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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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Tuesday, 26 October 10
DRY BULK MARKET TO KEEP RISING THIS WEEK ON STRONG CHINESE IRON ORE AND THERMAL COAL DEMAND - HELLENIC SHIPPING
Overcapacitated or not, the dry bulk market keeps its positive momentum as we move forward this week, with the Baltic Dry Index (BDI) rising by 0.77 ...
Monday, 25 October 10
TWO CHINESE COMPANIES INK DEAL TO TAP AUSSIE COAL RESERVES
China Daily reportd that, two Chinese coal firms have teamed up to explore and develop coal resources in an area in Australia that has forecast rese ...
Monday, 25 October 10
DRY BULK MARKET STILL HEAVILY DEPENDENT ON CHINA, POSTS SMALL WEEKLY LOSS OF 1.27% - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With every twitch and turn from China’s metals industry, the dry bulk market is disproportionally affected, as evidenced by the course of the ...
Sunday, 24 October 10
SUPRAMAX VESSELS BEING FIXED AROUND $ 15 K PER DAY DELIVERY N. CHINA FOR TRIP VIA INDONESIA TO INDIA - VISTAAR SHIPPING
COALspot.com: The freight market this week remained almost at same levels with not much change. However the Far East/SE Asia market was quite soft w ...
Saturday, 23 October 10
HEAVY RAINS NO DAMPENER FOR 2010 COAL OUTPUT TARGET, MINISTRY SAYS - THE JAKARTA GLOBE
The Jakarta Globe reported that, National coal production would likely meet the target set by the Energy Ministry despite unusually heavy rain this ...
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Antam Resourcindo - Indonesia
- Kobexindo Tractors - Indoneisa
- SMC Global Power, Philippines
- ASAPP Information Group - India
- Kepco SPC Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Bharathi Cement Corporation - India
- London Commodity Brokers - England
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Thai Mozambique Logistica
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wood Mackenzie - Singapore
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bukit Baiduri Energy - Indonesia
- Carbofer General Trading SA - India
- The Treasury - Australian Government
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Eastern Energy - Thailand
- Global Business Power Corporation, Philippines
- Planning Commission, India
- Minerals Council of Australia
- Makarim & Taira - Indonesia
- Indogreen Group - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Price Waterhouse Coopers - Russia
- SMG Consultants - Indonesia
- Sojitz Corporation - Japan
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Sical Logistics Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Bhushan Steel Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Salva Resources Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Siam City Cement PLC, Thailand
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Goldman Sachs - Singapore
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- Electricity Generating Authority of Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Vedanta Resources Plc - India
- Wilmar Investment Holdings
- Port Waratah Coal Services - Australia
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Chamber of Mines of South Africa
- Krishnapatnam Port Company Ltd. - India
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- Ind-Barath Power Infra Limited - India
- Standard Chartered Bank - UAE
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Bangladesh Power Developement Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Baramulti Group, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Bukit Makmur.PT - Indonesia
- MS Steel International - UAE
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Kaltim Prima Coal - Indonesia
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
- Bayan Resources Tbk. - Indonesia
- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- Romanian Commodities Exchange
- Deloitte Consulting - India
- Therma Luzon, Inc, Philippines
- Energy Link Ltd, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Orica Australia Pty. Ltd.
- GAC Shipping (India) Pvt Ltd
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- LBH Netherlands Bv - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Formosa Plastics Group - Taiwan
- Africa Commodities Group - South Africa
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Coal Association
- Electricity Authority, New Zealand
- Tata Chemicals Ltd - India
- Bhoruka Overseas - Indonesia
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- TeaM Sual Corporation - Philippines
- Merrill Lynch Commodities Europe
- Oldendorff Carriers - Singapore
- Thiess Contractors Indonesia
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- India Bulls Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Aditya Birla Group - India
- Tamil Nadu electricity Board
- Iligan Light & Power Inc, Philippines
- Indian Oil Corporation Limited
- Videocon Industries ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Kideco Jaya Agung - Indonesia
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Essar Steel Hazira Ltd - India
- New Zealand Coal & Carbon
- Indonesian Coal Mining Association
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Finance - Indonesia
- Lanco Infratech Ltd - India
- Latin American Coal - Colombia
- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Sarangani Energy Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rio Tinto Coal - Australia
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Central Java Power - Indonesia
- Coalindo Energy - Indonesia
- Independent Power Producers Association of India
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Manunggal Multi Energi - Indonesia
- Agrawal Coal Company - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Dalmia Cement Bharat India
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Trasteel International SA, Italy
- PTC India Limited - India
- Parliament of New Zealand
- Power Finance Corporation Ltd., India
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- International Coal Ventures Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- McConnell Dowell - Australia
- Kartika Selabumi Mining - Indonesia
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