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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.
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Saturday, 18 March 23
HEDGE TO OFFSET LNG VOLATILITY, TRADERS TOLD - BALTIC EXCHANGE
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Friday, 17 March 23
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Wednesday, 08 March 23
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Thursday, 02 March 23
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- Energy Development Corp, Philippines
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- Planning Commission, India
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Straits Asia Resources Limited - Singapore
- Kartika Selabumi Mining - Indonesia
- Indogreen Group - Indonesia
- Lanco Infratech Ltd - India
- Interocean Group of Companies - India
- Sarangani Energy Corporation, Philippines
- Goldman Sachs - Singapore
- Merrill Lynch Commodities Europe
- TNB Fuel Sdn Bhd - Malaysia
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Samtan Co., Ltd - South Korea
- Kepco SPC Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- White Energy Company Limited
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- Chamber of Mines of South Africa
- Australian Coal Association
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- Barasentosa Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- McConnell Dowell - Australia
- Vizag Seaport Private Limited - India
- Sical Logistics Limited - India
- The University of Queensland
- Global Green Power PLC Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Power Finance Corporation Ltd., India
- International Coal Ventures Pvt Ltd - India
- Borneo Indobara - Indonesia
- SMG Consultants - Indonesia
- Jindal Steel & Power Ltd - India
- Star Paper Mills Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- Economic Council, Georgia
- Bayan Resources Tbk. - Indonesia
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- VISA Power Limited - India
- Bharathi Cement Corporation - India
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Petron Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- Krishnapatnam Port Company Ltd. - India
- Wood Mackenzie - Singapore
- Globalindo Alam Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Trasteel International SA, Italy
- Metalloyd Limited - United Kingdom
- Price Waterhouse Coopers - Russia
- New Zealand Coal & Carbon
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Aditya Birla Group - India
- Sree Jayajothi Cements Limited - India
- Manunggal Multi Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- Carbofer General Trading SA - India
- ASAPP Information Group - India
- Bhoruka Overseas - Indonesia
- Standard Chartered Bank - UAE
- Xindia Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Renaissance Capital - South Africa
- Africa Commodities Group - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Ministry of Finance - Indonesia
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Simpson Spence & Young - Indonesia
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Uttam Galva Steels Limited - India
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- Mintek Dendrill Indonesia
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Attock Cement Pakistan Limited
- Indonesian Coal Mining Association
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- IHS Mccloskey Coal Group - USA
- San Jose City I Power Corp, Philippines
- Georgia Ports Authority, United States
- Holcim Trading Pte Ltd - Singapore
- Sojitz Corporation - Japan
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Indika Energy - Indonesia
- Parliament of New Zealand
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- South Luzon Thermal Energy Corporation
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Savvy Resources Ltd - HongKong
- Kumho Petrochemical, South Korea
- Sakthi Sugars Limited - India
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Neyveli Lignite Corporation Ltd, - India
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Larsen & Toubro Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- Videocon Industries ltd - India
- Electricity Authority, New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- London Commodity Brokers - England
- Thai Mozambique Logistica
- Ministry of Mines - Canada
- SN Aboitiz Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Minerals Council of Australia
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Leighton Contractors Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- The State Trading Corporation of India Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- Jorong Barutama Greston.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Kaltim Prima Coal - Indonesia
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Edison Trading Spa - Italy
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- Mjunction Services Limited - India
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Commonwealth Bank - Australia
- Meralco Power Generation, Philippines
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- ICICI Bank Limited - India
- Gujarat Sidhee Cement - India
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