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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, 01 December 23
COAL MINERS GROUP EXPECTS INDONESIA’S 2023 COAL OUTPUT TO SURPASS TARGET - REUTERS
The Indonesian Coal Mining Association (ICMA) expects the country’s 2023 coal output to surpass the official target of 695 million metric ton ...
Friday, 24 November 23
COAL IMPORTS TO INDIA IN OCTOBER 2023 REACHED HIGHEST LEVELS IN NEARLY A YEAR AND A HALF - VESSELSVALUE, VESON NAUTICAL
In October, coal imports to India reached 13.8 mt in October 2023, according to Oceanbolt, a Veson Nautical solution, the highest level since May 2 ...
Friday, 24 November 23
COAL SHIPMENTS TO ADVANCED ECONOMIES DOWN 17% SO FAR IN 2023 - BIMCO
In the first ten months of 2023, coal shipments to advanced economies fell by 17% y/y, as demand for electricity declined and the share of electric ...
Friday, 24 November 23
INTELLIGENT COAL MINES CONTRIBUTE TO IMPROVING SAFETY STANDARDS - CHINA DAILY
Mechanization, automation and intelligent upgrades have contributed to improved safety in coal mines, though the level of development of intelligen ...
Friday, 24 November 23
WHY AUSTRALIA'S COAL MINES ARE GETTING BIGGER - IEEFA
Australia’s largest coal mines are getting larger. Mines in New South Wales (NSW) are ramping up production following the state’s recov ...
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- Kideco Jaya Agung - Indonesia
- Africa Commodities Group - South Africa
- Global Green Power PLC Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Star Paper Mills Limited - India
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Kalimantan Lumbung Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Anglo American - United Kingdom
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Xindia Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Madhucon Powers Ltd - India
- Siam City Cement - Thailand
- Vizag Seaport Private Limited - India
- Ministry of Finance - Indonesia
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Bhushan Steel Limited - India
- PTC India Limited - India
- Edison Trading Spa - Italy
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Asmin Koalindo Tuhup - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- McConnell Dowell - Australia
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Australian Commodity Traders Exchange
- Orica Australia Pty. Ltd.
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- Dalmia Cement Bharat India
- Bukit Makmur.PT - Indonesia
- Tata Chemicals Ltd - India
- SMC Global Power, Philippines
- Port Waratah Coal Services - Australia
- Minerals Council of Australia
- IEA Clean Coal Centre - UK
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vijayanagar Sugar Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Coal and Oil Company - UAE
- GN Power Mariveles Coal Plant, Philippines
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- Orica Mining Services - Indonesia
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Kartika Selabumi Mining - Indonesia
- Makarim & Taira - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mintek Dendrill Indonesia
- Ceylon Electricity Board - Sri Lanka
- Parry Sugars Refinery, India
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
- Aboitiz Power Corporation - Philippines
- Thai Mozambique Logistica
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Gujarat Sidhee Cement - India
- OPG Power Generation Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Grasim Industreis Ltd - India
- Cement Manufacturers Association - India
- Sojitz Corporation - Japan
- Singapore Mercantile Exchange
- Standard Chartered Bank - UAE
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Indian Energy Exchange, India
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- Kapuas Tunggal Persada - Indonesia
- Rio Tinto Coal - Australia
- Energy Development Corp, Philippines
- Wood Mackenzie - Singapore
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- Sical Logistics Limited - India
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Petron Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Trasteel International SA, Italy
- LBH Netherlands Bv - Netherlands
- GAC Shipping (India) Pvt Ltd
- Electricity Authority, New Zealand
- VISA Power Limited - India
- ICICI Bank Limited - India
- Videocon Industries ltd - India
- Intertek Mineral Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Commonwealth Bank - Australia
- Bharathi Cement Corporation - India
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- The University of Queensland
- Marubeni Corporation - India
- Ministry of Mines - Canada
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Mjunction Services Limited - India
- Indo Tambangraya Megah - Indonesia
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- Chamber of Mines of South Africa
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Kobexindo Tractors - Indoneisa
- White Energy Company Limited
- Toyota Tsusho Corporation, Japan
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Economic Council, Georgia
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Eastern Energy - Thailand
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Salva Resources Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Thiess Contractors Indonesia
- Maheswari Brothers Coal Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Vedanta Resources Plc - India
- Gujarat Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Uttam Galva Steels Limited - India
- Planning Commission, India
- Alfred C Toepfer International GmbH - Germany
- Sakthi Sugars Limited - India
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Mercuria Energy - Indonesia
- GMR Energy Limited - India
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Meralco Power Generation, Philippines
- Altura Mining Limited, Indonesia
- Karaikal Port Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Power Finance Corporation Ltd., India
- Aditya Birla Group - India
- Meenaskhi Energy Private Limited - India
- Central Electricity Authority - India
- Bayan Resources Tbk. - Indonesia
- Kaltim Prima Coal - Indonesia
- Carbofer General Trading SA - India
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Latin American Coal - Colombia
- Central Java Power - Indonesia
- India Bulls Power Limited - India
- San Jose City I Power Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- TeaM Sual Corporation - Philippines
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