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