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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 November 10
JSW ENERGY BUYS CANADIAN COAL FIRM FOR $411 MN - NDTV PROFIT
NDTV Profit reported that, Sajjan Jindal-owned JSW Energy on Wednesday said it has entered into an agreement to buy out British Virgin Islands-based ...
Thursday, 25 November 10
DRY BULK MARKET STILL GOING STRONG THIS WEEK, CAPESIZE SECTOR LOSING STEAM - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market kept its upward momentum yesterday, with the industry’s benchmark, the Baltic Dry Index (BDI) gaining a further 0.64% to e ...
Wednesday, 24 November 10
COAL PRODUCTION PREDICTED TO CLIMB IN SUNNIER 2011 - THE JAKARTA GLOBE
The Jakarta Globe reported that, Indonesia’s coal producers are expected to increase output by 13 percent in 2011, thanks to predicted better ...
Monday, 22 November 10
RUSSIA'S KTK HAS PRODUCED 4.59 MLN TONNES OF COAL IN FIRST 9 MONTHS OR AN INCREASE OF 5% YEAR-ON-YEAR
COALspot.com (Press Release) - KTK has produced 4.59 mln tonnes of coal in first nine months or an increase of 5% year-on-year.
Kuzbasskaya Topli ...
Sunday, 21 November 10
THE FREIGHT MARKET MAY SLIGHTLY FIRM UP NEXT WEEK - CAPT. REDDY
COALspot.com: The freight market continued its down fall with BDI down by 6.83 pct and closed at 2,155 points.
According to Vistaar Shipping of S ...
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- Bayan Resources Tbk. - Indonesia
- GVK Power & Infra Limited - India
- Videocon Industries ltd - India
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- Vizag Seaport Private Limited - India
- Chettinad Cement Corporation Ltd - India
- South Luzon Thermal Energy Corporation
- Antam Resourcindo - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- Minerals Council of Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- TeaM Sual Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Deloitte Consulting - India
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Orica Mining Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- GMR Energy Limited - India
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- Posco Energy - South Korea
- White Energy Company Limited
- Renaissance Capital - South Africa
- Ministry of Finance - Indonesia
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Bukit Baiduri Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Jorong Barutama Greston.PT - Indonesia
- New Zealand Coal & Carbon
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Essar Steel Hazira Ltd - India
- Bharathi Cement Corporation - India
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bangladesh Power Developement Board
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Siam City Cement - Thailand
- The Treasury - Australian Government
- Kapuas Tunggal Persada - Indonesia
- Indogreen Group - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Lanco Infratech Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Electricity Regulatory Commission - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thiess Contractors Indonesia
- Meenaskhi Energy Private Limited - India
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Global Business Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Latin American Coal - Colombia
- Romanian Commodities Exchange
- Aboitiz Power Corporation - Philippines
- Xindia Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- SMG Consultants - Indonesia
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- Formosa Plastics Group - Taiwan
- Central Electricity Authority - India
- Sojitz Corporation - Japan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- ICICI Bank Limited - India
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- Edison Trading Spa - Italy
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Energy Development Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Coal and Oil Company - UAE
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Thai Mozambique Logistica
- Malabar Cements Ltd - India
- Indian Energy Exchange, India
- Kohat Cement Company Ltd. - Pakistan
- Krishnapatnam Port Company Ltd. - India
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Ministry of Transport, Egypt
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- Altura Mining Limited, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- International Coal Ventures Pvt Ltd - India
- Parliament of New Zealand
- Australian Coal Association
- PTC India Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Samtan Co., Ltd - South Korea
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Petron Corporation, Philippines
- Planning Commission, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Electricity Generating Authority of Thailand
- Australian Commodity Traders Exchange
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- Semirara Mining and Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kumho Petrochemical, South Korea
- Riau Bara Harum - Indonesia
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Indika Energy - Indonesia
- Medco Energi Mining Internasional
- Oldendorff Carriers - Singapore
- Rashtriya Ispat Nigam Limited - India
- Holcim Trading Pte Ltd - Singapore
- Agrawal Coal Company - India
- Savvy Resources Ltd - HongKong
- Semirara Mining Corp, Philippines
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Singapore Mercantile Exchange
- Power Finance Corporation Ltd., India
- Ceylon Electricity Board - Sri Lanka
- Simpson Spence & Young - Indonesia
- Economic Council, Georgia
- VISA Power Limited - India
- Parry Sugars Refinery, India
- Price Waterhouse Coopers - Russia
- Central Java Power - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mjunction Services Limited - India
- Standard Chartered Bank - UAE
- Ministry of Mines - Canada
- Mercator Lines Limited - India
- Meralco Power Generation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Makarim & Taira - Indonesia
- Sical Logistics Limited - India
- CNBM International Corporation - China
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- Madhucon Powers Ltd - India
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Electricity Authority, New Zealand
- Kepco SPC Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Bhatia International Limited - India
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- The University of Queensland
- European Bulk Services B.V. - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Banpu Public Company Limited - Thailand
- Barasentosa Lestari - Indonesia
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