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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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Sunday, 10 September 23
CHINA AUGUST COAL IMPORTS OF 44.3 MLN T HIT RECORD - REUTERS
China, the world’s top coal consumer, imported 44.3 million metric tons of the fuel last month, customs data showed, the highest amount in an ...
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Sunday, 23 July 23
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India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned min ...
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- PNOC Exploration Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Deloitte Consulting - India
- Edison Trading Spa - Italy
- The State Trading Corporation of India Ltd
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- Bangladesh Power Developement Board
- Indika Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Heidelberg Cement - Germany
- McConnell Dowell - Australia
- PTC India Limited - India
- Semirara Mining and Power Corporation, Philippines
- Eastern Energy - Thailand
- Planning Commission, India
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- Romanian Commodities Exchange
- Sree Jayajothi Cements Limited - India
- Latin American Coal - Colombia
- Malabar Cements Ltd - India
- Antam Resourcindo - Indonesia
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Coal Association
- Uttam Galva Steels Limited - India
- Aditya Birla Group - India
- Rio Tinto Coal - Australia
- Neyveli Lignite Corporation Ltd, - India
- CNBM International Corporation - China
- Savvy Resources Ltd - HongKong
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Videocon Industries ltd - India
- Ministry of Transport, Egypt
- Commonwealth Bank - Australia
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Kobexindo Tractors - Indoneisa
- Siam City Cement PLC, Thailand
- Singapore Mercantile Exchange
- Australian Commodity Traders Exchange
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- Tata Chemicals Ltd - India
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Power Finance Corporation Ltd., India
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Krishnapatnam Port Company Ltd. - India
- Jorong Barutama Greston.PT - Indonesia
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- IHS Mccloskey Coal Group - USA
- Wood Mackenzie - Singapore
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- SN Aboitiz Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bharathi Cement Corporation - India
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Barasentosa Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- Mercator Lines Limited - India
- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- India Bulls Power Limited - India
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- The University of Queensland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Riau Bara Harum - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Port Waratah Coal Services - Australia
- Cigading International Bulk Terminal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Posco Energy - South Korea
- OPG Power Generation Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Ministry of Mines - Canada
- GN Power Mariveles Coal Plant, Philippines
- Carbofer General Trading SA - India
- Agrawal Coal Company - India
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- ICICI Bank Limited - India
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Madhucon Powers Ltd - India
- Siam City Cement - Thailand
- London Commodity Brokers - England
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- The Treasury - Australian Government
- Energy Development Corp, Philippines
- Economic Council, Georgia
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Kideco Jaya Agung - Indonesia
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Vizag Seaport Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indian Oil Corporation Limited
- TeaM Sual Corporation - Philippines
- Interocean Group of Companies - India
- Attock Cement Pakistan Limited
- Gujarat Sidhee Cement - India
- Manunggal Multi Energi - Indonesia
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- Coastal Gujarat Power Limited - India
- Maheswari Brothers Coal Limited - India
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Simpson Spence & Young - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Star Paper Mills Limited - India
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Mjunction Services Limited - India
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- Electricity Authority, New Zealand
- Salva Resources Pvt Ltd - India
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- SMG Consultants - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Meralco Power Generation, Philippines
- GVK Power & Infra Limited - India
- European Bulk Services B.V. - Netherlands
- Independent Power Producers Association of India
- Sojitz Corporation - Japan
- Standard Chartered Bank - UAE
- Binh Thuan Hamico - Vietnam
- Intertek Mineral Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
- Global Business Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Sakthi Sugars Limited - India
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Generating Authority of Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
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