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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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Tuesday, 23 May 23
INDIA: COAL OUTPUT UP 8.9%, SUPPLY RISES 11.7% IN APRIL - FINANCIAL EXPRESS
India’s coal production jumped 8.85% to 73.14 million tonne (MT) in April 2023 and the total coal despatch during the month went up 11.66% to ...
Tuesday, 23 May 23
CHINA COAL OUTPUT UP 4.5 PCT IN APRIL - XINHUA
China’s raw coal output posted stable expansion in April, official data showed.
The country produced 380 million tonnes of raw ...
Saturday, 20 May 23
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
In 2022, non-OPEC supply is estimated to have increased by 1.9 mb/d y-o-y. Out of this, US liquids production increased by 1.2 mb/d, mainly on the ...
Saturday, 20 May 23
GLOBAL COAL TRADE HAS REALLY PICKED UP PACE IN RECENT MONTHS, NOW FULLY BACK TO PRE-COVID LEVELS - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels. In Jan-Apr 2023, total global seaborne coa ...
Saturday, 20 May 23
MARKET INSIGHT - INTERMODAL
India is one of the world's largest coal producers and one of the world's largest importers of coal. The country uses coal mainly for power ...
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Showing 101 to 105 news of total 6871 |
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- Bhatia International Limited - India
- Georgia Ports Authority, United States
- ICICI Bank Limited - India
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- Minerals Council of Australia
- Chamber of Mines of South Africa
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Kepco SPC Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Meenaskhi Energy Private Limited - India
- Krishnapatnam Port Company Ltd. - India
- Africa Commodities Group - South Africa
- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Indogreen Group - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Bayan Resources Tbk. - Indonesia
- Riau Bara Harum - Indonesia
- McConnell Dowell - Australia
- Wood Mackenzie - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- Kapuas Tunggal Persada - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bulk Trading Sa - Switzerland
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- Simpson Spence & Young - Indonesia
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Merrill Lynch Commodities Europe
- The University of Queensland
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Ministry of Finance - Indonesia
- SMG Consultants - Indonesia
- Central Electricity Authority - India
- Parry Sugars Refinery, India
- Global Green Power PLC Corporation, Philippines
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Romanian Commodities Exchange
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Aditya Birla Group - India
- Eastern Coal Council - USA
- Port Waratah Coal Services - Australia
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- Rashtriya Ispat Nigam Limited - India
- Oldendorff Carriers - Singapore
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- Intertek Mineral Services - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Goldman Sachs - Singapore
- CIMB Investment Bank - Malaysia
- Vedanta Resources Plc - India
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Aboitiz Power Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Thai Mozambique Logistica
- Singapore Mercantile Exchange
- VISA Power Limited - India
- The State Trading Corporation of India Ltd
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- International Coal Ventures Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Malabar Cements Ltd - India
- Commonwealth Bank - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Baiduri Energy - Indonesia
- CNBM International Corporation - China
- Indian Oil Corporation Limited
- Savvy Resources Ltd - HongKong
- Therma Luzon, Inc, Philippines
- Vizag Seaport Private Limited - India
- Semirara Mining Corp, Philippines
- Lanco Infratech Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- LBH Netherlands Bv - Netherlands
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- Sindya Power Generating Company Private Ltd
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Deloitte Consulting - India
- Petron Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Sinarmas Energy and Mining - Indonesia
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- Independent Power Producers Association of India
- Mercuria Energy - Indonesia
- Sojitz Corporation - Japan
- Bharathi Cement Corporation - India
- Edison Trading Spa - Italy
- Sarangani Energy Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Sical Logistics Limited - India
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- Grasim Industreis Ltd - India
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- The Treasury - Australian Government
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Wilmar Investment Holdings
- Kohat Cement Company Ltd. - Pakistan
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- GVK Power & Infra Limited - India
- Eastern Energy - Thailand
- Medco Energi Mining Internasional
- Ceylon Electricity Board - Sri Lanka
- MS Steel International - UAE
- Ministry of Transport, Egypt
- Semirara Mining and Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Dalmia Cement Bharat India
- PTC India Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- Parliament of New Zealand
- Meralco Power Generation, Philippines
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Energy Link Ltd, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Coal Association
- Orica Australia Pty. Ltd.
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Uttam Galva Steels Limited - India
- Jindal Steel & Power Ltd - India
- Straits Asia Resources Limited - Singapore
- IEA Clean Coal Centre - UK
- San Jose City I Power Corp, Philippines
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- White Energy Company Limited
- SN Aboitiz Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Coastal Gujarat Power Limited - India
- Planning Commission, India
- India Bulls Power Limited - India
- ASAPP Information Group - India
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Directorate Of Revenue Intelligence - India
- Coal and Oil Company - UAE
- Globalindo Alam Lestari - Indonesia
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Indika Energy - Indonesia
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Ind-Barath Power Infra Limited - India
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