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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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Friday, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
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- The Treasury - Australian Government
- TeaM Sual Corporation - Philippines
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- CIMB Investment Bank - Malaysia
- Ministry of Finance - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Romanian Commodities Exchange
- Merrill Lynch Commodities Europe
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- Makarim & Taira - Indonesia
- Mintek Dendrill Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Indian Oil Corporation Limited
- Sinarmas Energy and Mining - Indonesia
- Edison Trading Spa - Italy
- International Coal Ventures Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Wood Mackenzie - Singapore
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- Parliament of New Zealand
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Indian Energy Exchange, India
- Petrochimia International Co. Ltd.- Taiwan
- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vizag Seaport Private Limited - India
- Metalloyd Limited - United Kingdom
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- Marubeni Corporation - India
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Kaltim Prima Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Renaissance Capital - South Africa
- Globalindo Alam Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Port Waratah Coal Services - Australia
- ASAPP Information Group - India
- Essar Steel Hazira Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Holcim Trading Pte Ltd - Singapore
- Formosa Plastics Group - Taiwan
- Thai Mozambique Logistica
- Deloitte Consulting - India
- Bayan Resources Tbk. - Indonesia
- PNOC Exploration Corporation - Philippines
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- VISA Power Limited - India
- Petron Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Borneo Indobara - Indonesia
- Standard Chartered Bank - UAE
- Karaikal Port Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Bharathi Cement Corporation - India
- Kumho Petrochemical, South Korea
- Global Business Power Corporation, Philippines
- Wilmar Investment Holdings
- Goldman Sachs - Singapore
- ICICI Bank Limited - India
- Power Finance Corporation Ltd., India
- Baramulti Group, Indonesia
- Orica Mining Services - Indonesia
- SMC Global Power, Philippines
- Kartika Selabumi Mining - Indonesia
- Star Paper Mills Limited - India
- Agrawal Coal Company - India
- Indo Tambangraya Megah - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Siam City Cement - Thailand
- Chamber of Mines of South Africa
- Tata Chemicals Ltd - India
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- Iligan Light & Power Inc, Philippines
- Heidelberg Cement - Germany
- Sical Logistics Limited - India
- Savvy Resources Ltd - HongKong
- Bulk Trading Sa - Switzerland
- Neyveli Lignite Corporation Ltd, - India
- Posco Energy - South Korea
- Kideco Jaya Agung - Indonesia
- Gujarat Sidhee Cement - India
- IHS Mccloskey Coal Group - USA
- Madhucon Powers Ltd - India
- Ind-Barath Power Infra Limited - India
- Banpu Public Company Limited - Thailand
- Billiton Holdings Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- Ministry of Mines - Canada
- Sakthi Sugars Limited - India
- Altura Mining Limited, Indonesia
- Eastern Coal Council - USA
- Trasteel International SA, Italy
- Attock Cement Pakistan Limited
- London Commodity Brokers - England
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- The University of Queensland
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ministry of Transport, Egypt
- San Jose City I Power Corp, Philippines
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- White Energy Company Limited
- PetroVietnam Power Coal Import and Supply Company
- Intertek Mineral Services - Indonesia
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- CNBM International Corporation - China
- GMR Energy Limited - India
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Dalmia Cement Bharat India
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jindal Steel & Power Ltd - India
- GAC Shipping (India) Pvt Ltd
- Electricity Authority, New Zealand
- Toyota Tsusho Corporation, Japan
- Maharashtra Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- PTC India Limited - India
- Sarangani Energy Corporation, Philippines
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Therma Luzon, Inc, Philippines
- SN Aboitiz Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- MS Steel International - UAE
- Semirara Mining Corp, Philippines
- Planning Commission, India
- Cigading International Bulk Terminal - Indonesia
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- OPG Power Generation Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Sree Jayajothi Cements Limited - India
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- Central Java Power - Indonesia
- Coal and Oil Company - UAE
- Bhushan Steel Limited - India
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Mjunction Services Limited - India
- Economic Council, Georgia
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Bhoruka Overseas - Indonesia
- The State Trading Corporation of India Ltd
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Orica Australia Pty. Ltd.
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Meenaskhi Energy Private Limited - India
- Jaiprakash Power Ventures ltd
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
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