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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, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- Ind-Barath Power Infra Limited - India
- Therma Luzon, Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Sakthi Sugars Limited - India
- Bharathi Cement Corporation - India
- Bayan Resources Tbk. - Indonesia
- Port Waratah Coal Services - Australia
- Electricity Generating Authority of Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Vizag Seaport Private Limited - India
- Mintek Dendrill Indonesia
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Savvy Resources Ltd - HongKong
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- GMR Energy Limited - India
- Latin American Coal - Colombia
- Marubeni Corporation - India
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- European Bulk Services B.V. - Netherlands
- Bangladesh Power Developement Board
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- White Energy Company Limited
- Coalindo Energy - Indonesia
- Indonesian Coal Mining Association
- South Luzon Thermal Energy Corporation
- Eastern Coal Council - USA
- Bhoruka Overseas - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Parry Sugars Refinery, India
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Africa Commodities Group - South Africa
- Sojitz Corporation - Japan
- Sarangani Energy Corporation, Philippines
- New Zealand Coal & Carbon
- Toyota Tsusho Corporation, Japan
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Metalloyd Limited - United Kingdom
- Independent Power Producers Association of India
- Sical Logistics Limited - India
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- Jorong Barutama Greston.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- GAC Shipping (India) Pvt Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- Baramulti Group, Indonesia
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Aboitiz Power Corporation - Philippines
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Interocean Group of Companies - India
- Essar Steel Hazira Ltd - India
- Kartika Selabumi Mining - Indonesia
- Minerals Council of Australia
- Rashtriya Ispat Nigam Limited - India
- Bukit Makmur.PT - Indonesia
- Makarim & Taira - Indonesia
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Straits Asia Resources Limited - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Indika Energy - Indonesia
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Economic Council, Georgia
- Kumho Petrochemical, South Korea
- Planning Commission, India
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Grasim Industreis Ltd - India
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- The Treasury - Australian Government
- Trasteel International SA, Italy
- Riau Bara Harum - Indonesia
- Deloitte Consulting - India
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- SMC Global Power, Philippines
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Medco Energi Mining Internasional
- Standard Chartered Bank - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Agrawal Coal Company - India
- Siam City Cement - Thailand
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Karaikal Port Pvt Ltd - India
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Price Waterhouse Coopers - Russia
- Gujarat Electricity Regulatory Commission - India
- The University of Queensland
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- Banpu Public Company Limited - Thailand
- Ministry of Transport, Egypt
- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Posco Energy - South Korea
- Parliament of New Zealand
- Bhushan Steel Limited - India
- Romanian Commodities Exchange
- Kobexindo Tractors - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Malabar Cements Ltd - India
- Indian Energy Exchange, India
- Electricity Authority, New Zealand
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Ministry of Mines - Canada
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Development Corp, Philippines
- Simpson Spence & Young - Indonesia
- Merrill Lynch Commodities Europe
- Antam Resourcindo - Indonesia
- Tamil Nadu electricity Board
- Jaiprakash Power Ventures ltd
- PNOC Exploration Corporation - Philippines
- Tata Chemicals Ltd - India
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Thiess Contractors Indonesia
- Anglo American - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- Lanco Infratech Ltd - India
- TeaM Sual Corporation - Philippines
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- Videocon Industries ltd - India
- Borneo Indobara - Indonesia
- India Bulls Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- CIMB Investment Bank - Malaysia
- Aditya Birla Group - India
- AsiaOL BioFuels Corp., Philippines
- Kapuas Tunggal Persada - Indonesia
- SMG Consultants - Indonesia
- Semirara Mining Corp, Philippines
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- Indo Tambangraya Megah - Indonesia
- San Jose City I Power Corp, Philippines
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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