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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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Wednesday, 22 November 23
INDIA: GOVERNMENT PLANS 1.4 BILLION TONNE COAL OUTPUT BY 2027 - LIVEMINT
The Union coal ministry on Monday announced plans to increase India’s coal production to 1.404 billion tonne by 2027, with an eye to further ...
Wednesday, 22 November 23
OBLIGATION. INDONESIA AIMS TO START COLLECTING LEVIES FROM COAL MINERS IN JANUARY - REUTERS
Indonesia plans to start collecting levies from coal miners in January to be used to compensate miners who sell coal to the state utility at lower ...
Tuesday, 21 November 23
INDIAN COAL POWER PLANTS’ CAPACITY UTILISATION WILL IMPROVE TO 65% THIS FISCAL: - CRISIL
Coal-based thermal power units’ plant load factor (PLF) or capacity utilisation will improve to 65 percent in the current fiscal year despite ...
Tuesday, 14 November 23
CAPITAL PRODUCT PARTNERS L.P. ANNOUNCES TRANSFORMATIVE TRANSACTION INCLUDING THE ACQUISITION OF 11 NEWBUILD LNG CARRIERS FOR $3.1 BILLION
Capital Product Partners L.P. announced that it has entered into an umbrella agreement (the “Umbrella Agreement”) with Capital Maritime ...
Tuesday, 14 November 23
COAL INDIA BEATS Q2 PROFIT VIEW ON HIGH POWER DEMAND AMID WEAK MONSOON - REUTERS
Coal India on Friday reported better-than-expected second-quarter profit, helped by high power demand and boosted production amid a weak monsoon.
...
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- Parry Sugars Refinery, India
- Indonesian Coal Mining Association
- Cigading International Bulk Terminal - Indonesia
- South Luzon Thermal Energy Corporation
- Power Finance Corporation Ltd., India
- PetroVietnam Power Coal Import and Supply Company
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- Africa Commodities Group - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Chamber of Mines of South Africa
- McConnell Dowell - Australia
- Aditya Birla Group - India
- Semirara Mining and Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Indian Oil Corporation Limited
- Ministry of Finance - Indonesia
- Ministry of Mines - Canada
- White Energy Company Limited
- Global Green Power PLC Corporation, Philippines
- CNBM International Corporation - China
- Alfred C Toepfer International GmbH - Germany
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- Videocon Industries ltd - India
- Lanco Infratech Ltd - India
- Electricity Generating Authority of Thailand
- Thai Mozambique Logistica
- Pendopo Energi Batubara - Indonesia
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- VISA Power Limited - India
- ASAPP Information Group - India
- Kaltim Prima Coal - Indonesia
- Indian Energy Exchange, India
- Commonwealth Bank - Australia
- Kideco Jaya Agung - Indonesia
- Sree Jayajothi Cements Limited - India
- Global Business Power Corporation, Philippines
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- MS Steel International - UAE
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Goldman Sachs - Singapore
- Leighton Contractors Pty Ltd - Australia
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- Kartika Selabumi Mining - Indonesia
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Vijayanagar Sugar Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Antam Resourcindo - Indonesia
- CIMB Investment Bank - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Formosa Plastics Group - Taiwan
- Mintek Dendrill Indonesia
- Deloitte Consulting - India
- Manunggal Multi Energi - Indonesia
- Barasentosa Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Central Electricity Authority - India
- Uttam Galva Steels Limited - India
- London Commodity Brokers - England
- Electricity Authority, New Zealand
- Coalindo Energy - Indonesia
- Anglo American - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Renaissance Capital - South Africa
- Eastern Energy - Thailand
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Ambuja Cements Ltd - India
- Vizag Seaport Private Limited - India
- Bharathi Cement Corporation - India
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Timah Investasi Mineral - Indoneisa
- Latin American Coal - Colombia
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- Georgia Ports Authority, United States
- Grasim Industreis Ltd - India
- Kapuas Tunggal Persada - Indonesia
- PTC India Limited - India
- Independent Power Producers Association of India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- Heidelberg Cement - Germany
- Rio Tinto Coal - Australia
- Ceylon Electricity Board - Sri Lanka
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- Australian Commodity Traders Exchange
- GMR Energy Limited - India
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Thiess Contractors Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Ministry of Transport, Egypt
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- Gujarat Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Sical Logistics Limited - India
- Bangladesh Power Developement Board
- Central Java Power - Indonesia
- Semirara Mining Corp, Philippines
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- Ind-Barath Power Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Tata Chemicals Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Port Waratah Coal Services - Australia
- Riau Bara Harum - Indonesia
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- SN Aboitiz Power Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Coal and Oil Company - UAE
- Trasteel International SA, Italy
- Malabar Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Attock Cement Pakistan Limited
- Posco Energy - South Korea
- GVK Power & Infra Limited - India
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Sakthi Sugars Limited - India
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- Siam City Cement PLC, Thailand
- Marubeni Corporation - India
- Minerals Council of Australia
- Vedanta Resources Plc - India
- Mercuria Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Coastal Gujarat Power Limited - India
- Larsen & Toubro Limited - India
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Economic Council, Georgia
- OPG Power Generation Pvt Ltd - India
- Wood Mackenzie - Singapore
- The University of Queensland
- Dalmia Cement Bharat India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- Petron Corporation, Philippines
- TeaM Sual Corporation - Philippines
- LBH Netherlands Bv - Netherlands
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