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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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Tuesday, 06 July 10
SHENHUA GROUPS 2013 PROFIT MAY EXCEED $15 BILLION - BUSINESS WEEK
Business Week reported that, Shenhua Group Corp., China’s biggest coal producer, expects profit to exceed 100 billion yuan ($15 billion) by 20 ...
Saturday, 03 July 10
THE FREIGHT MARKET CONTINUES TO BE UNCERTAIN - CAPT. REDDY
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Friday, 02 July 10
SARDA ENERGY TO ACQUIRE COAL MINES IN INDONESIA
India Info Line reported that, Sarda Energy & Minerals Ltd has announced that the authorities in Indonesia have granted the Environment Cle ...
Friday, 02 July 10
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Friday, 02 July 10
PROPOSED MINERAL RESOURCE RENT TAX - PRESS RELEASE (2)
Press Release: BHP Billiton, Rio Tinto and Xstrata said today that they are encouraged by the Federal Government’s announcement that it propos ...
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- Gujarat Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- Semirara Mining Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Jaiprakash Power Ventures ltd
- Central Electricity Authority - India
- Electricity Generating Authority of Thailand
- Jindal Steel & Power Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Ambuja Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Siam City Cement PLC, Thailand
- Simpson Spence & Young - Indonesia
- Larsen & Toubro Limited - India
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Merrill Lynch Commodities Europe
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Coalindo Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Sree Jayajothi Cements Limited - India
- Antam Resourcindo - Indonesia
- Baramulti Group, Indonesia
- Ministry of Finance - Indonesia
- Petron Corporation, Philippines
- Lanco Infratech Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Port Waratah Coal Services - Australia
- GMR Energy Limited - India
- Coastal Gujarat Power Limited - India
- Bhushan Steel Limited - India
- Barasentosa Lestari - Indonesia
- Minerals Council of Australia
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Manunggal Multi Energi - Indonesia
- Thiess Contractors Indonesia
- The University of Queensland
- Directorate Of Revenue Intelligence - India
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Billiton Holdings Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Australian Commodity Traders Exchange
- Georgia Ports Authority, United States
- GAC Shipping (India) Pvt Ltd
- SMG Consultants - Indonesia
- PTC India Limited - India
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Coal and Oil Company - UAE
- Bangladesh Power Developement Board
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Salva Resources Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Meralco Power Generation, Philippines
- Medco Energi Mining Internasional
- Bukit Asam (Persero) Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- Leighton Contractors Pty Ltd - Australia
- Star Paper Mills Limited - India
- Attock Cement Pakistan Limited
- Australian Coal Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Planning Commission, India
- Deloitte Consulting - India
- Kapuas Tunggal Persada - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- Timah Investasi Mineral - Indoneisa
- CNBM International Corporation - China
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Holcim Trading Pte Ltd - Singapore
- Energy Link Ltd, New Zealand
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Romanian Commodities Exchange
- MS Steel International - UAE
- South Luzon Thermal Energy Corporation
- Videocon Industries ltd - India
- The State Trading Corporation of India Ltd
- Bukit Baiduri Energy - Indonesia
- Tata Chemicals Ltd - India
- Altura Mining Limited, Indonesia
- Ministry of Mines - Canada
- Orica Australia Pty. Ltd.
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Ceylon Electricity Board - Sri Lanka
- Wood Mackenzie - Singapore
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tamil Nadu electricity Board
- Miang Besar Coal Terminal - Indonesia
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Maheswari Brothers Coal Limited - India
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Siam City Cement - Thailand
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- IHS Mccloskey Coal Group - USA
- Central Java Power - Indonesia
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- Kohat Cement Company Ltd. - Pakistan
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Borneo Indobara - Indonesia
- Cement Manufacturers Association - India
- Interocean Group of Companies - India
- Mintek Dendrill Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Transport, Egypt
- Indian Energy Exchange, India
- Uttam Galva Steels Limited - India
- Anglo American - United Kingdom
- New Zealand Coal & Carbon
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Meenaskhi Energy Private Limited - India
- PNOC Exploration Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Metalloyd Limited - United Kingdom
- PowerSource Philippines DevCo
- Goldman Sachs - Singapore
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Chamber of Mines of South Africa
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- Sical Logistics Limited - India
- Globalindo Alam Lestari - Indonesia
- Sarangani Energy Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Makarim & Taira - Indonesia
- Bayan Resources Tbk. - Indonesia
- Gujarat Sidhee Cement - India
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Essar Steel Hazira Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Independent Power Producers Association of India
- Vizag Seaport Private Limited - India
- Orica Mining Services - Indonesia
- Commonwealth Bank - Australia
- Aboitiz Power Corporation - Philippines
- Savvy Resources Ltd - HongKong
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- VISA Power Limited - India
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Mjunction Services Limited - India
- Rio Tinto Coal - Australia
- Renaissance Capital - South Africa
- The Treasury - Australian Government
- Eastern Energy - Thailand
- International Coal Ventures Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Parry Sugars Refinery, India
- Aditya Birla Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercator Lines Limited - India
- Africa Commodities Group - South Africa
- Kepco SPC Power Corporation, Philippines
- Wilmar Investment Holdings
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
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