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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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Wednesday, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
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- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- Central Java Power - Indonesia
- Bangladesh Power Developement Board
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Orica Australia Pty. Ltd.
- Interocean Group of Companies - India
- PNOC Exploration Corporation - Philippines
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Goldman Sachs - Singapore
- Commonwealth Bank - Australia
- Simpson Spence & Young - Indonesia
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Medco Energi Mining Internasional
- Meralco Power Generation, Philippines
- CNBM International Corporation - China
- Agrawal Coal Company - India
- MS Steel International - UAE
- SMC Global Power, Philippines
- Planning Commission, India
- Leighton Contractors Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- GMR Energy Limited - India
- Edison Trading Spa - Italy
- Bhoruka Overseas - Indonesia
- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Renaissance Capital - South Africa
- Deloitte Consulting - India
- Heidelberg Cement - Germany
- European Bulk Services B.V. - Netherlands
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Parry Sugars Refinery, India
- Coastal Gujarat Power Limited - India
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- Toyota Tsusho Corporation, Japan
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Madhucon Powers Ltd - India
- Ceylon Electricity Board - Sri Lanka
- South Luzon Thermal Energy Corporation
- Economic Council, Georgia
- Australian Commodity Traders Exchange
- Iligan Light & Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Formosa Plastics Group - Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Jindal Steel & Power Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Jaiprakash Power Ventures ltd
- SN Aboitiz Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- Straits Asia Resources Limited - Singapore
- GVK Power & Infra Limited - India
- Australian Coal Association
- Tata Chemicals Ltd - India
- Wood Mackenzie - Singapore
- Larsen & Toubro Limited - India
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Bhushan Steel Limited - India
- Dalmia Cement Bharat India
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Indian Energy Exchange, India
- Trasteel International SA, Italy
- Port Waratah Coal Services - Australia
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- Electricity Generating Authority of Thailand
- Grasim Industreis Ltd - India
- Attock Cement Pakistan Limited
- Coalindo Energy - Indonesia
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Semirara Mining Corp, Philippines
- Tamil Nadu electricity Board
- Krishnapatnam Port Company Ltd. - India
- Manunggal Multi Energi - Indonesia
- Mercator Lines Limited - India
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Bhatia International Limited - India
- Sical Logistics Limited - India
- IHS Mccloskey Coal Group - USA
- VISA Power Limited - India
- White Energy Company Limited
- Karaikal Port Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Independent Power Producers Association of India
- Holcim Trading Pte Ltd - Singapore
- Kobexindo Tractors - Indoneisa
- Carbofer General Trading SA - India
- Sojitz Corporation - Japan
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Altura Mining Limited, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ASAPP Information Group - India
- Pendopo Energi Batubara - Indonesia
- Star Paper Mills Limited - India
- Kepco SPC Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- Merrill Lynch Commodities Europe
- Rashtriya Ispat Nigam Limited - India
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- The Treasury - Australian Government
- Sree Jayajothi Cements Limited - India
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Global Coal Blending Company Limited - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Makarim & Taira - Indonesia
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- Posco Energy - South Korea
- India Bulls Power Limited - India
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Metalloyd Limited - United Kingdom
- Vedanta Resources Plc - India
- Price Waterhouse Coopers - Russia
- Gujarat Mineral Development Corp Ltd - India
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- Standard Chartered Bank - UAE
- Oldendorff Carriers - Singapore
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Sakthi Sugars Limited - India
- Thiess Contractors Indonesia
- Chettinad Cement Corporation Ltd - India
- Kaltim Prima Coal - Indonesia
- PTC India Limited - India
- Indonesian Coal Mining Association
- Bukit Baiduri Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Therma Luzon, Inc, Philippines
- Riau Bara Harum - Indonesia
- Savvy Resources Ltd - HongKong
- Kideco Jaya Agung - Indonesia
- Indika Energy - Indonesia
- Global Business Power Corporation, Philippines
- SMG Consultants - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Mintek Dendrill Indonesia
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Latin American Coal - Colombia
- Mercuria Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
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