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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, 06 August 10
KRISHNAPATNAM PORT WINS NON MAJOR PORT AWARD 2ND TIME IN A ROW
COAlspot.com ( Press Release) Krishnapatnam Port, the world-class port on the Indian horizon, took the top honors for the second time in a row, in t ...
Friday, 06 August 10
POLANDS KOPEX GROUP DEVELOPS COAL MINE IN INDONESIA
Polishmarket reported that, Polish mining concern Kopex Group, , is to build the first in Indonesia mechanised underground coal mine. The group is c ...
Thursday, 05 August 10
MORATORIUM MAY HURT NEW PROJECTS: MINING GROUP
The government’s proposed two-year moratorium on issuing new concessions to convert forests and peatlands to other uses may hinder new mining ...
Thursday, 05 August 10
IRON ORE EXPORT BAN COMPOUNDS PROBLEMS OF INDUSTRY - BUSINESS STANDARD
Forex loss of Rs 300 crore (US$ 65.63 million) ; truckers, ports, Railways bear the brunt
The Karnataka government’s move to ban the export ...
Thursday, 05 August 10
DRY BULK LOOKING TO CHINA FOR A NEW RALLY, BUT INDIA COULD BE THIS YEAR'S SURPRISE
The dry bulk market’s rebound has hit a “wall” this week, with the industry’s benchmark, the BDI (Baltic Dry Index) ending i ...
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Power Finance Corporation Ltd., India
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- Star Paper Mills Limited - India
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- ICICI Bank Limited - India
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- Parliament of New Zealand
- Indian Oil Corporation Limited
- Romanian Commodities Exchange
- Parry Sugars Refinery, India
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- Mercuria Energy - Indonesia
- Posco Energy - South Korea
- Australian Coal Association
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Globalindo Alam Lestari - Indonesia
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- Indogreen Group - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- Interocean Group of Companies - India
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- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- Georgia Ports Authority, United States
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- Binh Thuan Hamico - Vietnam
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- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- SN Aboitiz Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Makarim & Taira - Indonesia
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Metalloyd Limited - United Kingdom
- Ambuja Cements Ltd - India
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- Electricity Authority, New Zealand
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- CNBM International Corporation - China
- Sojitz Corporation - Japan
- India Bulls Power Limited - India
- Tamil Nadu electricity Board
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- Aboitiz Power Corporation - Philippines
- Eastern Energy - Thailand
- Mercator Lines Limited - India
- Gujarat Sidhee Cement - India
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Planning Commission, India
- Vizag Seaport Private Limited - India
- Baramulti Group, Indonesia
- Vedanta Resources Plc - India
- Oldendorff Carriers - Singapore
- Merrill Lynch Commodities Europe
- The Treasury - Australian Government
- Energy Development Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Anglo American - United Kingdom
- Price Waterhouse Coopers - Russia
- AsiaOL BioFuels Corp., Philippines
- Kumho Petrochemical, South Korea
- SMG Consultants - Indonesia
- Tata Chemicals Ltd - India
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Salva Resources Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- Savvy Resources Ltd - HongKong
- European Bulk Services B.V. - Netherlands
- Dalmia Cement Bharat India
- TeaM Sual Corporation - Philippines
- Carbofer General Trading SA - India
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- GAC Shipping (India) Pvt Ltd
- Samtan Co., Ltd - South Korea
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Central Java Power - Indonesia
- Siam City Cement PLC, Thailand
- MS Steel International - UAE
- Africa Commodities Group - South Africa
- Kalimantan Lumbung Energi - Indonesia
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- Pendopo Energi Batubara - Indonesia
- Mintek Dendrill Indonesia
- Central Electricity Authority - India
- Deloitte Consulting - India
- Grasim Industreis Ltd - India
- Wood Mackenzie - Singapore
- Billiton Holdings Pty Ltd - Australia
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- Jorong Barutama Greston.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Coalindo Energy - Indonesia
- The University of Queensland
- Gujarat Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- Goldman Sachs - Singapore
- Bhushan Steel Limited - India
- Trasteel International SA, Italy
- Neyveli Lignite Corporation Ltd, - India
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Attock Cement Pakistan Limited
- Banpu Public Company Limited - Thailand
- Kapuas Tunggal Persada - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Timah Investasi Mineral - Indoneisa
- Antam Resourcindo - Indonesia
- Directorate Of Revenue Intelligence - India
- Iligan Light & Power Inc, Philippines
- McConnell Dowell - Australia
- Thiess Contractors Indonesia
- Energy Link Ltd, New Zealand
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bayan Resources Tbk. - Indonesia
- Chamber of Mines of South Africa
- Kepco SPC Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bangladesh Power Developement Board
- Minerals Council of Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- SMC Global Power, Philippines
- OPG Power Generation Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
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