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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, 30 September 10
DRY BULK MARKET HEADS SOUTH ONCE MORE WITH MARKET SENTIMENT TAKING A CAUTIOUS APPROACH - HELLENIC SHIPPING
The dry bulk market didn’t manage to maintain the slightly upward momentum it had established during the first two session of the week, with t ...
Wednesday, 29 September 10
MOZAMBIQUE: COAL IN THREE MORE TETE DISTRICTS
All africa reported that, Coal deposits have been confirmed in the districts of Changara, Cahora Bassa and Magoe, in the western Mozambican province ...
Tuesday, 28 September 10
MMTC TO AWARD CONTRACT TO CEPL AND KNOWLEDGE TO SUPPLY 0.835 MILLION TONS OF IMPORTED COAL
COALspot.com: MMTC, India’s state owned trading company has opened three coal purchase tenders today.
According to our market sources, Coas ...
Monday, 27 September 10
DRY BULK: FREIGHT RATES CONTINUE TO FALL ON LOW ACTIVITY - HELLENIC SHIPPING
The dry bulk market didn’t manage to change its fortunes during the past week, with holidays across many Asian countries, predominantly China, ...
Saturday, 25 September 10
INDONESIA HAS EXPORTED 187.656 MILLION TONNES OF COAL IN EIGHT MONTHS
COALspot.com: Indonesia, the world largest coal exporter has exported 187.656 million tons of coal for the period January – August this ...
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- Indian Energy Exchange, India
- New Zealand Coal & Carbon
- OPG Power Generation Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Gujarat Electricity Regulatory Commission - India
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- Edison Trading Spa - Italy
- Global Green Power PLC Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Medco Energi Mining Internasional
- South Luzon Thermal Energy Corporation
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- Barasentosa Lestari - Indonesia
- Sical Logistics Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Jorong Barutama Greston.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Mercator Lines Limited - India
- SMG Consultants - Indonesia
- Toyota Tsusho Corporation, Japan
- Oldendorff Carriers - Singapore
- AsiaOL BioFuels Corp., Philippines
- Sojitz Corporation - Japan
- Malabar Cements Ltd - India
- PTC India Limited - India
- Maheswari Brothers Coal Limited - India
- Sarangani Energy Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- Indo Tambangraya Megah - Indonesia
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Interocean Group of Companies - India
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Minerals Council of Australia
- Metalloyd Limited - United Kingdom
- Jaiprakash Power Ventures ltd
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- Bharathi Cement Corporation - India
- Thiess Contractors Indonesia
- ASAPP Information Group - India
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- Parry Sugars Refinery, India
- Timah Investasi Mineral - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Petron Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- MS Steel International - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indogreen Group - Indonesia
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- Australian Commodity Traders Exchange
- Agrawal Coal Company - India
- The Treasury - Australian Government
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Ceylon Electricity Board - Sri Lanka
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Formosa Plastics Group - Taiwan
- Simpson Spence & Young - Indonesia
- Africa Commodities Group - South Africa
- Port Waratah Coal Services - Australia
- Wilmar Investment Holdings
- IHS Mccloskey Coal Group - USA
- PowerSource Philippines DevCo
- PNOC Exploration Corporation - Philippines
- Indonesian Coal Mining Association
- Dalmia Cement Bharat India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Essar Steel Hazira Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Chettinad Cement Corporation Ltd - India
- Gujarat Sidhee Cement - India
- Larsen & Toubro Limited - India
- Anglo American - United Kingdom
- CNBM International Corporation - China
- Makarim & Taira - Indonesia
- Bangladesh Power Developement Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- Carbofer General Trading SA - India
- Global Business Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- GN Power Mariveles Coal Plant, Philippines
- Bukit Makmur.PT - Indonesia
- VISA Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Wood Mackenzie - Singapore
- Bhushan Steel Limited - India
- Siam City Cement - Thailand
- Banpu Public Company Limited - Thailand
- Orica Australia Pty. Ltd.
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- Cement Manufacturers Association - India
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Economic Council, Georgia
- Georgia Ports Authority, United States
- Uttam Galva Steels Limited - India
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Miang Besar Coal Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Global Coal Blending Company Limited - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- Electricity Generating Authority of Thailand
- Commonwealth Bank - Australia
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- Karaikal Port Pvt Ltd - India
- SMC Global Power, Philippines
- Holcim Trading Pte Ltd - Singapore
- LBH Netherlands Bv - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Australian Coal Association
- Petrochimia International Co. Ltd.- Taiwan
- Bhatia International Limited - India
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Latin American Coal - Colombia
- Romanian Commodities Exchange
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Directorate Of Revenue Intelligence - India
- Heidelberg Cement - Germany
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- Posco Energy - South Korea
- McConnell Dowell - Australia
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Karbindo Abesyapradhi - Indoneisa
- Iligan Light & Power Inc, Philippines
- Power Finance Corporation Ltd., India
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- Attock Cement Pakistan Limited
- Tamil Nadu electricity Board
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Lanco Infratech Ltd - India
- Parliament of New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining Corp, Philippines
- Ind-Barath Power Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
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- Aditya Birla Group - India
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- Grasim Industreis Ltd - India
- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- Bhoruka Overseas - Indonesia
- Straits Asia Resources Limited - Singapore
- International Coal Ventures Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
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