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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, 21 December 10
CIL TOLD TO SCOUT MINES ABROAD TO BRIDGE COAL DEFICIT - ECONOMIC TIMES
Economic Times reported that, The government asked state-owned CIL to look for acquiring assets abroad to meet the domestic shortfall of coal.
&q ...
Tuesday, 21 December 10
SHIPPING INDUSTRY RECOVERING, BUT STILL HAMPERED BY OVERSUPPLY OF VESSELS AND DEPRESSED FREIGHT RATES - UNCTAD / HELLENIC SHIPPING
International seaborne trade contracted by 4.5 per cent in 2009, reports UNCTAD´s Review of Maritime Transport 2010 . That decline put seaborn ...
Sunday, 19 December 10
SPOT SUPRAMAX VESSELS WERE FIXED AROUND US$ 13,000 PER DAY FOR TRIP VIA INDONESIA TO INDIA - VISTAAR
COALspot.com - The freight market continued to be soft with the BDI down by 96 points and closed at 1,999 points, touching below 2,000 points on Fri ...
Friday, 17 December 10
THE PANAMAX MARKET HAS EXPERIENCED A SOFTER TENDENCY THIS WEEK - FEARNBULK
Handy
Monotonous Atlantic markets with little fresh enquiry in Black Sea/Med/Continent. Large Supras are achieving usd 21/22k for TA rounds - 2/3 ...
Friday, 17 December 10
NALCO SHORTLISTS COAL FIRMS FOR INDONESIA PROJECT - BUSINESS-STANDARD
Business-Standard reported that, State-owned NALCO today said it has shortlisted two firms for supply of coal for its Rs 18,000-crore (US$ 3,953,003 ...
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- GAC Shipping (India) Pvt Ltd
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- Interocean Group of Companies - India
- Jindal Steel & Power Ltd - India
- SMG Consultants - Indonesia
- Madhucon Powers Ltd - India
- Orica Australia Pty. Ltd.
- Parry Sugars Refinery, India
- Edison Trading Spa - Italy
- Meralco Power Generation, Philippines
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- SMC Global Power, Philippines
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- Grasim Industreis Ltd - India
- Eastern Coal Council - USA
- Wilmar Investment Holdings
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Heidelberg Cement - Germany
- Kartika Selabumi Mining - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Posco Energy - South Korea
- IEA Clean Coal Centre - UK
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Aboitiz Power Corporation - Philippines
- Electricity Generating Authority of Thailand
- IHS Mccloskey Coal Group - USA
- South Luzon Thermal Energy Corporation
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Sakthi Sugars Limited - India
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- Kumho Petrochemical, South Korea
- Lanco Infratech Ltd - India
- Binh Thuan Hamico - Vietnam
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Globalindo Alam Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- Leighton Contractors Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Toyota Tsusho Corporation, Japan
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- Ministry of Mines - Canada
- Savvy Resources Ltd - HongKong
- Kepco SPC Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Power Finance Corporation Ltd., India
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- Ind-Barath Power Infra Limited - India
- Georgia Ports Authority, United States
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Minerals Council of Australia
- Krishnapatnam Port Company Ltd. - India
- Oldendorff Carriers - Singapore
- Singapore Mercantile Exchange
- Australian Commodity Traders Exchange
- Star Paper Mills Limited - India
- Formosa Plastics Group - Taiwan
- Tata Chemicals Ltd - India
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- OPG Power Generation Pvt Ltd - India
- Dalmia Cement Bharat India
- Billiton Holdings Pty Ltd - Australia
- Eastern Energy - Thailand
- Medco Energi Mining Internasional
- Semirara Mining and Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Carbofer General Trading SA - India
- GMR Energy Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Coal and Oil Company - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Indika Energy - Indonesia
- Wood Mackenzie - Singapore
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Siam City Cement - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Orica Mining Services - Indonesia
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Indo Tambangraya Megah - Indonesia
- Goldman Sachs - Singapore
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Petron Corporation, Philippines
- Ministry of Finance - Indonesia
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- PTC India Limited - India
- Borneo Indobara - Indonesia
- Central Electricity Authority - India
- Gujarat Mineral Development Corp Ltd - India
- Bangladesh Power Developement Board
- Sarangani Energy Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Attock Cement Pakistan Limited
- Ambuja Cements Ltd - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Bukit Baiduri Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- Thiess Contractors Indonesia
- Africa Commodities Group - South Africa
- Electricity Authority, New Zealand
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Planning Commission, India
- The Treasury - Australian Government
- Malabar Cements Ltd - India
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- European Bulk Services B.V. - Netherlands
- Australian Coal Association
- Bhatia International Limited - India
- London Commodity Brokers - England
- Global Green Power PLC Corporation, Philippines
- Sojitz Corporation - Japan
- Bayan Resources Tbk. - Indonesia
- Altura Mining Limited, Indonesia
- Mercator Lines Limited - India
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Straits Asia Resources Limited - Singapore
- Directorate Of Revenue Intelligence - India
- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Indogreen Group - Indonesia
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Samtan Co., Ltd - South Korea
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Larsen & Toubro Limited - India
- Indian Energy Exchange, India
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- Central Java Power - Indonesia
- Deloitte Consulting - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jaiprakash Power Ventures ltd
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- Commonwealth Bank - Australia
- Asmin Koalindo Tuhup - Indonesia
- Bharathi Cement Corporation - India
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