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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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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 ...
Tuesday, 22 August 23
CHINA'S COAL PRODUCTION LOGS STEADY GROWTH IN JANUARY-JULY: XINHUA
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The ...
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Sunday, 23 July 23
ANALYSIS-INDIA'S COAL MINING BET STUMBLES AS WARY BANKS WEIGH RISING RISKS - REUTERS
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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- Indika Energy - Indonesia
- Ministry of Transport, Egypt
- Salva Resources Pvt Ltd - India
- Coal and Oil Company - UAE
- Trasteel International SA, Italy
- CNBM International Corporation - China
- Malabar Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- SMG Consultants - Indonesia
- Bulk Trading Sa - Switzerland
- Price Waterhouse Coopers - Russia
- Parry Sugars Refinery, India
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Aditya Birla Group - India
- The University of Queensland
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Billiton Holdings Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- VISA Power Limited - India
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- Sakthi Sugars Limited - India
- Mjunction Services Limited - India
- Indonesian Coal Mining Association
- Baramulti Group, Indonesia
- PTC India Limited - India
- Directorate Of Revenue Intelligence - India
- Eastern Energy - Thailand
- Global Coal Blending Company Limited - Australia
- Mercator Lines Limited - India
- Kepco SPC Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Deloitte Consulting - India
- Orica Australia Pty. Ltd.
- Banpu Public Company Limited - Thailand
- SMC Global Power, Philippines
- Attock Cement Pakistan Limited
- Chettinad Cement Corporation Ltd - India
- TeaM Sual Corporation - Philippines
- MS Steel International - UAE
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
- Meralco Power Generation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Edison Trading Spa - Italy
- IEA Clean Coal Centre - UK
- Rio Tinto Coal - Australia
- Indogreen Group - Indonesia
- Bangladesh Power Developement Board
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- Interocean Group of Companies - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ceylon Electricity Board - Sri Lanka
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Mintek Dendrill Indonesia
- Indian Oil Corporation Limited
- Sarangani Energy Corporation, Philippines
- Petron Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Tamil Nadu electricity Board
- Miang Besar Coal Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- OPG Power Generation Pvt Ltd - India
- Thai Mozambique Logistica
- Global Green Power PLC Corporation, Philippines
- Vizag Seaport Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- San Jose City I Power Corp, Philippines
- Renaissance Capital - South Africa
- McConnell Dowell - Australia
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- GN Power Mariveles Coal Plant, Philippines
- Posco Energy - South Korea
- Cement Manufacturers Association - India
- Gujarat Sidhee Cement - India
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Vedanta Resources Plc - India
- Timah Investasi Mineral - Indoneisa
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Bhushan Steel Limited - India
- Energy Development Corp, Philippines
- Barasentosa Lestari - Indonesia
- India Bulls Power Limited - India
- Maheswari Brothers Coal Limited - India
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Oldendorff Carriers - Singapore
- Kartika Selabumi Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Iligan Light & Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- ICICI Bank Limited - India
- Goldman Sachs - Singapore
- Minerals Council of Australia
- Ministry of Mines - Canada
- Siam City Cement - Thailand
- Eastern Coal Council - USA
- Standard Chartered Bank - UAE
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- European Bulk Services B.V. - Netherlands
- Africa Commodities Group - South Africa
- New Zealand Coal & Carbon
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Semirara Mining Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Straits Asia Resources Limited - Singapore
- Toyota Tsusho Corporation, Japan
- Star Paper Mills Limited - India
- Wilmar Investment Holdings
- South Luzon Thermal Energy Corporation
- Electricity Generating Authority of Thailand
- Electricity Authority, New Zealand
- Riau Bara Harum - Indonesia
- Australian Commodity Traders Exchange
- Krishnapatnam Port Company Ltd. - India
- Port Waratah Coal Services - Australia
- Central Electricity Authority - India
- Agrawal Coal Company - India
- Globalindo Alam Lestari - Indonesia
- Economic Council, Georgia
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Savvy Resources Ltd - HongKong
- Georgia Ports Authority, United States
- Sojitz Corporation - Japan
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- Jaiprakash Power Ventures ltd
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IHS Mccloskey Coal Group - USA
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Jindal Steel & Power Ltd - India
- Borneo Indobara - Indonesia
- Latin American Coal - Colombia
- Intertek Mineral Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Bharathi Cement Corporation - India
- Central Java Power - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Indian Energy Exchange, India
- Siam City Cement PLC, Thailand
- Thiess Contractors Indonesia
- Sical Logistics Limited - India
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Finance - Indonesia
- Commonwealth Bank - Australia
- Carbofer General Trading SA - India
- Karaikal Port Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Grasim Industreis Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Leighton Contractors Pty Ltd - Australia
- Makarim & Taira - Indonesia
- Meenaskhi Energy Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- ASAPP Information Group - India
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Altura Mining Limited, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sindya Power Generating Company Private Ltd
- Coastal Gujarat Power Limited - India
- Antam Resourcindo - Indonesia
- Orica Mining Services - Indonesia
- Xindia Steels Limited - India
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