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