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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, 25 January 24
THE RED SEA ESCALATION IMPLICATIONS ON GLOBAL SEABORNE TRADE - MARIA BERTZELETOU
In recent days, discussions have intensified about the potential impact on the seaborne trade and ton-miles due to the evolving dynamics of market ...
Thursday, 25 January 24
RED SEA SHIPPING DISRUPTIONS KEEP GEOPOLITICAL PREMIUM FOR COMMODITIES - FITCH RATINGS
Shipping disruptions and re-routing away from the Red Sea will maintain the geopolitical premium in the main commodity markets, including for oil a ...
Friday, 19 January 24
INDONESIA TARGETS 710 MLN METRIC TONS COAL OUTPUT IN 2024 AFTER RECORD 2023 - REUTERS
Indonesia, a major thermal coal exporter, aims to produce 710 million metric tons of coal in 2024, its mining minister said on Monday, after postin ...
Friday, 19 January 24
DRUMMOND COLOMBIA COAL OUTPUT ROSE 7.1% IN 2023 - REUTERS
Coal production from miner Drummond’s Colombia operations rose 7.1% in 2023 to 29.5 million metric tons, while exports declined by 2.6% to 27 ...
Friday, 19 January 24
CHINA'S 2023 COAL OUTPUT HITS RECORD HIGH - REUTERS
China’s coal output reached a record high in 2023, data from the statistics bureau showed on Wednesday, amid an ongoing focus on energy secur ...
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Showing 51 to 55 news of total 6871 |
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- Ceylon Electricity Board - Sri Lanka
- Bukit Asam (Persero) Tbk - Indonesia
- London Commodity Brokers - England
- IEA Clean Coal Centre - UK
- Singapore Mercantile Exchange
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Iligan Light & Power Inc, Philippines
- Australian Commodity Traders Exchange
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Renaissance Capital - South Africa
- Anglo American - United Kingdom
- Kobexindo Tractors - Indoneisa
- Straits Asia Resources Limited - Singapore
- Mintek Dendrill Indonesia
- SMG Consultants - Indonesia
- Sical Logistics Limited - India
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- CIMB Investment Bank - Malaysia
- ASAPP Information Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- Minerals Council of Australia
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- CNBM International Corporation - China
- Independent Power Producers Association of India
- Eastern Energy - Thailand
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Alfred C Toepfer International GmbH - Germany
- Metalloyd Limited - United Kingdom
- Energy Link Ltd, New Zealand
- Borneo Indobara - Indonesia
- Romanian Commodities Exchange
- Agrawal Coal Company - India
- Intertek Mineral Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Maharashtra Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Global Coal Blending Company Limited - Australia
- ICICI Bank Limited - India
- The Treasury - Australian Government
- Holcim Trading Pte Ltd - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Power Finance Corporation Ltd., India
- Madhucon Powers Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Carbofer General Trading SA - India
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Banpu Public Company Limited - Thailand
- Binh Thuan Hamico - Vietnam
- AsiaOL BioFuels Corp., Philippines
- Cement Manufacturers Association - India
- GVK Power & Infra Limited - India
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Samtan Co., Ltd - South Korea
- McConnell Dowell - Australia
- Riau Bara Harum - Indonesia
- Electricity Authority, New Zealand
- Aditya Birla Group - India
- Sree Jayajothi Cements Limited - India
- Kapuas Tunggal Persada - Indonesia
- Tata Chemicals Ltd - India
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Thiess Contractors Indonesia
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Goldman Sachs - Singapore
- Kaltim Prima Coal - Indonesia
- GMR Energy Limited - India
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Energy Development Corp, Philippines
- Makarim & Taira - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Posco Energy - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Xindia Steels Limited - India
- Planning Commission, India
- Orica Mining Services - Indonesia
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Gujarat Mineral Development Corp Ltd - India
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Grasim Industreis Ltd - India
- Altura Mining Limited, Indonesia
- Timah Investasi Mineral - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Pendopo Energi Batubara - Indonesia
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indika Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Billiton Holdings Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Sinarmas Energy and Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining Corp, Philippines
- Oldendorff Carriers - Singapore
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Georgia Ports Authority, United States
- Economic Council, Georgia
- Eastern Coal Council - USA
- Trasteel International SA, Italy
- Bhoruka Overseas - Indonesia
- Rio Tinto Coal - Australia
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- Ministry of Mines - Canada
- Dalmia Cement Bharat India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Wilmar Investment Holdings
- Siam City Cement PLC, Thailand
- White Energy Company Limited
- Coalindo Energy - Indonesia
- Vedanta Resources Plc - India
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- Bharathi Cement Corporation - India
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Krishnapatnam Port Company Ltd. - India
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Wood Mackenzie - Singapore
- The State Trading Corporation of India Ltd
- Antam Resourcindo - Indonesia
- Salva Resources Pvt Ltd - India
- Thai Mozambique Logistica
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Coastal Gujarat Power Limited - India
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Bukit Makmur.PT - Indonesia
- Australian Coal Association
- Mercuria Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Global Business Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Indonesian Coal Mining Association
- Ind-Barath Power Infra Limited - India
- Therma Luzon, Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- Ambuja Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- TeaM Sual Corporation - Philippines
- Chamber of Mines of South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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