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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, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- Indian Oil Corporation Limited
- Aditya Birla Group - India
- Renaissance Capital - South Africa
- Straits Asia Resources Limited - Singapore
- IEA Clean Coal Centre - UK
- Banpu Public Company Limited - Thailand
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- Coalindo Energy - Indonesia
- Mintek Dendrill Indonesia
- Holcim Trading Pte Ltd - Singapore
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Borneo Indobara - Indonesia
- Indian Energy Exchange, India
- Madhucon Powers Ltd - India
- Central Electricity Authority - India
- SMC Global Power, Philippines
- Cigading International Bulk Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- Power Finance Corporation Ltd., India
- Timah Investasi Mineral - Indoneisa
- Orica Mining Services - Indonesia
- Makarim & Taira - Indonesia
- Siam City Cement - Thailand
- Jindal Steel & Power Ltd - India
- Oldendorff Carriers - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- International Coal Ventures Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Aboitiz Power Corporation - Philippines
- Thai Mozambique Logistica
- GMR Energy Limited - India
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- Sojitz Corporation - Japan
- Kohat Cement Company Ltd. - Pakistan
- Maharashtra Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Interocean Group of Companies - India
- Bhushan Steel Limited - India
- Africa Commodities Group - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Agrawal Coal Company - India
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- Leighton Contractors Pty Ltd - Australia
- CNBM International Corporation - China
- Mjunction Services Limited - India
- Riau Bara Harum - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Energy - Thailand
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- PTC India Limited - India
- Orica Australia Pty. Ltd.
- New Zealand Coal & Carbon
- Indonesian Coal Mining Association
- Economic Council, Georgia
- Energy Development Corp, Philippines
- Ministry of Mines - Canada
- Uttam Galva Steels Limited - India
- Petron Corporation, Philippines
- Latin American Coal - Colombia
- Gujarat Sidhee Cement - India
- Jorong Barutama Greston.PT - Indonesia
- San Jose City I Power Corp, Philippines
- Meralco Power Generation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Sakthi Sugars Limited - India
- Global Business Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- South Luzon Thermal Energy Corporation
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- PNOC Exploration Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Bayan Resources Tbk. - Indonesia
- Coal and Oil Company - UAE
- Essar Steel Hazira Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Wilmar Investment Holdings
- VISA Power Limited - India
- McConnell Dowell - Australia
- The University of Queensland
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Indika Energy - Indonesia
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Salva Resources Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bhoruka Overseas - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Kartika Selabumi Mining - Indonesia
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Global Coal Blending Company Limited - Australia
- Price Waterhouse Coopers - Russia
- Lanco Infratech Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercuria Energy - Indonesia
- Australian Commodity Traders Exchange
- Ministry of Transport, Egypt
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Energy Link Ltd, New Zealand
- Bukit Baiduri Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Therma Luzon, Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Grasim Industreis Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Karaikal Port Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Siam City Cement PLC, Thailand
- SMG Consultants - Indonesia
- Globalindo Alam Lestari - Indonesia
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Bangladesh Power Developement Board
- Coastal Gujarat Power Limited - India
- ICICI Bank Limited - India
- Edison Trading Spa - Italy
- Global Green Power PLC Corporation, Philippines
- Bhatia International Limited - India
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- Deloitte Consulting - India
- Eastern Coal Council - USA
- Vedanta Resources Plc - India
- Antam Resourcindo - Indonesia
- Semirara Mining Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Planning Commission, India
- SN Aboitiz Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Medco Energi Mining Internasional
- PowerSource Philippines DevCo
- The Treasury - Australian Government
- TeaM Sual Corporation - Philippines
- Minerals Council of Australia
- PetroVietnam Power Coal Import and Supply Company
- Electricity Authority, New Zealand
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- European Bulk Services B.V. - Netherlands
- Tamil Nadu electricity Board
- Larsen & Toubro Limited - India
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