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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, 04 November 10
GVK TALKS WITH MEC FOR INDONESIAN MINES DEAL - DNA INDIA
As reported by DNA India, GVK Power and Infrastructure on Wednesday said it is in talks with Gulf-based MEC Coal to buy its coal mines in Indonesia, ...
Wednesday, 03 November 10
PANAMAX SIZE DRY-BULK CARRIER MARKET IS STRONG - GERSON LEHRMAN
Panamax class vessels have been part of the fluctuation of the broader current dry bulk market. They have experienced occasional steep movements, du ...
Tuesday, 02 November 10
ADDED VALUE REMAINS STAGNANT - MAJALAH TAMBANG
The improvement of added value of mining products in accordance with mandate of the mining law has not been visible. Minerals and coal are still exp ...
Saturday, 30 October 10
THE SUPRAMAX FREIGHT MARKET THIS WEEK REMAINED ALMOST AT LAST WEEK LEVELS - VISTAAR SINGAPORE
COALspot.com: The freight market this week remained almost at same levels except for Panamax index which was up by 191 points.
The feast/SE Asia ...
Friday, 29 October 10
CAPE MARKET STARTED TO BREAK THOUGH THE UPWARDS RESISTANCE LEVEL OF USD 40K DAILY FOR SPOT CARGOS - FEARNLEYS
HANDY
The Atlantic markets remain flat and lackluster. The expectations that the grain ...
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- Latin American Coal - Colombia
- Electricity Authority, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- Orica Australia Pty. Ltd.
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Chettinad Cement Corporation Ltd - India
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Jindal Steel & Power Ltd - India
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Economic Council, Georgia
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- IEA Clean Coal Centre - UK
- Global Coal Blending Company Limited - Australia
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- TeaM Sual Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- Singapore Mercantile Exchange
- Mintek Dendrill Indonesia
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Meralco Power Generation, Philippines
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- South Luzon Thermal Energy Corporation
- Bayan Resources Tbk. - Indonesia
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Merrill Lynch Commodities Europe
- Interocean Group of Companies - India
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Madhucon Powers Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- Billiton Holdings Pty Ltd - Australia
- GMR Energy Limited - India
- Makarim & Taira - Indonesia
- VISA Power Limited - India
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Edison Trading Spa - Italy
- Kohat Cement Company Ltd. - Pakistan
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- PTC India Limited - India
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- Sarangani Energy Corporation, Philippines
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Commonwealth Bank - Australia
- Kideco Jaya Agung - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Mines - Canada
- Oldendorff Carriers - Singapore
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- Ind-Barath Power Infra Limited - India
- Power Finance Corporation Ltd., India
- Global Green Power PLC Corporation, Philippines
- Global Business Power Corporation, Philippines
- Minerals Council of Australia
- SMG Consultants - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Vedanta Resources Plc - India
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- Parliament of New Zealand
- Gujarat Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- Mjunction Services Limited - India
- Sindya Power Generating Company Private Ltd
- Sree Jayajothi Cements Limited - India
- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- Vizag Seaport Private Limited - India
- Sojitz Corporation - Japan
- Indonesian Coal Mining Association
- Kepco SPC Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- Romanian Commodities Exchange
- Mercator Lines Limited - India
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
- Thai Mozambique Logistica
- Agrawal Coal Company - India
- Cigading International Bulk Terminal - Indonesia
- Sical Logistics Limited - India
- Kaltim Prima Coal - Indonesia
- Orica Mining Services - Indonesia
- Bhatia International Limited - India
- White Energy Company Limited
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- The State Trading Corporation of India Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- Maheswari Brothers Coal Limited - India
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Tata Chemicals Ltd - India
- CIMB Investment Bank - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Link Ltd, New Zealand
- Energy Development Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- OPG Power Generation Pvt Ltd - India
- The University of Queensland
- Wilmar Investment Holdings
- Dalmia Cement Bharat India
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Central Electricity Authority - India
- Renaissance Capital - South Africa
- Bukit Baiduri Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- India Bulls Power Limited - India
- Videocon Industries ltd - India
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Australian Coal Association
- Malabar Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Essar Steel Hazira Ltd - India
- PowerSource Philippines DevCo
- Posco Energy - South Korea
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- Asmin Koalindo Tuhup - Indonesia
- Petron Corporation, Philippines
- Chamber of Mines of South Africa
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Riau Bara Harum - Indonesia
- Metalloyd Limited - United Kingdom
- Aditya Birla Group - India
- Bukit Makmur.PT - Indonesia
- Uttam Galva Steels Limited - India
- Trasteel International SA, Italy
- Cement Manufacturers Association - India
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Larsen & Toubro Limited - India
- Straits Asia Resources Limited - Singapore
- Borneo Indobara - Indonesia
- Aboitiz Power Corporation - Philippines
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Parry Sugars Refinery, India
- Iligan Light & Power Inc, Philippines
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Ministry of Transport, Egypt
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- AsiaOL BioFuels Corp., Philippines
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- Indian Oil Corporation Limited
- Planning Commission, India
- Neyveli Lignite Corporation Ltd, - India
- TNB Fuel Sdn Bhd - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Bangladesh Power Developement Board
- Bharathi Cement Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Kobexindo Tractors - Indoneisa
- Eastern Coal Council - USA
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
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