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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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Sunday, 05 September 10
HARUM ENERGY EYES 7.4 MILION TONS OF COAL OUTPUT IN 2010
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Sunday, 05 September 10
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Sunday, 05 September 10
NOROCHCHOLAI POWER PLANT TO BE COMMISSIONED ON JANUARY 1
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Friday, 03 September 10
BANPU CUTS INDONESIAN HOLDING BUT ITM REMAINS KEY STRATEGIC UNIT - BANGKOK POST
"SET-listed Banpu Plc, Asean's largest coal miner, yesterday announced the sale of an 8.72% stake in its listed coalmining holding company in ...
Friday, 03 September 10
NALCO, INDONESIAN FIRM DIFFER ON COAL SUPPLY TO SMELTER - DNA INDIA
A few days ago, National Aluminium Company (Nalco) advertised in Indonesian newspapers asking for companies to bid for coal supplies for its 500,000 ...
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- Orica Australia Pty. Ltd.
- Renaissance Capital - South Africa
- Larsen & Toubro Limited - India
- McConnell Dowell - Australia
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- Energy Development Corp, Philippines
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- Altura Mining Limited, Indonesia
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Indo Tambangraya Megah - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Mercuria Energy - Indonesia
- Australian Coal Association
- IHS Mccloskey Coal Group - USA
- Petron Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jaiprakash Power Ventures ltd
- Energy Link Ltd, New Zealand
- SMG Consultants - Indonesia
- Romanian Commodities Exchange
- Mintek Dendrill Indonesia
- VISA Power Limited - India
- Mjunction Services Limited - India
- Kobexindo Tractors - Indoneisa
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Sical Logistics Limited - India
- Electricity Generating Authority of Thailand
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Posco Energy - South Korea
- San Jose City I Power Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- London Commodity Brokers - England
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Samtan Co., Ltd - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Meenaskhi Energy Private Limited - India
- Latin American Coal - Colombia
- Semirara Mining and Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Tata Chemicals Ltd - India
- Cement Manufacturers Association - India
- Savvy Resources Ltd - HongKong
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Mercator Lines Limited - India
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Africa Commodities Group - South Africa
- India Bulls Power Limited - India
- The Treasury - Australian Government
- Rio Tinto Coal - Australia
- Trasteel International SA, Italy
- Kaltim Prima Coal - Indonesia
- Star Paper Mills Limited - India
- Toyota Tsusho Corporation, Japan
- Directorate Of Revenue Intelligence - India
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Baiduri Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Business Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Kideco Jaya Agung - Indonesia
- Kartika Selabumi Mining - Indonesia
- Simpson Spence & Young - Indonesia
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- Malabar Cements Ltd - India
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- Therma Luzon, Inc, Philippines
- Thiess Contractors Indonesia
- The University of Queensland
- Bhushan Steel Limited - India
- Medco Energi Mining Internasional
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Wood Mackenzie - Singapore
- Bangladesh Power Developement Board
- Eastern Coal Council - USA
- Chettinad Cement Corporation Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Central Java Power - Indonesia
- SMC Global Power, Philippines
- Gujarat Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Madhucon Powers Ltd - India
- Minerals Council of Australia
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Planning Commission, India
- Vedanta Resources Plc - India
- Indian Energy Exchange, India
- Electricity Authority, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- New Zealand Coal & Carbon
- Cigading International Bulk Terminal - Indonesia
- Kumho Petrochemical, South Korea
- ICICI Bank Limited - India
- Rashtriya Ispat Nigam Limited - India
- Aditya Birla Group - India
- Ind-Barath Power Infra Limited - India
- Barasentosa Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- Deloitte Consulting - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Attock Cement Pakistan Limited
- Metalloyd Limited - United Kingdom
- Eastern Energy - Thailand
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Borneo Indobara - Indonesia
- Marubeni Corporation - India
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- MS Steel International - UAE
- Heidelberg Cement - Germany
- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- Commonwealth Bank - Australia
- Agrawal Coal Company - India
- PowerSource Philippines DevCo
- Neyveli Lignite Corporation Ltd, - India
- South Luzon Thermal Energy Corporation
- Singapore Mercantile Exchange
- GAC Shipping (India) Pvt Ltd
- Bhoruka Overseas - Indonesia
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- OPG Power Generation Pvt Ltd - India
- Interocean Group of Companies - India
- Economic Council, Georgia
- Parry Sugars Refinery, India
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Indian Oil Corporation Limited
- Semirara Mining Corp, Philippines
- Ministry of Transport, Egypt
- Tamil Nadu electricity Board
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- PTC India Limited - India
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
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