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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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Friday, 17 September 10
CWP COAL WASHING PLANTS MACHINERY LANDS ON RUSSIAN MARKET!!
Press Release: CWP Coal Washing Plants Machinery Industry & Trade Co. which was founded in 1990, has been operating in Izmir with its closed pro ...
Friday, 17 September 10
FREIGHT RATES TO DECLINE FURTHER - ICICI SEC
Broking firm ICICI Securities said tanker freight rates reported a sharp drop with rates of Suezmax and Aframax carriers declining by 16% to USD 8,6 ...
Friday, 17 September 10
R-POWER, ADANI, GMR TO BID FOR $1-BN MINE
Reliance Power, Adani Power and GMR are in the race for a coal mine asset in Australia. The valuation of the asset is close to $1 billion (Rs 4,600 ...
Thursday, 16 September 10
RPG GROUP BUYS 10% IN AUSSIE COAL FIRM RESOURCE GENERATION
Dealcurry reported that, India's RPG Group's Integrated Coal Mining Limited (ICML) has acquired 10% stake (18,268,053 shares) in Resource Generati ...
Wednesday, 15 September 10
VIETNAM TO IMPORT UP TO 15 MLN TONS COAL/YR BY 2015 - VIETNAM BUSINESS
Vietnam Business reported that, Vietnam will need to import 3 million to 15 million tons of coal a year by 2015, rising to 21 million to 40 million ...
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- Interocean Group of Companies - India
- Kalimantan Lumbung Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- Salva Resources Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- TeaM Sual Corporation - Philippines
- Deloitte Consulting - India
- Intertek Mineral Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Thai Mozambique Logistica
- Global Green Power PLC Corporation, Philippines
- ICICI Bank Limited - India
- Jaiprakash Power Ventures ltd
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- SMG Consultants - Indonesia
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Goldman Sachs - Singapore
- Australian Coal Association
- Energy Development Corp, Philippines
- Carbofer General Trading SA - India
- Ministry of Transport, Egypt
- Mercuria Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Siam City Cement - Thailand
- Standard Chartered Bank - UAE
- Orica Mining Services - Indonesia
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- India Bulls Power Limited - India
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- White Energy Company Limited
- GVK Power & Infra Limited - India
- Chamber of Mines of South Africa
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Sree Jayajothi Cements Limited - India
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Ministry of Finance - Indonesia
- Karaikal Port Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Formosa Plastics Group - Taiwan
- London Commodity Brokers - England
- Coastal Gujarat Power Limited - India
- Ind-Barath Power Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Agrawal Coal Company - India
- Gujarat Electricity Regulatory Commission - India
- Sojitz Corporation - Japan
- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- Marubeni Corporation - India
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Renaissance Capital - South Africa
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- VISA Power Limited - India
- IHS Mccloskey Coal Group - USA
- CNBM International Corporation - China
- Bangladesh Power Developement Board
- Vizag Seaport Private Limited - India
- Semirara Mining Corp, Philippines
- Essar Steel Hazira Ltd - India
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Samtan Co., Ltd - South Korea
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- Manunggal Multi Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bayan Resources Tbk. - Indonesia
- PTC India Limited - India
- Makarim & Taira - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Cigading International Bulk Terminal - Indonesia
- Maheswari Brothers Coal Limited - India
- Rio Tinto Coal - Australia
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Trasteel International SA, Italy
- Riau Bara Harum - Indonesia
- Thiess Contractors Indonesia
- Power Finance Corporation Ltd., India
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- PNOC Exploration Corporation - Philippines
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement PLC, Thailand
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- The Treasury - Australian Government
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Global Business Power Corporation, Philippines
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Lanco Infratech Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- Tata Chemicals Ltd - India
- Central Java Power - Indonesia
- GAC Shipping (India) Pvt Ltd
- Grasim Industreis Ltd - India
- Australian Commodity Traders Exchange
- Commonwealth Bank - Australia
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Xindia Steels Limited - India
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- The State Trading Corporation of India Ltd
- Sakthi Sugars Limited - India
- Simpson Spence & Young - Indonesia
- Minerals Council of Australia
- Electricity Authority, New Zealand
- Iligan Light & Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Cement Manufacturers Association - India
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- PetroVietnam Power Coal Import and Supply Company
- AsiaOL BioFuels Corp., Philippines
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Wilmar Investment Holdings
- Asmin Koalindo Tuhup - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Attock Cement Pakistan Limited
- Ambuja Cements Ltd - India
- MS Steel International - UAE
- Wood Mackenzie - Singapore
- Parry Sugars Refinery, India
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Indo Tambangraya Megah - Indonesia
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Bukit Makmur.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Indogreen Group - Indonesia
- Bhatia International Limited - India
- Malabar Cements Ltd - India
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Planning Commission, India
- The University of Queensland
- Coalindo Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- GMR Energy Limited - India
- Pendopo Energi Batubara - Indonesia
- Indian Oil Corporation Limited
- Star Paper Mills Limited - India
- Energy Link Ltd, New Zealand
- Semirara Mining and Power Corporation, Philippines
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