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