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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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Thursday, 09 November 23
GREEK AND CHINESE COMPANIES OWN 34% OF THE GLOBAL FLEET’S CARGO CAPACITY - BIMCO
“The global fleet of cargo carrying ships consists of around 61,000 ships with a deadweight capacity of about 2,200 million tonnes. The ships ...
Monday, 23 October 23
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Monday, 23 October 23
INDIA COAL INVENTORIES DROP AT FASTEST PACE IN TWO YEARS, BOOSTING IMPORTS - REUTERS
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Tuesday, 19 September 23
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Sunday, 10 September 23
GOLDMAN SACHS PREDICTS OIL PRICE TO HIT $100 ON OPEC CUTS - YAHOO FINANCE
Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research h ...
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- PNOC Exploration Corporation - Philippines
- Energy Link Ltd, New Zealand
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Indika Energy - Indonesia
- Planning Commission, India
- Jaiprakash Power Ventures ltd
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Metalloyd Limited - United Kingdom
- New Zealand Coal & Carbon
- Cigading International Bulk Terminal - Indonesia
- Tata Chemicals Ltd - India
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- Madhucon Powers Ltd - India
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- Manunggal Multi Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Malabar Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Goldman Sachs - Singapore
- Dalmia Cement Bharat India
- Grasim Industreis Ltd - India
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Coal Council - USA
- McConnell Dowell - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Binh Thuan Hamico - Vietnam
- Energy Development Corp, Philippines
- Barasentosa Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Mintek Dendrill Indonesia
- Rio Tinto Coal - Australia
- Borneo Indobara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Australian Commodity Traders Exchange
- Bhatia International Limited - India
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- SN Aboitiz Power Inc, Philippines
- Banpu Public Company Limited - Thailand
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- The State Trading Corporation of India Ltd
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Medco Energi Mining Internasional
- Semirara Mining Corp, Philippines
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- Parliament of New Zealand
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Kapuas Tunggal Persada - Indonesia
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- Kumho Petrochemical, South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Chettinad Cement Corporation Ltd - India
- Global Business Power Corporation, Philippines
- Standard Chartered Bank - UAE
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- Posco Energy - South Korea
- Wood Mackenzie - Singapore
- Sical Logistics Limited - India
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Price Waterhouse Coopers - Russia
- Aditya Birla Group - India
- Oldendorff Carriers - Singapore
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- PTC India Limited - India
- Vizag Seaport Private Limited - India
- GVK Power & Infra Limited - India
- San Jose City I Power Corp, Philippines
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Pendopo Energi Batubara - Indonesia
- Indogreen Group - Indonesia
- Heidelberg Cement - Germany
- Cement Manufacturers Association - India
- Larsen & Toubro Limited - India
- Coal and Oil Company - UAE
- Kalimantan Lumbung Energi - Indonesia
- Xindia Steels Limited - India
- White Energy Company Limited
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Mjunction Services Limited - India
- Global Green Power PLC Corporation, Philippines
- Mercuria Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Marubeni Corporation - India
- Formosa Plastics Group - Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Sakthi Sugars Limited - India
- Australian Coal Association
- Intertek Mineral Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- Alfred C Toepfer International GmbH - Germany
- Bukit Makmur.PT - Indonesia
- Agrawal Coal Company - India
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ASAPP Information Group - India
- Commonwealth Bank - Australia
- Meralco Power Generation, Philippines
- Samtan Co., Ltd - South Korea
- Holcim Trading Pte Ltd - Singapore
- Aboitiz Power Corporation - Philippines
- Latin American Coal - Colombia
- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- MS Steel International - UAE
- Baramulti Group, Indonesia
- Ministry of Finance - Indonesia
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement - Thailand
- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Mining Services - Indonesia
- Uttam Galva Steels Limited - India
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Bhoruka Overseas - Indonesia
- Videocon Industries ltd - India
- Maheswari Brothers Coal Limited - India
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- Rashtriya Ispat Nigam Limited - India
- Georgia Ports Authority, United States
- Electricity Authority, New Zealand
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Central Java Power - Indonesia
- Sojitz Corporation - Japan
- OPG Power Generation Pvt Ltd - India
- Chamber of Mines of South Africa
- Anglo American - United Kingdom
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Ambuja Cements Ltd - India
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Jorong Barutama Greston.PT - Indonesia
- Eastern Energy - Thailand
- The University of Queensland
- Altura Mining Limited, Indonesia
- Meenaskhi Energy Private Limited - India
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