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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, 16 July 10
CHINA EXPORTS 10.14 MILLION TONNES OF COAL IN H1 OF 2010
China exported 10.14 million tonnes of coal in the first half of this year, down 13.1% compared with the corresponding period of last year, accordin ...
Thursday, 15 July 10
SMC TO PURSUE MINDANAO COAL MINING PROJECTS
Philippine Daily Inquirer reported that, DIVERSIFYING CONGLOMERATE San Miguel Corp. is inclined to pursue its coal mining projects in Mindanao ...
Thursday, 15 July 10
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Top News reported that, Adani Enterprises has almost managed to obtain a coal mine from Linc Energy for $1 billion in Queensland, Australia. This mi ...
Thursday, 15 July 10
ADANI TO DEVELOP COAL EXPORT TERMINAL IN AUSTRALIA - BUSINESS STANDARD
Business-Standard reported that, The Adani Group, promoter of Mundra Port and Special Economic Zone (MPSEZ), today said it has been selected as the ...
Thursday, 15 July 10
NO IMPROVEMENT IN THE DRY BULK MARKET - INTERMODAL
Broker’s insight
With the Baltic Dry Index today (13/7/2010) standing at 1,790 points - the lowest point since early May 2009 - ...
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- Gujarat Sidhee Cement - India
- TeaM Sual Corporation - Philippines
- Agrawal Coal Company - India
- Timah Investasi Mineral - Indoneisa
- Latin American Coal - Colombia
- Simpson Spence & Young - Indonesia
- Toyota Tsusho Corporation, Japan
- Madhucon Powers Ltd - India
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Essar Steel Hazira Ltd - India
- Carbofer General Trading SA - India
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- The University of Queensland
- Indian Energy Exchange, India
- Global Coal Blending Company Limited - Australia
- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- Electricity Authority, New Zealand
- Coalindo Energy - Indonesia
- Indika Energy - Indonesia
- Planning Commission, India
- Mjunction Services Limited - India
- Mercator Lines Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- ASAPP Information Group - India
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Neyveli Lignite Corporation Ltd, - India
- SN Aboitiz Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- Romanian Commodities Exchange
- CNBM International Corporation - China
- Goldman Sachs - Singapore
- Deloitte Consulting - India
- Sakthi Sugars Limited - India
- Meralco Power Generation, Philippines
- Wilmar Investment Holdings
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Eastern Coal Council - USA
- Bayan Resources Tbk. - Indonesia
- Lanco Infratech Ltd - India
- Savvy Resources Ltd - HongKong
- Formosa Plastics Group - Taiwan
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- PNOC Exploration Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sojitz Corporation - Japan
- Aboitiz Power Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- Siam City Cement - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Baramulti Group, Indonesia
- Binh Thuan Hamico - Vietnam
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Borneo Indobara - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
- Star Paper Mills Limited - India
- Interocean Group of Companies - India
- Billiton Holdings Pty Ltd - Australia
- Indonesian Coal Mining Association
- GAC Shipping (India) Pvt Ltd
- IHS Mccloskey Coal Group - USA
- Holcim Trading Pte Ltd - Singapore
- Standard Chartered Bank - UAE
- The State Trading Corporation of India Ltd
- Gujarat Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- AsiaOL BioFuels Corp., Philippines
- PowerSource Philippines DevCo
- Indian Oil Corporation Limited
- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- Bhatia International Limited - India
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Bulk Trading Sa - Switzerland
- Parry Sugars Refinery, India
- Manunggal Multi Energi - Indonesia
- Medco Energi Mining Internasional
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- IEA Clean Coal Centre - UK
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- Intertek Mineral Services - Indonesia
- Kideco Jaya Agung - Indonesia
- SMC Global Power, Philippines
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- Chamber of Mines of South Africa
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Ministry of Transport, Egypt
- Global Business Power Corporation, Philippines
- Malabar Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Aditya Birla Group - India
- Kaltim Prima Coal - Indonesia
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Straits Asia Resources Limited - Singapore
- Uttam Galva Steels Limited - India
- Central Java Power - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- ICICI Bank Limited - India
- PTC India Limited - India
- Videocon Industries ltd - India
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Vedanta Resources Plc - India
- Trasteel International SA, Italy
- Xindia Steels Limited - India
- Commonwealth Bank - Australia
- Asmin Koalindo Tuhup - Indonesia
- Coal and Oil Company - UAE
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
- Semirara Mining and Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Kobexindo Tractors - Indoneisa
- White Energy Company Limited
- Karaikal Port Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Pendopo Energi Batubara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- Bharathi Cement Corporation - India
- McConnell Dowell - Australia
- Jaiprakash Power Ventures ltd
- Mercuria Energy - Indonesia
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Kumho Petrochemical, South Korea
- MS Steel International - UAE
- International Coal Ventures Pvt Ltd - India
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- Energy Development Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Africa Commodities Group - South Africa
- Ceylon Electricity Board - Sri Lanka
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