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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.
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Friday, 02 July 10
MINERALS RESOURCE TAXATION IN AUSTRALIA - PRESS RELEASE
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Thursday, 01 July 10
TATA POWER TO RAISE US$300 MILLION THROUGH ITS COAL SPVS TO FUND ADDITIONAL ACQUISITIONS AND / OR REDUCE OUTSTANDING DEBT
Stock Markets Review reported that, Tata Power, India’s largest private power player has signed an agreement to raise US$300 million in Bhira ...
Thursday, 01 July 10
HELLENIC SHIPPING NEWS POLL: THE BDI WILL STAY ABOVE 3,000 POINTS IN THE SECOND HALF OF 2010
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Thursday, 01 July 10
PANAMAX MARKETS CONTINUE TO DROP IN ALL BASINS - FEARNLEYS
Handy
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Wednesday, 30 June 10
PTBA TO SUPPLY ADDITIONAL 180 MLN TONS OF COAL TO PLN FOR 20 YEARS
COALspot.com: Indonesia's state-owned coal mining company PT Tambang Batubara Bukit Asam Tbk (PTBA) has entered into a new contract with state owne ...
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- Leighton Contractors Pty Ltd - Australia
- Siam City Cement - Thailand
- Aboitiz Power Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Heidelberg Cement - Germany
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- Ministry of Finance - Indonesia
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- PTC India Limited - India
- Goldman Sachs - Singapore
- Cigading International Bulk Terminal - Indonesia
- Electricity Generating Authority of Thailand
- White Energy Company Limited
- Baramulti Group, Indonesia
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Central Electricity Authority - India
- IHS Mccloskey Coal Group - USA
- Sakthi Sugars Limited - India
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Parliament of New Zealand
- Tata Chemicals Ltd - India
- Rio Tinto Coal - Australia
- Price Waterhouse Coopers - Russia
- Agrawal Coal Company - India
- ICICI Bank Limited - India
- Orica Australia Pty. Ltd.
- Banpu Public Company Limited - Thailand
- Indika Energy - Indonesia
- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- Sarangani Energy Corporation, Philippines
- San Jose City I Power Corp, Philippines
- The University of Queensland
- Mercator Lines Limited - India
- Essar Steel Hazira Ltd - India
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- New Zealand Coal & Carbon
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- Wilmar Investment Holdings
- Planning Commission, India
- Indian Energy Exchange, India
- Aditya Birla Group - India
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- Indogreen Group - Indonesia
- Malabar Cements Ltd - India
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
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- Lanco Infratech Ltd - India
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhushan Steel Limited - India
- Global Green Power PLC Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Economic Council, Georgia
- Globalindo Alam Lestari - Indonesia
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- Eastern Energy - Thailand
- CIMB Investment Bank - Malaysia
- Samtan Co., Ltd - South Korea
- Chettinad Cement Corporation Ltd - India
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- GVK Power & Infra Limited - India
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Australian Coal Association
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Timah Investasi Mineral - Indoneisa
- Merrill Lynch Commodities Europe
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Ind-Barath Power Infra Limited - India
- ASAPP Information Group - India
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Pendopo Energi Batubara - Indonesia
- Mintek Dendrill Indonesia
- Tamil Nadu electricity Board
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- Latin American Coal - Colombia
- Interocean Group of Companies - India
- Formosa Plastics Group - Taiwan
- Savvy Resources Ltd - HongKong
- Manunggal Multi Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- McConnell Dowell - Australia
- Semirara Mining Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Miang Besar Coal Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Altura Mining Limited, Indonesia
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- PetroVietnam Power Coal Import and Supply Company
- Eastern Coal Council - USA
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Thai Mozambique Logistica
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- SMC Global Power, Philippines
- AsiaOL BioFuels Corp., Philippines
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- Georgia Ports Authority, United States
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement PLC, Thailand
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- India Bulls Power Limited - India
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- GMR Energy Limited - India
- South Luzon Thermal Energy Corporation
- Sojitz Corporation - Japan
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Billiton Holdings Pty Ltd - Australia
- Commonwealth Bank - Australia
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- MS Steel International - UAE
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Metalloyd Limited - United Kingdom
- Deloitte Consulting - India
- Toyota Tsusho Corporation, Japan
- Therma Luzon, Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Carbofer General Trading SA - India
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- European Bulk Services B.V. - Netherlands
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- Marubeni Corporation - India
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