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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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Sunday, 11 July 10
OVERALL NO OR NEGLIGIBLE IMPACT IN ARUTMIN MINE - BUMI
COALspot.com: Bumi denies the media reports on an impact of unusually rains on coal production in BUMI mines.
"Arutmin is being impacted by ...
Saturday, 10 July 10
FREIGHT MARKET SITUATION MAY CONTINUE FOR NEXT COUPLE OF WEEKS - VISTAAR
COALspot.com: The market continued to soften further with the cape and panamax index down by about 20 pct and closed at 2,102 and 1,944 points respe ...
Saturday, 10 July 10
STC OF INDIA TO ASSOCIATE WITH FUEL SUPPLIERS
COALspot.com: State Trading corporation of India, which is under Ministry of Commerce, has invited Expression of Interest from coal suppliers ...
Saturday, 10 July 10
SCOMI TO SELL STAKE IN INDONESIA OPS - THE STAR
The star online reported that, Scomi Marine Bhd will sell a stake in its marine logistics business in Indonesia to a large Indonesian company to dea ...
Thursday, 08 July 10
KPCL RECEIVES 8 QUALIFIED BIDS TO SUPPLY 500,000 MT OF COAL
COALspot.com: Indian state utility KARNATAKA POWER CORPORATION LIMITED has opened price bid yesterday.
According to a participant, the quo ...
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- Oldendorff Carriers - Singapore
- Coastal Gujarat Power Limited - India
- The State Trading Corporation of India Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Electricity Authority - India
- Australian Coal Association
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Coal and Oil Company - UAE
- Anglo American - United Kingdom
- PTC India Limited - India
- Trasteel International SA, Italy
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Singapore Mercantile Exchange
- Simpson Spence & Young - Indonesia
- Coalindo Energy - Indonesia
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- Jindal Steel & Power Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- Romanian Commodities Exchange
- Savvy Resources Ltd - HongKong
- IEA Clean Coal Centre - UK
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
- Miang Besar Coal Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- India Bulls Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Indika Energy - Indonesia
- Baramulti Group, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- Straits Asia Resources Limited - Singapore
- Binh Thuan Hamico - Vietnam
- Kepco SPC Power Corporation, Philippines
- CNBM International Corporation - China
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- Kaltim Prima Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Bhatia International Limited - India
- Kumho Petrochemical, South Korea
- Sindya Power Generating Company Private Ltd
- Bayan Resources Tbk. - Indonesia
- Ministry of Mines - Canada
- Madhucon Powers Ltd - India
- Uttam Galva Steels Limited - India
- Semirara Mining and Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- VISA Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- Africa Commodities Group - South Africa
- Economic Council, Georgia
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Energy Development Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- SMG Consultants - Indonesia
- New Zealand Coal & Carbon
- Aditya Birla Group - India
- Alfred C Toepfer International GmbH - Germany
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Wilmar Investment Holdings
- Samtan Co., Ltd - South Korea
- Ministry of Transport, Egypt
- OPG Power Generation Pvt Ltd - India
- Chamber of Mines of South Africa
- ASAPP Information Group - India
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- Indian Oil Corporation Limited
- Indian Energy Exchange, India
- Power Finance Corporation Ltd., India
- Tamil Nadu electricity Board
- Vedanta Resources Plc - India
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Interocean Group of Companies - India
- Independent Power Producers Association of India
- Salva Resources Pvt Ltd - India
- White Energy Company Limited
- Videocon Industries ltd - India
- SN Aboitiz Power Inc, Philippines
- Thai Mozambique Logistica
- Globalindo Alam Lestari - Indonesia
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Parry Sugars Refinery, India
- Georgia Ports Authority, United States
- Metalloyd Limited - United Kingdom
- Grasim Industreis Ltd - India
- London Commodity Brokers - England
- Parliament of New Zealand
- Sical Logistics Limited - India
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- San Jose City I Power Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Renaissance Capital - South Africa
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- Krishnapatnam Port Company Ltd. - India
- Pendopo Energi Batubara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- GVK Power & Infra Limited - India
- SMC Global Power, Philippines
- Planning Commission, India
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Maheswari Brothers Coal Limited - India
- Sojitz Corporation - Japan
- Karbindo Abesyapradhi - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Port Waratah Coal Services - Australia
- GMR Energy Limited - India
- LBH Netherlands Bv - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- South Luzon Thermal Energy Corporation
- Banpu Public Company Limited - Thailand
- McConnell Dowell - Australia
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Medco Energi Mining Internasional
- Xindia Steels Limited - India
- Merrill Lynch Commodities Europe
- Australian Commodity Traders Exchange
- Iligan Light & Power Inc, Philippines
- Energy Link Ltd, New Zealand
- GAC Shipping (India) Pvt Ltd
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- Minerals Council of Australia
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Petron Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- The University of Queensland
- Jorong Barutama Greston.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- Meralco Power Generation, Philippines
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Bangladesh Power Developement Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- MS Steel International - UAE
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