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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, 24 July 10
INDONESIAS BUKIT ASAM H1 2010, SALES RAISED 10% TO 6.44 MILLION TONS
COALspot.com: PT Tambang Batubara Bukit Asam (PTBA), Indonesian state owned mining company’s H1 2010, sales raised 10% to 6.44 million tons. T ...
Saturday, 24 July 10
INDONESIAN COAL MINERS ARE REQUIRED TO SUPPLY 64.96 MLN TONS OF COAL TO DOMESTIC MARKET IN 2010
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Saturday, 24 July 10
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Saturday, 24 July 10
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Friday, 23 July 10
KOWEPO TO IMPORT ADDITIONAL 1.2 MILLION TONS OF INDONESIAN COAL WITHIN 5 MONTHS
Korea Western Power Company Limited has finalized around 1.2 million tonnes of Indonesian origin of coal last week. According to K ...
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Minerals Council of Australia
- Leighton Contractors Pty Ltd - Australia
- Price Waterhouse Coopers - Russia
- Siam City Cement PLC, Thailand
- Ministry of Mines - Canada
- Deloitte Consulting - India
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
- Australian Coal Association
- Maharashtra Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- Riau Bara Harum - Indonesia
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement - Thailand
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bhatia International Limited - India
- Independent Power Producers Association of India
- Australian Commodity Traders Exchange
- Altura Mining Limited, Indonesia
- Uttam Galva Steels Limited - India
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Thai Mozambique Logistica
- Sakthi Sugars Limited - India
- Medco Energi Mining Internasional
- Intertek Mineral Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Standard Chartered Bank - UAE
- New Zealand Coal & Carbon
- Indian Oil Corporation Limited
- Star Paper Mills Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- White Energy Company Limited
- Timah Investasi Mineral - Indoneisa
- SMG Consultants - Indonesia
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Ceylon Electricity Board - Sri Lanka
- Billiton Holdings Pty Ltd - Australia
- Parry Sugars Refinery, India
- Jaiprakash Power Ventures ltd
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Lanco Infratech Ltd - India
- Savvy Resources Ltd - HongKong
- Krishnapatnam Port Company Ltd. - India
- TNB Fuel Sdn Bhd - Malaysia
- European Bulk Services B.V. - Netherlands
- Ind-Barath Power Infra Limited - India
- South Luzon Thermal Energy Corporation
- Electricity Generating Authority of Thailand
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Manunggal Multi Energi - Indonesia
- The Treasury - Australian Government
- Jorong Barutama Greston.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Jindal Steel & Power Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Sindya Power Generating Company Private Ltd
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Singapore Mercantile Exchange
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- Gujarat Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Videocon Industries ltd - India
- SMC Global Power, Philippines
- Kapuas Tunggal Persada - Indonesia
- Global Business Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Simpson Spence & Young - Indonesia
- Carbofer General Trading SA - India
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- Cement Manufacturers Association - India
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Energy Development Corp, Philippines
- VISA Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Indonesian Coal Mining Association
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Petron Corporation, Philippines
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Semirara Mining and Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Marubeni Corporation - India
- ASAPP Information Group - India
- Wilmar Investment Holdings
- Latin American Coal - Colombia
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Banpu Public Company Limited - Thailand
- Meralco Power Generation, Philippines
- GMR Energy Limited - India
- Metalloyd Limited - United Kingdom
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- Economic Council, Georgia
- OPG Power Generation Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Coalindo Energy - Indonesia
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- Xindia Steels Limited - India
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Directorate Of Revenue Intelligence - India
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Malabar Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- The State Trading Corporation of India Ltd
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Energy Link Ltd, New Zealand
- Madhucon Powers Ltd - India
- Parliament of New Zealand
- London Commodity Brokers - England
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Makarim & Taira - Indonesia
- Heidelberg Cement - Germany
- Tata Chemicals Ltd - India
- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Iligan Light & Power Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Thiess Contractors Indonesia
- GVK Power & Infra Limited - India
- Mjunction Services Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Ambuja Cements Ltd - India
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Rio Tinto Coal - Australia
- Coal and Oil Company - UAE
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Anglo American - United Kingdom
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- Bukit Baiduri Energy - Indonesia
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