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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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Thursday, 19 August 10
INDONESIA EXPORTED 5.93 MLN TON OF COAL TO CHINA AND 3.52 MLN TONS TO INDIA IN JULY
COALspot.com: Indonesia shipped 3.52 million tones of thermal coal to India in July, fell 25.39 percent compared to June's exports of 4.71 million ...
Thursday, 19 August 10
WBPDCL INDIA LAUNCHES SPOT COAL TENDER
COALspot.com: The West Bengal Power Development Corporation Limited (WBPDCL ), A Govt. of West Bengal Enterprise, has launched spot contract tender ...
Thursday, 19 August 10
PANAMAX BACKED BY A STRONGER SHORT PERIOD MARKET AND SUPPORTED BY SOME FRESH REQUIREMENTS - FEARNBULK
Handy
The events of this week have confirmed our assessment of last week i.e. activity gradually picked up in the Atlantic with more enquiry seen ...
Thursday, 19 August 10
CSC TO SHIP COAL FOR NOROCHCHOLAI POWER PLANT
Daily Mirror reported that, coal for the Norochcholai Power Plant will be shipped to the country by the Ceylon Shipping Corporation (CSC) officials ...
Wednesday, 18 August 10
MADHUCON TO START MINING AT SUMATRA BLOCK IN 2-3 MONTHS
DNA India reported that, Hyderabad-based Madhucon Projects is set to begin mining at one of its coal blocks in Indonesia in 2-3 months, said S Vaiku ...
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- Merrill Lynch Commodities Europe
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Kohat Cement Company Ltd. - Pakistan
- Central Java Power - Indonesia
- Vizag Seaport Private Limited - India
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Gujarat Sidhee Cement - India
- Cement Manufacturers Association - India
- Mercuria Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- Ind-Barath Power Infra Limited - India
- Formosa Plastics Group - Taiwan
- Vedanta Resources Plc - India
- Bayan Resources Tbk. - Indonesia
- Indian Oil Corporation Limited
- Maharashtra Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- OPG Power Generation Pvt Ltd - India
- Ambuja Cements Ltd - India
- Antam Resourcindo - Indonesia
- Minerals Council of Australia
- Malabar Cements Ltd - India
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- Sical Logistics Limited - India
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Kobexindo Tractors - Indoneisa
- Meenaskhi Energy Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Agrawal Coal Company - India
- Interocean Group of Companies - India
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Thai Mozambique Logistica
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- Star Paper Mills Limited - India
- Chamber of Mines of South Africa
- Global Coal Blending Company Limited - Australia
- Eastern Coal Council - USA
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- Orica Australia Pty. Ltd.
- Africa Commodities Group - South Africa
- GMR Energy Limited - India
- Medco Energi Mining Internasional
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Indonesian Coal Mining Association
- Bharathi Cement Corporation - India
- Central Electricity Authority - India
- Kapuas Tunggal Persada - Indonesia
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- New Zealand Coal & Carbon
- Aboitiz Power Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Pendopo Energi Batubara - Indonesia
- Mercator Lines Limited - India
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Rio Tinto Coal - Australia
- McConnell Dowell - Australia
- Kepco SPC Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Semirara Mining Corp, Philippines
- San Jose City I Power Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Uttam Galva Steels Limited - India
- Thiess Contractors Indonesia
- Baramulti Group, Indonesia
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Australian Commodity Traders Exchange
- Kideco Jaya Agung - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Sree Jayajothi Cements Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Orica Mining Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Planning Commission, India
- Sinarmas Energy and Mining - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Trasteel International SA, Italy
- Tata Chemicals Ltd - India
- Jaiprakash Power Ventures ltd
- Makarim & Taira - Indonesia
- Ministry of Finance - Indonesia
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Eastern Energy - Thailand
- PowerSource Philippines DevCo
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- The University of Queensland
- Intertek Mineral Services - Indonesia
- Singapore Mercantile Exchange
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- London Commodity Brokers - England
- Port Waratah Coal Services - Australia
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- The State Trading Corporation of India Ltd
- AsiaOL BioFuels Corp., Philippines
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
- Heidelberg Cement - Germany
- White Energy Company Limited
- Latin American Coal - Colombia
- The Treasury - Australian Government
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- Lanco Infratech Ltd - India
- Electricity Generating Authority of Thailand
- Semirara Mining and Power Corporation, Philippines
- Commonwealth Bank - Australia
- Leighton Contractors Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Bangladesh Power Developement Board
- MS Steel International - UAE
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- Directorate Of Revenue Intelligence - India
- Xindia Steels Limited - India
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- Manunggal Multi Energi - Indonesia
- Ministry of Mines - Canada
- European Bulk Services B.V. - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Parliament of New Zealand
- ICICI Bank Limited - India
- Salva Resources Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Maheswari Brothers Coal Limited - India
- Chettinad Cement Corporation Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- SN Aboitiz Power Inc, Philippines
- Standard Chartered Bank - UAE
- Therma Luzon, Inc, Philippines
- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- Videocon Industries ltd - India
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
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