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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, 11 April 23
OIL RISES ON CHINA STIMULUS EXPECTATIONS, WEAKER DOLLAR - REUTERS
Oil prices rose on Tuesday on expectations of potential economic stimulus by China, healthy demand in the rest of Asia and a drop in U.S. crude sto ...
Sunday, 09 April 23
CHINA’S BUSINESS INCOME REBOUND POINTS TO IMPROVING ECONOMY: OFFICIAL - XINHUA
Chinese businesses have posted a strong rebound in sales revenue since the beginning of this year in the latest signal of an improving economy.
...
Sunday, 09 April 23
COAL INDIA TO BOOST SUPPLIES TO INDUSTRIES AS UTILITIES’ INVENTORIES RISE - REUTERS
Coal India Ltd will increase supplies to industries, the world’s largest coal miner said on Wednesday as fuel inventories at utilities run by ...
Thursday, 06 April 23
MARKET INSIGHT - INTERMODAL
LNG Current Supply/Demand Dynamics
This year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourag ...
Sunday, 26 March 23
EUROPE’S RUSH TO LNG COULD TURN INTO 'WORLD’S MOST EXPENSIVE AND UNNECESSARY INSURANCE POLICY'- CNBC
Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new r ...
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Showing 111 to 115 news of total 6871 |
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- Krishnapatnam Port Company Ltd. - India
- Electricity Authority, New Zealand
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- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Aboitiz Power Corporation - Philippines
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- Maharashtra Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Iligan Light & Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Ministry of Mines - Canada
- LBH Netherlands Bv - Netherlands
- Simpson Spence & Young - Indonesia
- The University of Queensland
- Port Waratah Coal Services - Australia
- Attock Cement Pakistan Limited
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- International Coal Ventures Pvt Ltd - India
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- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
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- Global Business Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Bhoruka Overseas - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indian Energy Exchange, India
- Tamil Nadu electricity Board
- Intertek Mineral Services - Indonesia
- Mintek Dendrill Indonesia
- VISA Power Limited - India
- Binh Thuan Hamico - Vietnam
- Holcim Trading Pte Ltd - Singapore
- Kaltim Prima Coal - Indonesia
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- PetroVietnam Power Coal Import and Supply Company
- New Zealand Coal & Carbon
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- Bukit Asam (Persero) Tbk - Indonesia
- Parry Sugars Refinery, India
- Globalindo Alam Lestari - Indonesia
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
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- Sinarmas Energy and Mining - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Banpu Public Company Limited - Thailand
- Semirara Mining Corp, Philippines
- IEA Clean Coal Centre - UK
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Tata Chemicals Ltd - India
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Energy Development Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Chamber of Mines of South Africa
- Kumho Petrochemical, South Korea
- Siam City Cement PLC, Thailand
- SN Aboitiz Power Inc, Philippines
- Africa Commodities Group - South Africa
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Petron Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Economic Council, Georgia
- Sree Jayajothi Cements Limited - India
- ASAPP Information Group - India
- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- Grasim Industreis Ltd - India
- Cement Manufacturers Association - India
- Australian Commodity Traders Exchange
- Riau Bara Harum - Indonesia
- Eastern Energy - Thailand
- Deloitte Consulting - India
- Bukit Makmur.PT - Indonesia
- The Treasury - Australian Government
- GVK Power & Infra Limited - India
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- India Bulls Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
- Baramulti Group, Indonesia
- Sojitz Corporation - Japan
- CNBM International Corporation - China
- Australian Coal Association
- Parliament of New Zealand
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Eastern Coal Council - USA
- Semirara Mining and Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Ministry of Finance - Indonesia
- Uttam Galva Steels Limited - India
- Jaiprakash Power Ventures ltd
- Kohat Cement Company Ltd. - Pakistan
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Gujarat Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- MS Steel International - UAE
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- Formosa Plastics Group - Taiwan
- Wilmar Investment Holdings
- Energy Link Ltd, New Zealand
- London Commodity Brokers - England
- Siam City Cement - Thailand
- White Energy Company Limited
- Thai Mozambique Logistica
- Kapuas Tunggal Persada - Indonesia
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Pendopo Energi Batubara - Indonesia
- Barasentosa Lestari - Indonesia
- Coal and Oil Company - UAE
- Central Java Power - Indonesia
- Rio Tinto Coal - Australia
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Essar Steel Hazira Ltd - India
- TeaM Sual Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Thiess Contractors Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- McConnell Dowell - Australia
- Bharathi Cement Corporation - India
- PTC India Limited - India
- Aditya Birla Group - India
- Planning Commission, India
- Star Paper Mills Limited - India
- Bukit Baiduri Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Sindya Power Generating Company Private Ltd
- Ceylon Electricity Board - Sri Lanka
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Power Finance Corporation Ltd., India
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- CIMB Investment Bank - Malaysia
- Mercuria Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Goldman Sachs - Singapore
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- IHS Mccloskey Coal Group - USA
- Merrill Lynch Commodities Europe
- Timah Investasi Mineral - Indoneisa
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