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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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Saturday, 28 August 10
THE FUTURES FOR THREE YEARS (2010-2012) WAS FIRM FOR CAPE AND PANAMAX VESSELS - VISTAAR
COALspot.com: The freight market appeared to be heading for correction with the indices coming off during later part of the week. The BDI closed 44 ...
Saturday, 28 August 10
KRISHNAPATNAM PORT SETS AN ALL INDIA COAL DISCHARGE RECORD
COALspot.com: Krishnapatnam Port has established all new record for coal discharged in India using the conventional system of coal unloading for por ...
Friday, 27 August 10
PAKISTAN WILL IMPORT 8 TO 10 PERCENT MORE COAL IN 2011
COALspot.com: Pakistan to import 4 million ton of coal in 2011 up by 8-10 percent compare to this year’s imports. "Pakistan's tota ...
Thursday, 26 August 10
CHARTERERS SWITCHING FROM PANAMAX TO CAPE STEMS DUE TO CAPE FALL
Handy
The activity picked up in the Atlantic with more enquiries seen for short period tonnage for end August/beg September - As the grain season ...
Wednesday, 25 August 10
BUKIT ASAM OUT TO BECOME BIGGEST COAL PRODUCER
The Jakarta Post reported that, State-owned PT Batubara Bukit Asam Tbk intends to become the country's biggest coal producer in 2016 with productio ...
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- Kapuas Tunggal Persada - Indonesia
- Uttam Galva Steels Limited - India
- Attock Cement Pakistan Limited
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Savvy Resources Ltd - HongKong
- Global Coal Blending Company Limited - Australia
- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- LBH Netherlands Bv - Netherlands
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- IEA Clean Coal Centre - UK
- Gujarat Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- McConnell Dowell - Australia
- Indogreen Group - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- Indika Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Singapore Mercantile Exchange
- Heidelberg Cement - Germany
- Merrill Lynch Commodities Europe
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- Kohat Cement Company Ltd. - Pakistan
- Larsen & Toubro Limited - India
- Iligan Light & Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Baiduri Energy - Indonesia
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Carbofer General Trading SA - India
- Global Green Power PLC Corporation, Philippines
- Renaissance Capital - South Africa
- Sinarmas Energy and Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- White Energy Company Limited
- Minerals Council of Australia
- Sarangani Energy Corporation, Philippines
- Sical Logistics Limited - India
- Aditya Birla Group - India
- Borneo Indobara - Indonesia
- Eastern Coal Council - USA
- Medco Energi Mining Internasional
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- CNBM International Corporation - China
- Kepco SPC Power Corporation, Philippines
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Siam City Cement PLC, Thailand
- Banpu Public Company Limited - Thailand
- The Treasury - Australian Government
- Electricity Authority, New Zealand
- Sakthi Sugars Limited - India
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Meralco Power Generation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- Videocon Industries ltd - India
- Africa Commodities Group - South Africa
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- GVK Power & Infra Limited - India
- Timah Investasi Mineral - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Independent Power Producers Association of India
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Georgia Ports Authority, United States
- Standard Chartered Bank - UAE
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Madhucon Powers Ltd - India
- Parliament of New Zealand
- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- Neyveli Lignite Corporation Ltd, - India
- Bhatia International Limited - India
- Eastern Energy - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- Kaltim Prima Coal - Indonesia
- Energy Link Ltd, New Zealand
- Energy Development Corp, Philippines
- Interocean Group of Companies - India
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Bukit Makmur.PT - Indonesia
- Ambuja Cements Ltd - India
- The University of Queensland
- ICICI Bank Limited - India
- Commonwealth Bank - Australia
- The State Trading Corporation of India Ltd
- Alfred C Toepfer International GmbH - Germany
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Indonesian Coal Mining Association
- International Coal Ventures Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- VISA Power Limited - India
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- IHS Mccloskey Coal Group - USA
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- Coastal Gujarat Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Bhoruka Overseas - Indonesia
- Mintek Dendrill Indonesia
- Sindya Power Generating Company Private Ltd
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- TeaM Sual Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Transport, Egypt
- Deloitte Consulting - India
- Bhushan Steel Limited - India
- Kumho Petrochemical, South Korea
- Formosa Plastics Group - Taiwan
- Xindia Steels Limited - India
- European Bulk Services B.V. - Netherlands
- Petron Corporation, Philippines
- Ministry of Finance - Indonesia
- Jaiprakash Power Ventures ltd
- Central Electricity Authority - India
- PTC India Limited - India
- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Goldman Sachs - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Tamil Nadu electricity Board
- Bulk Trading Sa - Switzerland
- New Zealand Coal & Carbon
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Leighton Contractors Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- India Bulls Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- ASAPP Information Group - India
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Kideco Jaya Agung - Indonesia
- Romanian Commodities Exchange
- Essar Steel Hazira Ltd - India
- SMC Global Power, Philippines
- Australian Commodity Traders Exchange
- Makarim & Taira - Indonesia
- Chettinad Cement Corporation Ltd - India
- Mercator Lines Limited - India
- Star Paper Mills Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Simpson Spence & Young - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Price Waterhouse Coopers - Russia
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Sojitz Corporation - Japan
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
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