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