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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, 29 October 10
CHINA'S COAL DEMAND DRIVES DRY BULK MARKET HIGHER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market is posting marginal, yet steady growth this week, with the Baltic Dry Index rising yesterday to 2784 points, up by 0.2%. Both th ...
Wednesday, 27 October 10
TNPL TO AWARD 240,000 MT COAL SUPPLY CONTRACT TO COAL & OIL
COALspot.com: Tamil Nadu Newsprint Papers Limited, Tamil Nadu state owned Newsprint and Printing & Writing Paper producer has opened a coal purc ...
Wednesday, 27 October 10
CHINA AIDS RUSSIA IN DEVELOPING COAL RESOURCES - PEOPLE'S DAILY
People's Daily reported that, Russia will use 6 billion U.S. dollars in loans provided by China to develop coal resources in Sakhalin Island, Elege ...
Wednesday, 27 October 10
MAIDEN COAL SHIPMENTS TO NOBLE RESOURCES - PAN ASIA AUSTRALIA
Press Release :
First Coal Shipments made from Nadvara Coal Project, East Kalimantan
51,616 tonnes delivered from October production &ndas ...
Tuesday, 26 October 10
INDONESIA SHIPPED 5.32 PERCENT LESS COAL IN SEPTEMBER 10
COALspot.com: Indonesia, the world largest coal exporter, shipped 21,661,817 MT of coal in September 2010, which is 5.32 percent lesser than Au ...
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- Toyota Tsusho Corporation, Japan
- Indogreen Group - Indonesia
- Tamil Nadu electricity Board
- Maheswari Brothers Coal Limited - India
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Billiton Holdings Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
- Bayan Resources Tbk. - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bharathi Cement Corporation - India
- Thai Mozambique Logistica
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Economic Council, Georgia
- GN Power Mariveles Coal Plant, Philippines
- OPG Power Generation Pvt Ltd - India
- ASAPP Information Group - India
- PTC India Limited - India
- Sree Jayajothi Cements Limited - India
- Central Java Power - Indonesia
- Uttam Galva Steels Limited - India
- White Energy Company Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wilmar Investment Holdings
- Global Green Power PLC Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- Kapuas Tunggal Persada - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meralco Power Generation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Chamber of Mines of South Africa
- Planning Commission, India
- Thiess Contractors Indonesia
- Minerals Council of Australia
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Indonesian Coal Mining Association
- Aditya Birla Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Essar Steel Hazira Ltd - India
- European Bulk Services B.V. - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Coal Blending Company Limited - Australia
- PetroVietnam Power Coal Import and Supply Company
- Sindya Power Generating Company Private Ltd
- Power Finance Corporation Ltd., India
- Eastern Energy - Thailand
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- Georgia Ports Authority, United States
- Goldman Sachs - Singapore
- Carbofer General Trading SA - India
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Agrawal Coal Company - India
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Straits Asia Resources Limited - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Vizag Seaport Private Limited - India
- Parliament of New Zealand
- Directorate Of Revenue Intelligence - India
- TeaM Sual Corporation - Philippines
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Mercator Lines Limited - India
- Ministry of Mines - Canada
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Metalloyd Limited - United Kingdom
- GVK Power & Infra Limited - India
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Globalindo Alam Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Borneo Indobara - Indonesia
- PNOC Exploration Corporation - Philippines
- The Treasury - Australian Government
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Latin American Coal - Colombia
- Ind-Barath Power Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Electricity Generating Authority of Thailand
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- VISA Power Limited - India
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Aboitiz Power Corporation - Philippines
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
- Siam City Cement PLC, Thailand
- ICICI Bank Limited - India
- Commonwealth Bank - Australia
- Kobexindo Tractors - Indoneisa
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- Simpson Spence & Young - Indonesia
- Kartika Selabumi Mining - Indonesia
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Therma Luzon, Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Star Paper Mills Limited - India
- Heidelberg Cement - Germany
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Larsen & Toubro Limited - India
- Port Waratah Coal Services - Australia
- Pendopo Energi Batubara - Indonesia
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- LBH Netherlands Bv - Netherlands
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Mercuria Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- AsiaOL BioFuels Corp., Philippines
- Central Electricity Authority - India
- Coastal Gujarat Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- CNBM International Corporation - China
- Interocean Group of Companies - India
- IHS Mccloskey Coal Group - USA
- Singapore Mercantile Exchange
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Ambuja Cements Ltd - India
- Iligan Light & Power Inc, Philippines
- Coalindo Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Vedanta Resources Plc - India
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- McConnell Dowell - Australia
- SN Aboitiz Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- Bukit Baiduri Energy - Indonesia
- Deloitte Consulting - India
- Lanco Infratech Ltd - India
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- Antam Resourcindo - Indonesia
- Semirara Mining Corp, Philippines
- Cement Manufacturers Association - India
- MS Steel International - UAE
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
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