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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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Thursday, 14 October 10
COAL PRICES AT QINHUANGDAO PORT UP - CAPITALVUE
Capitalvue reported that, prices of steam coal yielding 5,500 kilocalories per kilogram (kcal/kg) in Qinhuangdao Port have risen five yuan to 715-72 ...
Thursday, 14 October 10
DRY BULK MARKET MAINTAINS POSITIVE TREND ON FIRMER CHINESE IRON ORE DEMAND
The dry bulk market has kept its upward trend set since last week, with the industry’s main benchmark, the Baltic Dry Index (BDI) rising to 2, ...
Tuesday, 12 October 10
DRY BULK MARKET LOOKING FOR DIRECTION AFTER WEEK OF CAPESIZE GROWTH
The dry bulk market ended Monday unchanged from Friday’s closing, today standing at 2,695 points. In summary, the capesize and the supramax se ...
Tuesday, 12 October 10
COAL SPOT TRADING MAY SOOTH PRICING CONFLICTS - GLOBAL TIMES
Global Times reported that, Tianjin-based Bohai Commodity Exchange launched steam coal for spot trading for the first time Monday. Steam coal is mai ...
Monday, 11 October 10
INDONESIAN POWER PLANTS AND OTHER INDUSTRIES TO BURN 78.97 MLN TONS OF COAL IN 2011
COALspot.com: The Minister of Energy and Mineral Resources of Indonesia has issued a ministerial degree 2360 K/30/MEM/ 2010 related to Domestic mark ...
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- Intertek Mineral Services - Indonesia
- Coastal Gujarat Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Coalindo Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ind-Barath Power Infra Limited - India
- Malabar Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- White Energy Company Limited
- Sinarmas Energy and Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Bahari Cakrawala Sebuku - Indonesia
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- TeaM Sual Corporation - Philippines
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- PTC India Limited - India
- Savvy Resources Ltd - HongKong
- The Treasury - Australian Government
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Tata Chemicals Ltd - India
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Sojitz Corporation - Japan
- Sindya Power Generating Company Private Ltd
- Karaikal Port Pvt Ltd - India
- Indian Oil Corporation Limited
- London Commodity Brokers - England
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Borneo Indobara - Indonesia
- International Coal Ventures Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- European Bulk Services B.V. - Netherlands
- Grasim Industreis Ltd - India
- Interocean Group of Companies - India
- Chettinad Cement Corporation Ltd - India
- Straits Asia Resources Limited - Singapore
- Maheswari Brothers Coal Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Australian Commodity Traders Exchange
- Toyota Tsusho Corporation, Japan
- Pendopo Energi Batubara - Indonesia
- CIMB Investment Bank - Malaysia
- SN Aboitiz Power Inc, Philippines
- Lanco Infratech Ltd - India
- Binh Thuan Hamico - Vietnam
- Leighton Contractors Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
- Merrill Lynch Commodities Europe
- PNOC Exploration Corporation - Philippines
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Iligan Light & Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- South Luzon Thermal Energy Corporation
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- New Zealand Coal & Carbon
- MS Steel International - UAE
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Australian Coal Association
- ASAPP Information Group - India
- Eastern Coal Council - USA
- Posco Energy - South Korea
- Sical Logistics Limited - India
- Chamber of Mines of South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PowerSource Philippines DevCo
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- Medco Energi Mining Internasional
- SMC Global Power, Philippines
- Deloitte Consulting - India
- Banpu Public Company Limited - Thailand
- Attock Cement Pakistan Limited
- Economic Council, Georgia
- Romanian Commodities Exchange
- Simpson Spence & Young - Indonesia
- Indogreen Group - Indonesia
- Wilmar Investment Holdings
- IHS Mccloskey Coal Group - USA
- Offshore Bulk Terminal Pte Ltd, Singapore
- India Bulls Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- OPG Power Generation Pvt Ltd - India
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Dalmia Cement Bharat India
- Trasteel International SA, Italy
- Meenaskhi Energy Private Limited - India
- The University of Queensland
- Eastern Energy - Thailand
- Parry Sugars Refinery, India
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Vedanta Resources Plc - India
- Sakthi Sugars Limited - India
- Makarim & Taira - Indonesia
- Latin American Coal - Colombia
- Power Finance Corporation Ltd., India
- Global Green Power PLC Corporation, Philippines
- Uttam Galva Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- CNBM International Corporation - China
- Minerals Council of Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Planning Commission, India
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- San Jose City I Power Corp, Philippines
- Ministry of Transport, Egypt
- Carbofer General Trading SA - India
- Bukit Makmur.PT - Indonesia
- Altura Mining Limited, Indonesia
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Kalimantan Lumbung Energi - Indonesia
- Mercator Lines Limited - India
- Agrawal Coal Company - India
- Global Coal Blending Company Limited - Australia
- Vizag Seaport Private Limited - India
- Directorate Of Revenue Intelligence - India
- Star Paper Mills Limited - India
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- IEA Clean Coal Centre - UK
- Semirara Mining Corp, Philippines
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Petron Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- McConnell Dowell - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Vijayanagar Sugar Pvt Ltd - India
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Baramulti Group, Indonesia
- Bhushan Steel Limited - India
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Mines - Canada
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- Electricity Authority, New Zealand
- Essar Steel Hazira Ltd - India
- Jindal Steel & Power Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- Mintek Dendrill Indonesia
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Orica Mining Services - Indonesia
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