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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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Wednesday, 04 August 10
MALAYSIA'S AGATE GROUP TIES UP WITH INDIA'S ECOGREEN TO DEVELOP COAL BUSINESS
COALspot.com: "Malaysian based AGATE Group had entered into an agreement with India's EcoGreen to jointly develop coal business in India ...
Wednesday, 04 August 10
ADARO PRODUCED 21.62 MILLION TONS OF COAL IN 1H 2010
COALspot.com: “Adaro Energy’s production volume during the second quarter of 2010 was 10.26 million tones and for the first half of 2010 ...
Wednesday, 04 August 10
CIL TO TAKE UP NEW PROJECT TO MEET INCREASED DEMAND OF COAL
As part of Annual Plan 2010-11, Planning Commission has projected all India demand of coal 656.31 Million Tonnes against which the indigenous supply ...
Tuesday, 03 August 10
INDONESIA CONSIDERING RUPIAH DENOMINATION
The jakarta post reportd that, the central bank is deliberating a potential Rupiah denomination in light of decreasing exchange rate valuations agai ...
Monday, 02 August 10
DRY BULK MARKET NEEDS TO FIND ADDITIONAL SUPPORT IN AUGUST
The dry bulk market ended another week of rebounding, posting on Friday its 11th straight rise. Still, as analysts point out the rate of this rise h ...
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- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- PowerSource Philippines DevCo
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- Star Paper Mills Limited - India
- Krishnapatnam Port Company Ltd. - India
- The Treasury - Australian Government
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- Sojitz Corporation - Japan
- Renaissance Capital - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Commonwealth Bank - Australia
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- San Jose City I Power Corp, Philippines
- Samtan Co., Ltd - South Korea
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- Electricity Generating Authority of Thailand
- Kohat Cement Company Ltd. - Pakistan
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Australian Commodity Traders Exchange
- Cigading International Bulk Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- Sical Logistics Limited - India
- Salva Resources Pvt Ltd - India
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bharathi Cement Corporation - India
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- Goldman Sachs - Singapore
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Siam City Cement - Thailand
- Xindia Steels Limited - India
- Tata Chemicals Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Australian Coal Association
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- Makarim & Taira - Indonesia
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Kobexindo Tractors - Indoneisa
- Economic Council, Georgia
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Central Electricity Authority - India
- Wilmar Investment Holdings
- Thai Mozambique Logistica
- Singapore Mercantile Exchange
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Thiess Contractors Indonesia
- White Energy Company Limited
- CIMB Investment Bank - Malaysia
- Sarangani Energy Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- PTC India Limited - India
- European Bulk Services B.V. - Netherlands
- ASAPP Information Group - India
- Gujarat Mineral Development Corp Ltd - India
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Parry Sugars Refinery, India
- Romanian Commodities Exchange
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- South Luzon Thermal Energy Corporation
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Malabar Cements Ltd - India
- Coalindo Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Global Business Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Attock Cement Pakistan Limited
- VISA Power Limited - India
- Eastern Coal Council - USA
- Billiton Holdings Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- CNBM International Corporation - China
- SMG Consultants - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Marubeni Corporation - India
- Borneo Indobara - Indonesia
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- PetroVietnam Power Coal Import and Supply Company
- OPG Power Generation Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Meralco Power Generation, Philippines
- ICICI Bank Limited - India
- Orica Australia Pty. Ltd.
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Antam Resourcindo - Indonesia
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bhatia International Limited - India
- Binh Thuan Hamico - Vietnam
- Heidelberg Cement - Germany
- Ind-Barath Power Infra Limited - India
- Electricity Authority, New Zealand
- Globalindo Alam Lestari - Indonesia
- Ministry of Transport, Egypt
- Aditya Birla Group - India
- MS Steel International - UAE
- Leighton Contractors Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Rio Tinto Coal - Australia
- Wood Mackenzie - Singapore
- Bukit Baiduri Energy - Indonesia
- The State Trading Corporation of India Ltd
- Vedanta Resources Plc - India
- IEA Clean Coal Centre - UK
- Kumho Petrochemical, South Korea
- Indonesian Coal Mining Association
- Planning Commission, India
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- McConnell Dowell - Australia
- Power Finance Corporation Ltd., India
- Global Coal Blending Company Limited - Australia
- Maheswari Brothers Coal Limited - India
- Vizag Seaport Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Bangladesh Power Developement Board
- Central Java Power - Indonesia
- Indogreen Group - Indonesia
- Essar Steel Hazira Ltd - India
- New Zealand Coal & Carbon
- Indian Energy Exchange, India
- Petron Corporation, Philippines
- Coal and Oil Company - UAE
- Posco Energy - South Korea
- Coastal Gujarat Power Limited - India
- Metalloyd Limited - United Kingdom
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Mjunction Services Limited - India
- Baramulti Group, Indonesia
- Jaiprakash Power Ventures ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Aboitiz Power Corporation - Philippines
- Independent Power Producers Association of India
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Energy Development Corp, Philippines
- Chamber of Mines of South Africa
- Tamil Nadu electricity Board
- Timah Investasi Mineral - Indoneisa
- Minerals Council of Australia
- Interocean Group of Companies - India
- Barasentosa Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Carbofer General Trading SA - India
- GMR Energy Limited - India
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