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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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Friday, 23 July 10
THE PANAMAX MARKET HAS CONTINUED ITS SLOW CLIMB - FEARNLEYS
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Continued flat Atlantic markets and over-supply of tonnage across all segments on spot basis. Nevertheless there is more fresh enquiry on Co ...
Friday, 23 July 10
KPMG INDIA FACES COAL DEFICIT OF 50% OF EXPECTED POWER PLANT DEMAND, SAYS - BLOOMBERG
Bloomberg reported that, India may face a coal shortfall of 189 million metric tons a year by 2015, about 50 percent of the power sector’s exp ...
Thursday, 22 July 10
BERAUS IPO NEXT MONTH CAN BECOME THE LARGEST THIS YEAR - THE JAKARTA POST
The Jakarta Post reported that, Indonesia’s fifth largest coal miner PT Berau Coal Energy Tbk will launch its initial public offering (IPO) ne ...
Thursday, 22 July 10
DRY BULK MARKET EDGES HIGHER, BUT RECOVERY IS SLOW
The dry bulk market’s recovery, which started last Friday has sustained its momentum thus far, but the pace of it seems to be an agonizing one ...
Wednesday, 21 July 10
CHARTER RATES FOR BIG SHIPS GO INTO FREEFALL
It is reported that concerns over the slowdown in the mainland construction sector posturing over ore price negotiations and a general summer slowdo ...
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- Wood Mackenzie - Singapore
- Videocon Industries ltd - India
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Standard Chartered Bank - UAE
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Thai Mozambique Logistica
- Gujarat Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Metalloyd Limited - United Kingdom
- The State Trading Corporation of India Ltd
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Energy Development Corp, Philippines
- Renaissance Capital - South Africa
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- McConnell Dowell - Australia
- PetroVietnam Power Coal Import and Supply Company
- GAC Shipping (India) Pvt Ltd
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- GVK Power & Infra Limited - India
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Electricity Generating Authority of Thailand
- Romanian Commodities Exchange
- European Bulk Services B.V. - Netherlands
- Semirara Mining and Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Indogreen Group - Indonesia
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Baramulti Group, Indonesia
- Banpu Public Company Limited - Thailand
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Global Coal Blending Company Limited - Australia
- SN Aboitiz Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Commonwealth Bank - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- AsiaOL BioFuels Corp., Philippines
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Aboitiz Power Corporation - Philippines
- Bangladesh Power Developement Board
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Cement Manufacturers Association - India
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Jaiprakash Power Ventures ltd
- Barasentosa Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Bhatia International Limited - India
- ASAPP Information Group - India
- Tata Chemicals Ltd - India
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Samtan Co., Ltd - South Korea
- Coastal Gujarat Power Limited - India
- Aditya Birla Group - India
- IHS Mccloskey Coal Group - USA
- Bulk Trading Sa - Switzerland
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- Indonesian Coal Mining Association
- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Malabar Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Ambuja Cements Ltd - India
- Mercuria Energy - Indonesia
- Interocean Group of Companies - India
- Asmin Koalindo Tuhup - Indonesia
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- Wilmar Investment Holdings
- Posco Energy - South Korea
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- Essar Steel Hazira Ltd - India
- Larsen & Toubro Limited - India
- Vedanta Resources Plc - India
- Sojitz Corporation - Japan
- Australian Coal Association
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Independent Power Producers Association of India
- Ceylon Electricity Board - Sri Lanka
- Neyveli Lignite Corporation Ltd, - India
- Mjunction Services Limited - India
- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vizag Seaport Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Chamber of Mines of South Africa
- Heidelberg Cement - Germany
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Madhucon Powers Ltd - India
- Kaltim Prima Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Ministry of Mines - Canada
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- The University of Queensland
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- Straits Asia Resources Limited - Singapore
- Chettinad Cement Corporation Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Meralco Power Generation, Philippines
- Eastern Coal Council - USA
- MS Steel International - UAE
- Tamil Nadu electricity Board
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Ind-Barath Power Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Maheswari Brothers Coal Limited - India
- PowerSource Philippines DevCo
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Economic Council, Georgia
- SMC Global Power, Philippines
- Therma Luzon, Inc, Philippines
- Planning Commission, India
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Directorate Of Revenue Intelligence - India
- Thiess Contractors Indonesia
- Mintek Dendrill Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement PLC, Thailand
- Kohat Cement Company Ltd. - Pakistan
- SMG Consultants - Indonesia
- Jindal Steel & Power Ltd - India
- OPG Power Generation Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Minerals Council of Australia
- CNBM International Corporation - China
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Binh Thuan Hamico - Vietnam
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