- Parliament of New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- VISA Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Vedanta Resources Plc - India
- Wilmar Investment Holdings
- Electricity Authority, New Zealand
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- India Bulls Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- Bukit Baiduri Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Australian Commodity Traders Exchange
- Indonesian Coal Mining Association
- Aboitiz Power Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Orica Mining Services - Indonesia
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Interocean Group of Companies - India
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- White Energy Company Limited
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- GN Power Mariveles Coal Plant, Philippines
- Barasentosa Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Tamil Nadu electricity Board
- Semirara Mining Corp, Philippines
- Mercuria Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- GVK Power & Infra Limited - India
- Coastal Gujarat Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Grasim Industreis Ltd - India
- MS Steel International - UAE
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indian Energy Exchange, India
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Alfred C Toepfer International GmbH - Germany
- International Coal Ventures Pvt Ltd - India
- New Zealand Coal & Carbon
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- Meralco Power Generation, Philippines
- IEA Clean Coal Centre - UK
- Baramulti Group, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Bharathi Cement Corporation - India
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Jaiprakash Power Ventures ltd
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Eastern Energy - Thailand
- Sinarmas Energy and Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- Posco Energy - South Korea
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Bayan Resources Tbk. - Indonesia
- Sindya Power Generating Company Private Ltd
- Gujarat Mineral Development Corp Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Bhatia International Limited - India
- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Pendopo Energi Batubara - Indonesia
- Minerals Council of Australia
- Bhoruka Overseas - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Antam Resourcindo - Indonesia
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- Videocon Industries ltd - India
- Oldendorff Carriers - Singapore
- Cigading International Bulk Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Uttam Galva Steels Limited - India
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Latin American Coal - Colombia
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Kalimantan Lumbung Energi - Indonesia
- Global Business Power Corporation, Philippines
- Anglo American - United Kingdom
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- IHS Mccloskey Coal Group - USA
- Parry Sugars Refinery, India
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Java Power - Indonesia
- Chamber of Mines of South Africa
- OPG Power Generation Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Straits Asia Resources Limited - Singapore
- Edison Trading Spa - Italy
- Chettinad Cement Corporation Ltd - India
- Essar Steel Hazira Ltd - India
- Port Waratah Coal Services - Australia
- Therma Luzon, Inc, Philippines
- Tata Chemicals Ltd - India
- Australian Coal Association
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Gujarat Sidhee Cement - India
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