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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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Saturday, 09 October 10
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Thursday, 07 October 10
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Tuesday, 05 October 10
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- Karbindo Abesyapradhi - Indoneisa
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Energy Development Corp, Philippines
- Global Business Power Corporation, Philippines
- Indika Energy - Indonesia
- White Energy Company Limited
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- Interocean Group of Companies - India
- TNB Fuel Sdn Bhd - Malaysia
- Sakthi Sugars Limited - India
- Attock Cement Pakistan Limited
- Bangladesh Power Developement Board
- Bukit Makmur.PT - Indonesia
- Bulk Trading Sa - Switzerland
- Marubeni Corporation - India
- Star Paper Mills Limited - India
- Electricity Authority, New Zealand
- TeaM Sual Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Barasentosa Lestari - Indonesia
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- Standard Chartered Bank - UAE
- GAC Shipping (India) Pvt Ltd
- Orica Australia Pty. Ltd.
- Jindal Steel & Power Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Sindya Power Generating Company Private Ltd
- Miang Besar Coal Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- MS Steel International - UAE
- Agrawal Coal Company - India
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Petron Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Bhushan Steel Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Oldendorff Carriers - Singapore
- Ceylon Electricity Board - Sri Lanka
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- PTC India Limited - India
- Globalindo Alam Lestari - Indonesia
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- GN Power Mariveles Coal Plant, Philippines
- PowerSource Philippines DevCo
- Tamil Nadu electricity Board
- Semirara Mining Corp, Philippines
- India Bulls Power Limited - India
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- Coalindo Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement - Thailand
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Riau Bara Harum - Indonesia
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Siam City Cement PLC, Thailand
- Parliament of New Zealand
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- Sree Jayajothi Cements Limited - India
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Meralco Power Generation, Philippines
- Australian Coal Association
- Aditya Birla Group - India
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- McConnell Dowell - Australia
- Heidelberg Cement - Germany
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- GVK Power & Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Formosa Plastics Group - Taiwan
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- Cement Manufacturers Association - India
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- CNBM International Corporation - China
- Sarangani Energy Corporation, Philippines
- Price Waterhouse Coopers - Russia
- London Commodity Brokers - England
- ASAPP Information Group - India
- Deloitte Consulting - India
- Maharashtra Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Orica Mining Services - Indonesia
- Indian Energy Exchange, India
- Wilmar Investment Holdings
- Dalmia Cement Bharat India
- Maheswari Brothers Coal Limited - India
- Carbofer General Trading SA - India
- Commonwealth Bank - Australia
- Chettinad Cement Corporation Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Electricity Generating Authority of Thailand
- Posco Energy - South Korea
- Intertek Mineral Services - Indonesia
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Antam Resourcindo - Indonesia
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- Thai Mozambique Logistica
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Merrill Lynch Commodities Europe
- Trasteel International SA, Italy
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- Semirara Mining and Power Corporation, Philippines
- Indonesian Coal Mining Association
- Africa Commodities Group - South Africa
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Rashtriya Ispat Nigam Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Minerals Council of Australia
- VISA Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Metalloyd Limited - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- Asmin Koalindo Tuhup - Indonesia
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Coastal Gujarat Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- Indian Oil Corporation Limited
- Videocon Industries ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Bhatia International Limited - India
- IEA Clean Coal Centre - UK
- Tata Chemicals Ltd - India
- Ministry of Transport, Egypt
- Rio Tinto Coal - Australia
- Kobexindo Tractors - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- Parry Sugars Refinery, India
- Renaissance Capital - South Africa
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Romanian Commodities Exchange
- Singapore Mercantile Exchange
- Neyveli Lignite Corporation Ltd, - India
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Altura Mining Limited, Indonesia
- Borneo Indobara - Indonesia
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- Samtan Co., Ltd - South Korea
- Sical Logistics Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Economic Council, Georgia
- Malabar Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Port Waratah Coal Services - Australia
- Bukit Baiduri Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- The State Trading Corporation of India Ltd
- Kideco Jaya Agung - Indonesia
- Madhucon Powers Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
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