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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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Monday, 04 October 10
2 BLN TONS OF COAL RESERVES DISCOVERED IN SOUTHERN PAKISTAN - XINHUA / HELLENIC SHIPPING
Xinhua and Hellenic Shipping reporte dhtat, the discovery of at least two billion tons of usable coal reserves has been confirmed in one of the ...
Sunday, 03 October 10
THE BDI WAS JUST INCREASED BY 8 POINTS AND CLOSED AT 2452 POINTS LAST FRIDAY - VISTAAR
COALspot.com: The BDI was almost at same levels and just increased by 8 points and closed at 2452 points , however the cape index was up by al ...
Sunday, 03 October 10
NALCO TO FINALIZE INDONESIA COAL DEAL BY JANUARY - HINDUSTAN TIMES
HindustanTimes reported that, state-owned National Aluminium Company (NALCO) will finalise a deal with a coal source in Indonesia for its $4 billion ...
Sunday, 03 October 10
INDONESIA WILL BECOME A NET IMPORTER OF ENERGY IN 2030 - BPPT
Jakarta Updates reported that,Indonesian Agency for the Assessment and Application of Technology (BPPT) predicted that the energy situation in Indon ...
Saturday, 02 October 10
FOUR INDONESIAN COAL FIRMS KEEN TO TIE UP WITH NALCO - SIFY
Sify reported that, Four Indonesian coal companies have shown interest to tie up with public sector National Aluminium Company (Nalco) for its 4 bil ...
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- Bukit Makmur.PT - Indonesia
- Jindal Steel & Power Ltd - India
- ASAPP Information Group - India
- Parry Sugars Refinery, India
- Indian Oil Corporation Limited
- McConnell Dowell - Australia
- Bharathi Cement Corporation - India
- Thiess Contractors Indonesia
- Siam City Cement - Thailand
- European Bulk Services B.V. - Netherlands
- Tata Chemicals Ltd - India
- Bukit Baiduri Energy - Indonesia
- New Zealand Coal & Carbon
- Binh Thuan Hamico - Vietnam
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Intertek Mineral Services - Indonesia
- Wood Mackenzie - Singapore
- Meenaskhi Energy Private Limited - India
- Jaiprakash Power Ventures ltd
- San Jose City I Power Corp, Philippines
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Wilmar Investment Holdings
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Leighton Contractors Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Chamber of Mines of South Africa
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Bhatia International Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- The State Trading Corporation of India Ltd
- Globalindo Alam Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Riau Bara Harum - Indonesia
- Lanco Infratech Ltd - India
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Agrawal Coal Company - India
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Maheswari Brothers Coal Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- PTC India Limited - India
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- IHS Mccloskey Coal Group - USA
- Global Coal Blending Company Limited - Australia
- Essar Steel Hazira Ltd - India
- Tamil Nadu electricity Board
- OPG Power Generation Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- PowerSource Philippines DevCo
- Indika Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Miang Besar Coal Terminal - Indonesia
- Indogreen Group - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mjunction Services Limited - India
- White Energy Company Limited
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Eastern Coal Council - USA
- Manunggal Multi Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Savvy Resources Ltd - HongKong
- Renaissance Capital - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Heidelberg Cement - Germany
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Bhushan Steel Limited - India
- Mercuria Energy - Indonesia
- India Bulls Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Toyota Tsusho Corporation, Japan
- ICICI Bank Limited - India
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Kalimantan Lumbung Energi - Indonesia
- Coalindo Energy - Indonesia
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- Madhucon Powers Ltd - India
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Independent Power Producers Association of India
- MS Steel International - UAE
- Makarim & Taira - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Oldendorff Carriers - Singapore
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- Salva Resources Pvt Ltd - India
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- Indonesian Coal Mining Association
- Thai Mozambique Logistica
- CNBM International Corporation - China
- The University of Queensland
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- Australian Coal Association
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Coastal Gujarat Power Limited - India
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- Sical Logistics Limited - India
- London Commodity Brokers - England
- SMG Consultants - Indonesia
- Larsen & Toubro Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- Rio Tinto Coal - Australia
- Simpson Spence & Young - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Goldman Sachs - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Grasim Industreis Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Energy Link Ltd, New Zealand
- Aboitiz Power Corporation - Philippines
- Carbofer General Trading SA - India
- Electricity Authority, New Zealand
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Kaltim Prima Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- Edison Trading Spa - Italy
- GMR Energy Limited - India
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Planning Commission, India
- SN Aboitiz Power Inc, Philippines
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
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