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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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Thursday, 09 December 10
DRY BULK MARKET LOOKING FOR DIRECTION THIS WEEK, AS CAPESIZE SHIPS END THEIR MISFORTUNES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk has began the week on a positive note capitalizing on the positive sentiment which finally prevailed during the last days of the previo ...
Monday, 06 December 10
NTPC MAY OPT FOR INDONESIA OVER AFRICA, OZ FOR COAL MINES
Country's largest power producer NTPC, which is scouting for coal properties abroad to fuel its power plants back home, may zero in on Indonesia fo ...
Saturday, 04 December 10
INDONESIA TO INDIA AND CHINA SEA FREIGHT UP BY ABOUT US$ 2.50 PMT - CAPT. REDDY
COALspot.com - The freight market even though remained weak, but towards end of the week the market seemed to firm up.
The BDI was almost at sam ...
Saturday, 04 December 10
OFF WEST COAST OF INDIA TONNAGE IS SEEMINGLY QUITE SPARSE - FEARNBULK
Handy
The Atlantic markets are weak and remained unusually calm after the Thanksgiving ...
Friday, 03 December 10
INDONESIAN LOW RANK COAL IS ATTRACTING COAL BUYERS FROM INDIA AND CHINA
COALspot.com - Bhakti Energi Persada has sold out its whole coal production until the end of 2011, Jeffry Mulyono said during McCloskey Asia P ...
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- Eastern Coal Council - USA
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Kumho Petrochemical, South Korea
- Ministry of Transport, Egypt
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Ceylon Electricity Board - Sri Lanka
- Oldendorff Carriers - Singapore
- New Zealand Coal & Carbon
- Ind-Barath Power Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- McConnell Dowell - Australia
- European Bulk Services B.V. - Netherlands
- Electricity Generating Authority of Thailand
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Manunggal Multi Energi - Indonesia
- Wilmar Investment Holdings
- Romanian Commodities Exchange
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Siam City Cement PLC, Thailand
- Orica Australia Pty. Ltd.
- Economic Council, Georgia
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- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
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- Africa Commodities Group - South Africa
- Petron Corporation, Philippines
- Coalindo Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
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- Ministry of Finance - Indonesia
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- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
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- Planning Commission, India
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- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Semirara Mining Corp, Philippines
- Central Electricity Authority - India
- Essar Steel Hazira Ltd - India
- Sical Logistics Limited - India
- Australian Commodity Traders Exchange
- Kalimantan Lumbung Energi - Indonesia
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cigading International Bulk Terminal - Indonesia
- The University of Queensland
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- Minerals Council of Australia
- Tamil Nadu electricity Board
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- Chettinad Cement Corporation Ltd - India
- Lanco Infratech Ltd - India
- Marubeni Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kapuas Tunggal Persada - Indonesia
- SMC Global Power, Philippines
- Videocon Industries ltd - India
- Kepco SPC Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Barasentosa Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- Sojitz Corporation - Japan
- Jaiprakash Power Ventures ltd
- Chamber of Mines of South Africa
- ICICI Bank Limited - India
- Global Coal Blending Company Limited - Australia
- International Coal Ventures Pvt Ltd - India
- Australian Coal Association
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Indian Oil Corporation Limited
- PowerSource Philippines DevCo
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Antam Resourcindo - Indonesia
- Meenaskhi Energy Private Limited - India
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Coastal Gujarat Power Limited - India
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- CIMB Investment Bank - Malaysia
- South Luzon Thermal Energy Corporation
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- Larsen & Toubro Limited - India
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- Posco Energy - South Korea
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- Standard Chartered Bank - UAE
- Maheswari Brothers Coal Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Renaissance Capital - South Africa
- Rio Tinto Coal - Australia
- Kohat Cement Company Ltd. - Pakistan
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- Altura Mining Limited, Indonesia
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- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- AsiaOL BioFuels Corp., Philippines
- GVK Power & Infra Limited - India
- Therma Luzon, Inc, Philippines
- Ministry of Mines - Canada
- Indonesian Coal Mining Association
- ASAPP Information Group - India
- Aditya Birla Group - India
- Parliament of New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Star Paper Mills Limited - India
- Cement Manufacturers Association - India
- Leighton Contractors Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Bayan Resources Tbk. - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Vedanta Resources Plc - India
- Georgia Ports Authority, United States
- Bukit Baiduri Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercuria Energy - Indonesia
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- Timah Investasi Mineral - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Thai Mozambique Logistica
- Parry Sugars Refinery, India
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
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- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
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- Banpu Public Company Limited - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asmin Koalindo Tuhup - Indonesia
- GAC Shipping (India) Pvt Ltd
- Interocean Group of Companies - India
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- IEA Clean Coal Centre - UK
- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- White Energy Company Limited
- PTC India Limited - India
- GMR Energy Limited - India
- Salva Resources Pvt Ltd - India
- VISA Power Limited - India
- Merrill Lynch Commodities Europe
- LBH Netherlands Bv - Netherlands
- Riau Bara Harum - Indonesia
- Singapore Mercantile Exchange
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- Sakthi Sugars Limited - India
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- SMG Consultants - Indonesia
- Baramulti Group, Indonesia
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