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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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Wednesday, 23 June 10
WILHELMSEN SHIPS SERVICE OPENS NEW OFFICE IN KRISHNAPATNAM PORT INDIA
Wilhelmsen Ships Service has opened a branch office in Krishnapatnam port on the east coast of India according to statement released by company ...
Wednesday, 23 June 10
PTC'S INDONESIAN COAL-MINING FORAY-I: TO INVEST USD 69 MILLION VIA OVERSEAS SPV
Moving ahead with its plans to acquire coal assets abroad, the power trading major, PTC India Limited, has decided to invest a total of USD 69 milli ...
Tuesday, 22 June 10
INDIA HAS REPORTED MORE COAL IMPORTS FROM COLOMBIA
A second consecutive week of sharp corrections for the dry bulk market, although some of the softness could be attributed to Chinese holidays at the ...
Monday, 21 June 10
THE SUPRAMAX INDEX IN THE FAR-EAST (S6 ROUTE) WAS DOWN BY $ 1300 PER DAY - VISTAAR
COALspot.com: The market continued to soften in all sectors last week also with the BDI dropping by 18.07 pct and Cape index by 26.71 pct.
The BD ...
Sunday, 20 June 10
OUR COAL: ITS DEVELOPMENT AND CONTROVERSIAL ISSUES
Indonesia’s production of coal has been growing amazingly. In the mid 1980s, national coal production was less than 1 million tons per annum, ...
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- Jaiprakash Power Ventures ltd
- Bayan Resources Tbk. - Indonesia
- Xindia Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indonesian Coal Mining Association
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Maheswari Brothers Coal Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- PowerSource Philippines DevCo
- Orica Australia Pty. Ltd.
- Global Green Power PLC Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Mercator Lines Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Central Electricity Authority - India
- Port Waratah Coal Services - Australia
- Vijayanagar Sugar Pvt Ltd - India
- PTC India Limited - India
- Coal and Oil Company - UAE
- MS Steel International - UAE
- Agrawal Coal Company - India
- Minerals Council of Australia
- Petron Corporation, Philippines
- Borneo Indobara - Indonesia
- Videocon Industries ltd - India
- Rio Tinto Coal - Australia
- Kepco SPC Power Corporation, Philippines
- Standard Chartered Bank - UAE
- Power Finance Corporation Ltd., India
- Planning Commission, India
- Neyveli Lignite Corporation Ltd, - India
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Toyota Tsusho Corporation, Japan
- Indo Tambangraya Megah - Indonesia
- London Commodity Brokers - England
- Malabar Cements Ltd - India
- Marubeni Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
- Madhucon Powers Ltd - India
- White Energy Company Limited
- India Bulls Power Limited - India
- Indian Energy Exchange, India
- Gujarat Mineral Development Corp Ltd - India
- GVK Power & Infra Limited - India
- Directorate Of Revenue Intelligence - India
- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Kumho Petrochemical, South Korea
- Rashtriya Ispat Nigam Limited - India
- Metalloyd Limited - United Kingdom
- Kaltim Prima Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Mercuria Energy - Indonesia
- Tamil Nadu electricity Board
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Kobexindo Tractors - Indoneisa
- Baramulti Group, Indonesia
- Essar Steel Hazira Ltd - India
- Independent Power Producers Association of India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mintek Dendrill Indonesia
- Sinarmas Energy and Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Electricity Authority, New Zealand
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Posco Energy - South Korea
- Straits Asia Resources Limited - Singapore
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Kartika Selabumi Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Siam City Cement - Thailand
- Latin American Coal - Colombia
- Simpson Spence & Young - Indonesia
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Global Business Power Corporation, Philippines
- Ministry of Transport, Egypt
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Interocean Group of Companies - India
- GMR Energy Limited - India
- Vizag Seaport Private Limited - India
- Bhoruka Overseas - Indonesia
- Ambuja Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- The University of Queensland
- IEA Clean Coal Centre - UK
- Bhatia International Limited - India
- Kapuas Tunggal Persada - Indonesia
- Formosa Plastics Group - Taiwan
- New Zealand Coal & Carbon
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Therma Luzon, Inc, Philippines
- Singapore Mercantile Exchange
- Bukit Baiduri Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parry Sugars Refinery, India
- Eastern Energy - Thailand
- Economic Council, Georgia
- Sakthi Sugars Limited - India
- Australian Coal Association
- Grasim Industreis Ltd - India
- Star Paper Mills Limited - India
- International Coal Ventures Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Indian Oil Corporation Limited
- Sarangani Energy Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- ASAPP Information Group - India
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- ICICI Bank Limited - India
- Bangladesh Power Developement Board
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- Savvy Resources Ltd - HongKong
- Africa Commodities Group - South Africa
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Romanian Commodities Exchange
- SMC Global Power, Philippines
- Attock Cement Pakistan Limited
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Wood Mackenzie - Singapore
- LBH Netherlands Bv - Netherlands
- Parliament of New Zealand
- Aditya Birla Group - India
- Sical Logistics Limited - India
- OPG Power Generation Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- Ministry of Finance - Indonesia
- Riau Bara Harum - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Energy Link Ltd, New Zealand
- Chettinad Cement Corporation Ltd - India
- Karaikal Port Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Bulk Trading Sa - Switzerland
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indika Energy - Indonesia
- Oldendorff Carriers - Singapore
- Ind-Barath Power Infra Limited - India
- Renaissance Capital - South Africa
- Bukit Makmur.PT - Indonesia
- Vedanta Resources Plc - India
- CNBM International Corporation - China
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Meralco Power Generation, Philippines
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- Bhushan Steel Limited - India
- Samtan Co., Ltd - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- Mjunction Services Limited - India
- VISA Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
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