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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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Monday, 28 June 10
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Business Line reported that, First it was power producers moving to pick up stakes in coal mining projects to ensure the raw material supplies.
N ...
Monday, 28 June 10
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The BDI softened ...
Saturday, 26 June 10
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Business Week reported that, Mongolian lawmakers have approved plans for a rail line linking with Russia to help tap large coal deposits in the sout ...
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- India Bulls Power Limited - India
- Deloitte Consulting - India
- Star Paper Mills Limited - India
- Bhoruka Overseas - Indonesia
- Ministry of Finance - Indonesia
- White Energy Company Limited
- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
- Essar Steel Hazira Ltd - India
- AsiaOL BioFuels Corp., Philippines
- SMC Global Power, Philippines
- Coal and Oil Company - UAE
- Straits Asia Resources Limited - Singapore
- CNBM International Corporation - China
- Mjunction Services Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Bhushan Steel Limited - India
- Maheswari Brothers Coal Limited - India
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
- SMG Consultants - Indonesia
- Barasentosa Lestari - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- Bayan Resources Tbk. - Indonesia
- Riau Bara Harum - Indonesia
- Billiton Holdings Pty Ltd - Australia
- PowerSource Philippines DevCo
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Samtan Co., Ltd - South Korea
- PTC India Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- South Luzon Thermal Energy Corporation
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- GN Power Mariveles Coal Plant, Philippines
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Videocon Industries ltd - India
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- Romanian Commodities Exchange
- Ind-Barath Power Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- MS Steel International - UAE
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Port Waratah Coal Services - Australia
- Wood Mackenzie - Singapore
- Wilmar Investment Holdings
- Indonesian Coal Mining Association
- Grasim Industreis Ltd - India
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- Metalloyd Limited - United Kingdom
- Agrawal Coal Company - India
- Manunggal Multi Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- ICICI Bank Limited - India
- Chettinad Cement Corporation Ltd - India
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Makarim & Taira - Indonesia
- Jaiprakash Power Ventures ltd
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Jindal Steel & Power Ltd - India
- Global Business Power Corporation, Philippines
- Singapore Mercantile Exchange
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Indian Energy Exchange, India
- Tata Chemicals Ltd - India
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- Siam City Cement PLC, Thailand
- OPG Power Generation Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- Kideco Jaya Agung - Indonesia
- Renaissance Capital - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Attock Cement Pakistan Limited
- McConnell Dowell - Australia
- Meralco Power Generation, Philippines
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- Cement Manufacturers Association - India
- Vijayanagar Sugar Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Leighton Contractors Pty Ltd - Australia
- Georgia Ports Authority, United States
- Vedanta Resources Plc - India
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Bukit Makmur.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Alfred C Toepfer International GmbH - Germany
- The State Trading Corporation of India Ltd
- Gujarat Electricity Regulatory Commission - India
- Salva Resources Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kaltim Prima Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Gujarat Sidhee Cement - India
- Thiess Contractors Indonesia
- Kumho Petrochemical, South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Binh Thuan Hamico - Vietnam
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Standard Chartered Bank - UAE
- Cigading International Bulk Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Mercuria Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Central Java Power - Indonesia
- Australian Coal Association
- Minerals Council of Australia
- Jorong Barutama Greston.PT - Indonesia
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Goldman Sachs - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- Sojitz Corporation - Japan
- Sindya Power Generating Company Private Ltd
- Trasteel International SA, Italy
- Interocean Group of Companies - India
- Maharashtra Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- Aditya Birla Group - India
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Indogreen Group - Indonesia
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- Global Green Power PLC Corporation, Philippines
- Anglo American - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Parliament of New Zealand
- LBH Netherlands Bv - Netherlands
- Heidelberg Cement - Germany
- Edison Trading Spa - Italy
- Lanco Infratech Ltd - India
- Parry Sugars Refinery, India
- Larsen & Toubro Limited - India
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- The Treasury - Australian Government
- European Bulk Services B.V. - Netherlands
- Marubeni Corporation - India
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Iligan Light & Power Inc, Philippines
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Globalindo Alam Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Ambuja Cements Ltd - India
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
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