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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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Monday, 11 October 10
COAL IMPORTS TO START IN 2015 - VIETNAM BUSINESS
Vietnam Business reported that, Viet Nam is now likely to import coal only from 2015, not 2013 as earlier forecast since many thermal power pl ...
Monday, 11 October 10
OCTOBER INDONESIAN COAL PRICE REFERENCE UP BY 2.92 PERCENT
COALspot.com: The Directorate General of Mineral, Coal and Geothermal of Indonesia has been publishing a monthly coal price reference (HBA) since Fe ...
Saturday, 09 October 10
MPPGCL SEEKS TO BUY 0.40 MLN MT OF COAL FOR ITS THERMAL POWER STATIONS
COALspot.com: India's Madhya Pradesh Generating Company Limited (MPPGCL), Jabalpur, Madhya Pradesh invites bidders through tender 07-03/Import/Coal ...
Saturday, 09 October 10
FREIGHT MARKET IS EXPECTED TO FIRM UP NEXT WEEK CAPT REDDY
COALspot.com: Inspite of Chinese holidays the BDI was up by 10 pct and closed at 2,696 points. The cape index shot up to 20 pct and closed at 4,076 ...
Saturday, 09 October 10
9TH ASIA PACIFIC MINING CONFERENCE & EXHIBITION 13 14 OCTOBER 2010 AT SHANGRI-LA HOTEL, JAKARTA.
COALspot.com: (Press Release) In October 2010, the Indonesian Mining Association (IMA) and the Indonesian Coal Mining Association (APBI) will host t ...
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- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Renaissance Capital - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Indian Oil Corporation Limited
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Goldman Sachs - Singapore
- Kaltim Prima Coal - Indonesia
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- CNBM International Corporation - China
- Barasentosa Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Port Waratah Coal Services - Australia
- Bukit Baiduri Energy - Indonesia
- Altura Mining Limited, Indonesia
- ASAPP Information Group - India
- Rio Tinto Coal - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Bulk Trading Sa - Switzerland
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- VISA Power Limited - India
- Electricity Authority, New Zealand
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- Bukit Makmur.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Power Finance Corporation Ltd., India
- Iligan Light & Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- PTC India Limited - India
- Gujarat Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Banpu Public Company Limited - Thailand
- Interocean Group of Companies - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- Intertek Mineral Services - Indonesia
- Metalloyd Limited - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Simpson Spence & Young - Indonesia
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- Heidelberg Cement - Germany
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Aditya Birla Group - India
- San Jose City I Power Corp, Philippines
- Star Paper Mills Limited - India
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Tamil Nadu electricity Board
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Larsen & Toubro Limited - India
- White Energy Company Limited
- Kartika Selabumi Mining - Indonesia
- New Zealand Coal & Carbon
- ICICI Bank Limited - India
- Posco Energy - South Korea
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Ambuja Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Coal and Oil Company - UAE
- Borneo Indobara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Electricity Generating Authority of Thailand
- PowerSource Philippines DevCo
- Lanco Infratech Ltd - India
- Merrill Lynch Commodities Europe
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- The Treasury - Australian Government
- Agrawal Coal Company - India
- India Bulls Power Limited - India
- Savvy Resources Ltd - HongKong
- Siam City Cement - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Cigading International Bulk Terminal - Indonesia
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Indonesian Coal Mining Association
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- Videocon Industries ltd - India
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- PNOC Exploration Corporation - Philippines
- Bangladesh Power Developement Board
- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- Deloitte Consulting - India
- Oldendorff Carriers - Singapore
- Riau Bara Harum - Indonesia
- Global Green Power PLC Corporation, Philippines
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karbindo Abesyapradhi - Indoneisa
- Formosa Plastics Group - Taiwan
- Wilmar Investment Holdings
- Orica Mining Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Orica Australia Pty. Ltd.
- Rashtriya Ispat Nigam Limited - India
- Indo Tambangraya Megah - Indonesia
- Standard Chartered Bank - UAE
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- Price Waterhouse Coopers - Russia
- Indogreen Group - Indonesia
- Sojitz Corporation - Japan
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Africa Commodities Group - South Africa
- Meenaskhi Energy Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- McConnell Dowell - Australia
- Ceylon Electricity Board - Sri Lanka
- Sakthi Sugars Limited - India
- London Commodity Brokers - England
- Kalimantan Lumbung Energi - Indonesia
- Mintek Dendrill Indonesia
- Attock Cement Pakistan Limited
- Thai Mozambique Logistica
- GVK Power & Infra Limited - India
- Parliament of New Zealand
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Australian Commodity Traders Exchange
- South Luzon Thermal Energy Corporation
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Bhatia International Limited - India
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Coalindo Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Sinarmas Energy and Mining - Indonesia
- Commonwealth Bank - Australia
- Parry Sugars Refinery, India
- Grasim Industreis Ltd - India
- Essar Steel Hazira Ltd - India
- Ind-Barath Power Infra Limited - India
- Salva Resources Pvt Ltd - India
- Vedanta Resources Plc - India
- Chettinad Cement Corporation Ltd - India
- Manunggal Multi Energi - Indonesia
- Meralco Power Generation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Chamber of Mines of South Africa
- Minerals Council of Australia
- Malabar Cements Ltd - India
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Pendopo Energi Batubara - Indonesia
- Uttam Galva Steels Limited - India
- Toyota Tsusho Corporation, Japan
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