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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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Thursday, 29 July 10
BALTIC INDEXES ARE POSITIVE SINCE A FEW DAYS
Handy
Baltic indexes are positive since a few days which could mean that markets have bottomed out (as we correctly predicted in our report of las ...
Wednesday, 28 July 10
INDONESIA'S MERUKH SECURES US$200 MLN INVESTMENT FROM SAN MIGUEL
Trading Market Reported that, Indonesian mining company Merukh Enterprises said it has secured an investment commitment of US$200 million from the P ...
Wednesday, 28 July 10
RIZAL RISJAD MAY OWN 10% BERAU ENERGY
Rizal Risjad, son of Indonesian tycoon Ibrahim Risjad, might own 10% stakes in PT Berau Coal Energy Tbk (BRAU), parent company of Indonesia's fifth ...
Wednesday, 28 July 10
UNUSUAL RAINS TO HIT COAL EXPORTS
COALspot.com: Heavy rains in South and East Kalimantan have compelled coal exporters to delay or cancel coal exports. PT Bayan and PT. TIA hav ...
Tuesday, 27 July 10
INDIA HAS IMPORTED 1.5 MILLION TONS OF COAL LAST WEEK
COALspot.com: Coal imports in Indian ports have reached over 1.5 million tons for the week ended 25 July 2010. According to port agents, aroun ...
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- Toyota Tsusho Corporation, Japan
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Malabar Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Madhucon Powers Ltd - India
- Metalloyd Limited - United Kingdom
- Deloitte Consulting - India
- Antam Resourcindo - Indonesia
- Interocean Group of Companies - India
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- Karaikal Port Pvt Ltd - India
- Petron Corporation, Philippines
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Ministry of Transport, Egypt
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Medco Energi Mining Internasional
- Sree Jayajothi Cements Limited - India
- Meenaskhi Energy Private Limited - India
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- Vizag Seaport Private Limited - India
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Carbofer General Trading SA - India
- Economic Council, Georgia
- LBH Netherlands Bv - Netherlands
- Indian Oil Corporation Limited
- Samtan Co., Ltd - South Korea
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Pendopo Energi Batubara - Indonesia
- Goldman Sachs - Singapore
- Star Paper Mills Limited - India
- Indian Energy Exchange, India
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Merrill Lynch Commodities Europe
- MS Steel International - UAE
- Sojitz Corporation - Japan
- European Bulk Services B.V. - Netherlands
- SMC Global Power, Philippines
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Posco Energy - South Korea
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Energy Link Ltd, New Zealand
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Electricity Authority, New Zealand
- Singapore Mercantile Exchange
- Power Finance Corporation Ltd., India
- Siam City Cement PLC, Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Bhatia International Limited - India
- Maheswari Brothers Coal Limited - India
- Wilmar Investment Holdings
- Vijayanagar Sugar Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Coal and Oil Company - UAE
- Xindia Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Indonesian Coal Mining Association
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Bayan Resources Tbk. - Indonesia
- Parliament of New Zealand
- Bulk Trading Sa - Switzerland
- ICICI Bank Limited - India
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Tata Chemicals Ltd - India
- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Thiess Contractors Indonesia
- Bangladesh Power Developement Board
- Ministry of Finance - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- OPG Power Generation Pvt Ltd - India
- Energy Development Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Cement Manufacturers Association - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Independent Power Producers Association of India
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Uttam Galva Steels Limited - India
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Port Waratah Coal Services - Australia
- Parry Sugars Refinery, India
- The University of Queensland
- Pipit Mutiara Jaya. PT, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Australian Commodity Traders Exchange
- Mercator Lines Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Makarim & Taira - Indonesia
- Indika Energy - Indonesia
- Riau Bara Harum - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- Global Green Power PLC Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Leighton Contractors Pty Ltd - Australia
- India Bulls Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Bhushan Steel Limited - India
- Sakthi Sugars Limited - India
- Kartika Selabumi Mining - Indonesia
- Savvy Resources Ltd - HongKong
- SN Aboitiz Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- The State Trading Corporation of India Ltd
- Bukit Makmur.PT - Indonesia
- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- Gujarat Mineral Development Corp Ltd - India
- Formosa Plastics Group - Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- The Treasury - Australian Government
- Offshore Bulk Terminal Pte Ltd, Singapore
- PTC India Limited - India
- Romanian Commodities Exchange
- Standard Chartered Bank - UAE
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Binh Thuan Hamico - Vietnam
- Gujarat Sidhee Cement - India
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- Mercuria Energy - Indonesia
- Aditya Birla Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Chamber of Mines of South Africa
- Krishnapatnam Port Company Ltd. - India
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
- Meralco Power Generation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Siam City Cement - Thailand
- Eastern Energy - Thailand
- London Commodity Brokers - England
- Tamil Nadu electricity Board
- Jorong Barutama Greston.PT - Indonesia
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- GN Power Mariveles Coal Plant, Philippines
- Kapuas Tunggal Persada - Indonesia
- Manunggal Multi Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Rio Tinto Coal - Australia
- San Jose City I Power Corp, Philippines
- Bhoruka Overseas - Indonesia
- New Zealand Coal & Carbon
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
- Globalindo Alam Lestari - Indonesia
- PowerSource Philippines DevCo
- Therma Luzon, Inc, Philippines
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