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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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Tuesday, 14 November 23
CHINA'S BELT AND ROAD INITIATIVE TURNS AWAY FROM COAL - WOOD MACKENZIE
Ambitious, contentious and big spending, China’s Belt and Road Initiative (BRI) is 10 years old. In that time, China has splashed more than U ...
Friday, 10 November 23
THE COMMODITIES FEED: OIL UNDER PRESSURE - ING
Energy – Brent plummets
The oil market came under significant pressure yesterday. ICE Brent settled 4.19% lower on the day and ...
Friday, 10 November 23
COAL USE AT U.S. POWER PLANTS CONTINUES DOWNWARD SPIRAL; FULL IMPACT ON MINES TO BE FELT IN 2024 - IEEFA
This year, the use of coal by the U.S.’s power producers has been so anemic that the fuel has not achieved a 20% market share in any month so ...
Friday, 10 November 23
INDIA: NATIONAL COAL INDEX RISES 3.83 POINTS IN SEPTEMBER AMID HIGHER DEMAND - LIVEMINT
The National Coal Index (NCI) rose 3.83 points to 143.91 in September amid growing demand for coal.
The union coal ministry on Tuesd ...
Thursday, 09 November 23
WE'RE PRODUCING TOO MUCH COAL, OIL AND GAS, REPORT SAYS - WSJ
World leaders pledged in 2015 to reduce emissions in a combined effort to limit climate change.
Now they are stepping up production ...
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- Holcim Trading Pte Ltd - Singapore
- Orica Australia Pty. Ltd.
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Romanian Commodities Exchange
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Wilmar Investment Holdings
- Latin American Coal - Colombia
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Vedanta Resources Plc - India
- AsiaOL BioFuels Corp., Philippines
- PowerSource Philippines DevCo
- Riau Bara Harum - Indonesia
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- Semirara Mining and Power Corporation, Philippines
- McConnell Dowell - Australia
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- Savvy Resources Ltd - HongKong
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Neyveli Lignite Corporation Ltd, - India
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Bayan Resources Tbk. - Indonesia
- The State Trading Corporation of India Ltd
- Tamil Nadu electricity Board
- SMG Consultants - Indonesia
- GMR Energy Limited - India
- Renaissance Capital - South Africa
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Videocon Industries ltd - India
- Sakthi Sugars Limited - India
- Dalmia Cement Bharat India
- Pendopo Energi Batubara - Indonesia
- Binh Thuan Hamico - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Posco Energy - South Korea
- Indo Tambangraya Megah - Indonesia
- New Zealand Coal & Carbon
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Bangladesh Power Developement Board
- Ministry of Mines - Canada
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- European Bulk Services B.V. - Netherlands
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- Indogreen Group - Indonesia
- Central Electricity Authority - India
- Goldman Sachs - Singapore
- Alfred C Toepfer International GmbH - Germany
- Thai Mozambique Logistica
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- CIMB Investment Bank - Malaysia
- Straits Asia Resources Limited - Singapore
- Orica Mining Services - Indonesia
- Xindia Steels Limited - India
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- White Energy Company Limited
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- Uttam Galva Steels Limited - India
- Eastern Energy - Thailand
- MS Steel International - UAE
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- Coastal Gujarat Power Limited - India
- Siam City Cement - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Petron Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Kepco SPC Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Sree Jayajothi Cements Limited - India
- Banpu Public Company Limited - Thailand
- Madhucon Powers Ltd - India
- Aditya Birla Group - India
- SMC Global Power, Philippines
- Toyota Tsusho Corporation, Japan
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- The University of Queensland
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Gujarat Sidhee Cement - India
- Deloitte Consulting - India
- PTC India Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Edison Trading Spa - Italy
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Bulk Trading Sa - Switzerland
- Mercuria Energy - Indonesia
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Makarim & Taira - Indonesia
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Singapore Mercantile Exchange
- Central Java Power - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
- Attock Cement Pakistan Limited
- Mercator Lines Limited - India
- Essar Steel Hazira Ltd - India
- Vizag Seaport Private Limited - India
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- Merrill Lynch Commodities Europe
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Bukit Baiduri Energy - Indonesia
- Altura Mining Limited, Indonesia
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Minerals Council of Australia
- Jaiprakash Power Ventures ltd
- Ambuja Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Indika Energy - Indonesia
- Mjunction Services Limited - India
- Rio Tinto Coal - Australia
- Intertek Mineral Services - Indonesia
- Therma Luzon, Inc, Philippines
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