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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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Wednesday, 21 July 10
FEWER SHIPS SOLD FOR SCRAP IN JUNE, ADDING PRESSURE TO FREIGHT RATES
The easing of vessel tonnage supply should be among the main concerns among ship owners, especially those active in dry bulk shipping. The reason is ...
Wednesday, 21 July 10
BUKIT ASAM SEALS RP900 BIO COAL DEAL
Souce: Insider Stories
Insider Stories reported that, State-Owned coal producer PT Tambang Batubara Bukit Asam Tbk (PTBA) have agreed t ...
Wednesday, 21 July 10
TUAH TURANGGA BUYS ABP US$ 15.9 MIO
Source: Insider Stories
Insider Stories reported that, Komatsu heavy equipment PT United Tractors Tbk (UNTR) through its wh ...
Tuesday, 20 July 10
CHINA'S RELIANCE ON COAL TO DROP 7% BY 2015 - XINHUA NET
Xinhua Net reported that, China's coal consumption is likely to drop to 63 percent of total energy consumption by 2015, down from 70 percent last y ...
Tuesday, 20 July 10
CHURCHILL PLANNING TO PRODUCE 35 MILLION TONNES PER ANNUM FROM ITS EAST KUTAI COAL PROJECT
According to Churchill's website, the East Kutai Coal Project is a world-class thermal coal deposit, with a JORC Mining Reserve of 961 milli ...
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- Thai Mozambique Logistica
- Bank of Tokyo Mitsubishi UFJ Ltd
- Banpu Public Company Limited - Thailand
- Coalindo Energy - Indonesia
- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
- ASAPP Information Group - India
- Indian Energy Exchange, India
- Sindya Power Generating Company Private Ltd
- Australian Coal Association
- Mercator Lines Limited - India
- European Bulk Services B.V. - Netherlands
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- London Commodity Brokers - England
- Indonesian Coal Mining Association
- Attock Cement Pakistan Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sakthi Sugars Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Edison Trading Spa - Italy
- Krishnapatnam Port Company Ltd. - India
- Karaikal Port Pvt Ltd - India
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Jindal Steel & Power Ltd - India
- Carbofer General Trading SA - India
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Billiton Holdings Pty Ltd - Australia
- Central Java Power - Indonesia
- PowerSource Philippines DevCo
- Dalmia Cement Bharat India
- Global Green Power PLC Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- Latin American Coal - Colombia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Deloitte Consulting - India
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Australian Commodity Traders Exchange
- Chettinad Cement Corporation Ltd - India
- Trasteel International SA, Italy
- Siam City Cement PLC, Thailand
- Kepco SPC Power Corporation, Philippines
- MS Steel International - UAE
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- White Energy Company Limited
- Indian Oil Corporation Limited
- GVK Power & Infra Limited - India
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Jaiprakash Power Ventures ltd
- CIMB Investment Bank - Malaysia
- Grasim Industreis Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- IHS Mccloskey Coal Group - USA
- Metalloyd Limited - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indogreen Group - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- Binh Thuan Hamico - Vietnam
- Bangladesh Power Developement Board
- Aditya Birla Group - India
- Mjunction Services Limited - India
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- Star Paper Mills Limited - India
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- Heidelberg Cement - Germany
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Minerals Council of Australia
- Eastern Energy - Thailand
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- Oldendorff Carriers - Singapore
- GMR Energy Limited - India
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- The Treasury - Australian Government
- Savvy Resources Ltd - HongKong
- Kartika Selabumi Mining - Indonesia
- Bhatia International Limited - India
- Barasentosa Lestari - Indonesia
- Intertek Mineral Services - Indonesia
- Videocon Industries ltd - India
- Riau Bara Harum - Indonesia
- Marubeni Corporation - India
- Port Waratah Coal Services - Australia
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- San Jose City I Power Corp, Philippines
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- Parliament of New Zealand
- Electricity Authority, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Tata Chemicals Ltd - India
- Madhucon Powers Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Interocean Group of Companies - India
- Price Waterhouse Coopers - Russia
- Bukit Baiduri Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Thiess Contractors Indonesia
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Larsen & Toubro Limited - India
- PTC India Limited - India
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Medco Energi Mining Internasional
- Petron Corporation, Philippines
- Energy Development Corp, Philippines
- Wood Mackenzie - Singapore
- Altura Mining Limited, Indonesia
- Alfred C Toepfer International GmbH - Germany
- PetroVietnam Power Coal Import and Supply Company
- Salva Resources Pvt Ltd - India
- Eastern Coal Council - USA
- Rashtriya Ispat Nigam Limited - India
- Aboitiz Power Corporation - Philippines
- Chamber of Mines of South Africa
- Maharashtra Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Cigading International Bulk Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Orica Australia Pty. Ltd.
- Mintek Dendrill Indonesia
- Vizag Seaport Private Limited - India
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- The University of Queensland
- Mercuria Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Romanian Commodities Exchange
- Ministry of Transport, Egypt
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Renaissance Capital - South Africa
- Bhushan Steel Limited - India
- Lanco Infratech Ltd - India
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- Iligan Light & Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- CNBM International Corporation - China
- Baramulti Group, Indonesia
- Tamil Nadu electricity Board
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Antam Resourcindo - Indonesia
- Ind-Barath Power Infra Limited - India
- Planning Commission, India
- Central Electricity Authority - India
- SMG Consultants - Indonesia
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