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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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Friday, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
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 ...
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Showing 61 to 65 news of total 6871 |
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- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Sindya Power Generating Company Private Ltd
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- Thai Mozambique Logistica
- Globalindo Alam Lestari - Indonesia
- Ministry of Finance - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Bharathi Cement Corporation - India
- Chamber of Mines of South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- European Bulk Services B.V. - Netherlands
- Anglo American - United Kingdom
- Standard Chartered Bank - UAE
- Videocon Industries ltd - India
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Attock Cement Pakistan Limited
- India Bulls Power Limited - India
- Salva Resources Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- Indo Tambangraya Megah - Indonesia
- Barasentosa Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- Meralco Power Generation, Philippines
- South Luzon Thermal Energy Corporation
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Madhucon Powers Ltd - India
- VISA Power Limited - India
- Xindia Steels Limited - India
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- Bhatia International Limited - India
- Tata Chemicals Ltd - India
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- Dalmia Cement Bharat India
- PTC India Limited - India
- The Treasury - Australian Government
- Aditya Birla Group - India
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Parry Sugars Refinery, India
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Straits Asia Resources Limited - Singapore
- Indika Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- Trasteel International SA, Italy
- Uttam Galva Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Star Paper Mills Limited - India
- Global Coal Blending Company Limited - Australia
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Kideco Jaya Agung - Indonesia
- Savvy Resources Ltd - HongKong
- Leighton Contractors Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- London Commodity Brokers - England
- Deloitte Consulting - India
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Sojitz Corporation - Japan
- Altura Mining Limited, Indonesia
- Eastern Coal Council - USA
- Indian Oil Corporation Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Kapuas Tunggal Persada - Indonesia
- Australian Coal Association
- Karaikal Port Pvt Ltd - India
- Petron Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Jindal Steel & Power Ltd - India
- Planning Commission, India
- Indian Energy Exchange, India
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Maharashtra Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- Siam City Cement - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- White Energy Company Limited
- Singapore Mercantile Exchange
- Chettinad Cement Corporation Ltd - India
- Heidelberg Cement - Germany
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- The University of Queensland
- New Zealand Coal & Carbon
- Bukit Baiduri Energy - Indonesia
- Tamil Nadu electricity Board
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- PetroVietnam Power Coal Import and Supply Company
- Simpson Spence & Young - Indonesia
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Independent Power Producers Association of India
- SMG Consultants - Indonesia
- Energy Development Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- Ministry of Mines - Canada
- Bukit Makmur.PT - Indonesia
- Indogreen Group - Indonesia
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Central Java Power - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mercuria Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Edison Trading Spa - Italy
- Parliament of New Zealand
- International Coal Ventures Pvt Ltd - India
- Romanian Commodities Exchange
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Coastal Gujarat Power Limited - India
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- Renaissance Capital - South Africa
- Goldman Sachs - Singapore
- Energy Link Ltd, New Zealand
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- PowerSource Philippines DevCo
- Maheswari Brothers Coal Limited - India
- Global Business Power Corporation, Philippines
- Vedanta Resources Plc - India
- Mercator Lines Limited - India
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Semirara Mining Corp, Philippines
- Agrawal Coal Company - India
- Sical Logistics Limited - India
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Malabar Cements Ltd - India
- McConnell Dowell - Australia
- The State Trading Corporation of India Ltd
- Economic Council, Georgia
- Metalloyd Limited - United Kingdom
- CNBM International Corporation - China
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Wilmar Investment Holdings
- Ministry of Transport, Egypt
- Interocean Group of Companies - India
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Larsen & Toubro Limited - India
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Rashtriya Ispat Nigam Limited - India
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
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