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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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Wednesday, 15 December 10
SMALLER DRY BULK VESSELS ARE LOOKING UP, LARGER ONES FAIL TO DELIVER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market lost further ground at the beginning of the week, in what could prove one of the slowest periods ship owners have been faced. Ye ...
Tuesday, 14 December 10
COAL IMPORTS MAY INCREASE 78% TO CHINA, INDIA: ENERGY MARKETS - BUSINESS WEEK
Business Week reported that, China and India may increase imports of coal by 78 percent to 337 million metric tons next year, further driving up pri ...
Tuesday, 14 December 10
BANPU PLANNING PRODUCTION BOOM - BANGKOK POST
Australian, Indonesian output to lead growth
Bangkok Post reported that, Banpu Plc, Asean's largest coal miner, wants to nearly double its coal ...
Tuesday, 14 December 10
THE FREIGHT RATES FROM INDONESIA TO INDIA AND CHINA REMAINED FIRM - CAPT. REDDY
COALspot.com - The freight market continued to be soft with the Cape sector most effected which was down by 289 points and closed at 2,694 poi ...
Monday, 13 December 10
ICE FUTURES EUROPE TO LAUNCH IHS MCCLOSKEY INDONESIAN SUB-BITUMINOUS FOB MARKER COAL CONTRACTS - MONDOVISIONE
Mondovisione reported that, IntercontinentalExchange (NYSE: ICE), a leading operator of global regulated futures exchanges, clearing houses and over ...
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- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- The State Trading Corporation of India Ltd
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- Sindya Power Generating Company Private Ltd
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Altura Mining Limited, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Rashtriya Ispat Nigam Limited - India
- Krishnapatnam Port Company Ltd. - India
- Aditya Birla Group - India
- Kalimantan Lumbung Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Mines - Canada
- Energy Link Ltd, New Zealand
- Lanco Infratech Ltd - India
- VISA Power Limited - India
- Latin American Coal - Colombia
- Petrochimia International Co. Ltd.- Taiwan
- Kepco SPC Power Corporation, Philippines
- Siam City Cement - Thailand
- Attock Cement Pakistan Limited
- Vedanta Resources Plc - India
- Jorong Barutama Greston.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- TeaM Sual Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Independent Power Producers Association of India
- Ambuja Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Goldman Sachs - Singapore
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Bhushan Steel Limited - India
- Energy Development Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
- Oldendorff Carriers - Singapore
- Holcim Trading Pte Ltd - Singapore
- Borneo Indobara - Indonesia
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Singapore Mercantile Exchange
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maheswari Brothers Coal Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Posco Energy - South Korea
- Interocean Group of Companies - India
- Videocon Industries ltd - India
- Sical Logistics Limited - India
- PTC India Limited - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- LBH Netherlands Bv - Netherlands
- Iligan Light & Power Inc, Philippines
- Eastern Coal Council - USA
- SMC Global Power, Philippines
- Kartika Selabumi Mining - Indonesia
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Ceylon Electricity Board - Sri Lanka
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- Renaissance Capital - South Africa
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- PowerSource Philippines DevCo
- Ind-Barath Power Infra Limited - India
- ICICI Bank Limited - India
- Barasentosa Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- SN Aboitiz Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Orica Mining Services - Indonesia
- McConnell Dowell - Australia
- Port Waratah Coal Services - Australia
- Central Java Power - Indonesia
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Australian Coal Association
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- Indo Tambangraya Megah - Indonesia
- Xindia Steels Limited - India
- Indonesian Coal Mining Association
- Central Electricity Authority - India
- Maharashtra Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Marubeni Corporation - India
- International Coal Ventures Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- Samtan Co., Ltd - South Korea
- GVK Power & Infra Limited - India
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Aboitiz Power Corporation - Philippines
- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- Bhatia International Limited - India
- Georgia Ports Authority, United States
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Meralco Power Generation, Philippines
- Malabar Cements Ltd - India
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Jaiprakash Power Ventures ltd
- Kumho Petrochemical, South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Kobexindo Tractors - Indoneisa
- Semirara Mining Corp, Philippines
- Chamber of Mines of South Africa
- Indian Oil Corporation Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Petron Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
- Sakthi Sugars Limited - India
- GMR Energy Limited - India
- Sinarmas Energy and Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Salva Resources Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Planning Commission, India
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Anglo American - United Kingdom
- Jindal Steel & Power Ltd - India
- Therma Luzon, Inc, Philippines
- Rio Tinto Coal - Australia
- Meenaskhi Energy Private Limited - India
- Coalindo Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- Savvy Resources Ltd - HongKong
- Eastern Energy - Thailand
- Minerals Council of Australia
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- Grasim Industreis Ltd - India
- Semirara Mining and Power Corporation, Philippines
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Merrill Lynch Commodities Europe
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Intertek Mineral Services - Indonesia
- Indika Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- Kaltim Prima Coal - Indonesia
- Mintek Dendrill Indonesia
- Sojitz Corporation - Japan
- Tamil Nadu electricity Board
- Carbofer General Trading SA - India
- Price Waterhouse Coopers - Russia
- Cement Manufacturers Association - India
- OPG Power Generation Pvt Ltd - India
- Mjunction Services Limited - India
- Dalmia Cement Bharat India
- Indogreen Group - Indonesia
- Metalloyd Limited - United Kingdom
- Bhoruka Overseas - Indonesia
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