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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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Friday, 26 November 10
INDIA WILL IMPORT 100 MLN TONS OF COAL BY 2012 - LAKSHMINARAYANA
COALspot.com – “India’s coal shortfall will reach 100 million mt by 2011-12”, said Lakshminarayana, Vice Preside ...
Friday, 26 November 10
CHINAS COAL INVENTORY STAYS HIGH FOR 22 MONTHS AT 220 MLN T, ASSOCIATION
Xinhua News Agency reported that, China’s coal inventory has stayed high and unchanged for 22 months to be around 220 million tonnes, reflecti ...
Friday, 26 November 10
DR WOLFGANG CIESLIK TO HEAD GERMAN COAL IMPORTERS ASSOCIATION
COALspot.com – (Press Release): The Management Board of the German Coal Importers Association (Verein der Kohlenimporteure e.V.) has elected D ...
Thursday, 25 November 10
ANALYSIS: COAL SECTOR: VALUE EMERGENCE - THE JAKARTA POST
Coal demand will remain firm due to a build-up of coal-fired power plants in India, China and Indonesia. As a result, we have upgraded our coal pric ...
Thursday, 25 November 10
INDONESIAN ROUNDS ARE ACHIEVING IN THE LOW 10S, OWNERS ARE NOT KEEN FOR TRIPS TO INDIA - FEARNBULK
HANDY
Uneventful week - Supra/Panamax stems ex USG to China/Korea/Japan are the main focus + grains ex. Argentina. The Atlantic market activity re ...
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Showing 5511 to 5515 news of total 6871 |
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- Global Green Power PLC Corporation, Philippines
- MS Steel International - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Metalloyd Limited - United Kingdom
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- Electricity Authority, New Zealand
- Intertek Mineral Services - Indonesia
- Energy Development Corp, Philippines
- Planning Commission, India
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- ASAPP Information Group - India
- Indonesian Coal Mining Association
- Sarangani Energy Corporation, Philippines
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- IEA Clean Coal Centre - UK
- London Commodity Brokers - England
- Directorate Of Revenue Intelligence - India
- Samtan Co., Ltd - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Aditya Birla Group - India
- Petron Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Standard Chartered Bank - UAE
- CNBM International Corporation - China
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mintek Dendrill Indonesia
- Indogreen Group - Indonesia
- Makarim & Taira - Indonesia
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Ceylon Electricity Board - Sri Lanka
- Essar Steel Hazira Ltd - India
- GMR Energy Limited - India
- ICICI Bank Limited - India
- Chettinad Cement Corporation Ltd - India
- VISA Power Limited - India
- Meralco Power Generation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Merrill Lynch Commodities Europe
- Videocon Industries ltd - India
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Sree Jayajothi Cements Limited - India
- Madhucon Powers Ltd - India
- Singapore Mercantile Exchange
- Bhatia International Limited - India
- Malabar Cements Ltd - India
- Bangladesh Power Developement Board
- Grasim Industreis Ltd - India
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Coalindo Energy - Indonesia
- Renaissance Capital - South Africa
- Indian Energy Exchange, India
- Thai Mozambique Logistica
- International Coal Ventures Pvt Ltd - India
- Edison Trading Spa - Italy
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- TeaM Sual Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Indian Oil Corporation Limited
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Sidhee Cement - India
- Mercator Lines Limited - India
- PTC India Limited - India
- Bhushan Steel Limited - India
- Ambuja Cements Ltd - India
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Australian Coal Association
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- San Jose City I Power Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Bukit Baiduri Energy - Indonesia
- Chamber of Mines of South Africa
- Sakthi Sugars Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- GAC Shipping (India) Pvt Ltd
- Vizag Seaport Private Limited - India
- Borneo Indobara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Posco Energy - South Korea
- Tamil Nadu electricity Board
- Wood Mackenzie - Singapore
- Interocean Group of Companies - India
- Maheswari Brothers Coal Limited - India
- Power Finance Corporation Ltd., India
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Lanco Infratech Ltd - India
- Siam City Cement PLC, Thailand
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Wilmar Investment Holdings
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Directorate General of MIneral and Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Altura Mining Limited, Indonesia
- Australian Commodity Traders Exchange
- Orica Australia Pty. Ltd.
- Medco Energi Mining Internasional
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Meenaskhi Energy Private Limited - India
- Larsen & Toubro Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Parliament of New Zealand
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Sical Logistics Limited - India
- Vedanta Resources Plc - India
- Salva Resources Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Deloitte Consulting - India
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- Savvy Resources Ltd - HongKong
- Therma Luzon, Inc, Philippines
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- Ministry of Mines - Canada
- Oldendorff Carriers - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Minerals Council of Australia
- Indika Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Latin American Coal - Colombia
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Rashtriya Ispat Nigam Limited - India
- Rio Tinto Coal - Australia
- European Bulk Services B.V. - Netherlands
- Timah Investasi Mineral - Indoneisa
- Bhoruka Overseas - Indonesia
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Star Paper Mills Limited - India
- IHS Mccloskey Coal Group - USA
- South Luzon Thermal Energy Corporation
- Simpson Spence & Young - Indonesia
- Trasteel International SA, Italy
- Tata Chemicals Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- PowerSource Philippines DevCo
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
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