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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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Thursday, 02 March 23
DRY BULK MARKET: THE WAY CHINA GOES, SO GOES THE MARKET - BIMCO
We expect demand growth within the 1.5-2.5% range in 2023, driven by China’s economic recovery. Improvements in consumer sentiment should hel ...
Thursday, 02 March 23
INDIA, CHINA DEMAND BOOST LOW-RANK THERMAL COAL PRICES IN ASIA - RUSSELL, REUTERS
Signs of stronger import demand from India have arrested the decline in price of the thermal coal grades most commonly sought by the world’s ...
Thursday, 02 March 23
INDIA CHEERS THE RETURN OF ‘KING COAL’ AS INDUSTRY SEES BUOYANT FUTURE - REUTERS
India’s coal industry celebrated the return of its major conference after a three-year pandemic hiatus by presenting a bullish view of demand ...
Wednesday, 01 March 23
GEO CONNECT ASIA RETURNS IN MARCH TO ACCELERATE THE REGION’S GEOSPATIAL AND LOCATION INTELLIGENCE CAPABILITIES
Press Release: The third edition of GCA will be held in conjunction with Digital Construction Asia and the inaugural Drones Asia – an event d ...
Wednesday, 01 March 23
THE DECLINE IN THE COAL PRICE SINCE THE BEGINNING OF THE YEAR HAS BEEN SIGNIFICANT - INTERMODAL
Last week, the front-month API2 future rose by 3.5%, but since the beginning of the year the future has fallen by 39% to $136.65/t, while the Newca ...
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- Cigading International Bulk Terminal - Indonesia
- Eastern Coal Council - USA
- Coalindo Energy - Indonesia
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Goldman Sachs - Singapore
- South Luzon Thermal Energy Corporation
- Ministry of Finance - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- Leighton Contractors Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Indian Energy Exchange, India
- Minerals Council of Australia
- Indika Energy - Indonesia
- Power Finance Corporation Ltd., India
- Indonesian Coal Mining Association
- Cement Manufacturers Association - India
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- Heidelberg Cement - Germany
- Aboitiz Power Corporation - Philippines
- Xindia Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Simpson Spence & Young - Indonesia
- Australian Commodity Traders Exchange
- TeaM Sual Corporation - Philippines
- Ambuja Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Mintek Dendrill Indonesia
- Gujarat Sidhee Cement - India
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- Siam City Cement PLC, Thailand
- McConnell Dowell - Australia
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Anglo American - United Kingdom
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- VISA Power Limited - India
- ASAPP Information Group - India
- Deloitte Consulting - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Mercuria Energy - Indonesia
- Indogreen Group - Indonesia
- Metalloyd Limited - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Australia Pty. Ltd.
- Australian Coal Association
- Vijayanagar Sugar Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Bhushan Steel Limited - India
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- PetroVietnam Power Coal Import and Supply Company
- Therma Luzon, Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Star Paper Mills Limited - India
- Madhucon Powers Ltd - India
- Chettinad Cement Corporation Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Romanian Commodities Exchange
- Jorong Barutama Greston.PT - Indonesia
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Port Waratah Coal Services - Australia
- Bahari Cakrawala Sebuku - Indonesia
- White Energy Company Limited
- Sojitz Corporation - Japan
- Petrochimia International Co. Ltd.- Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- GAC Shipping (India) Pvt Ltd
- Gujarat Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- SN Aboitiz Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- Pendopo Energi Batubara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- PowerSource Philippines DevCo
- Banpu Public Company Limited - Thailand
- Tamil Nadu electricity Board
- Uttam Galva Steels Limited - India
- Barasentosa Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- Parry Sugars Refinery, India
- Bhoruka Overseas - Indonesia
- Global Coal Blending Company Limited - Australia
- ICICI Bank Limited - India
- SMC Global Power, Philippines
- Ind-Barath Power Infra Limited - India
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
- Oldendorff Carriers - Singapore
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- GMR Energy Limited - India
- Mercator Lines Limited - India
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Siam City Cement - Thailand
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Price Waterhouse Coopers - Russia
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Maheswari Brothers Coal Limited - India
- Standard Chartered Bank - UAE
- New Zealand Coal & Carbon
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- European Bulk Services B.V. - Netherlands
- Meenaskhi Energy Private Limited - India
- Rashtriya Ispat Nigam Limited - India
- AsiaOL BioFuels Corp., Philippines
- Planning Commission, India
- Videocon Industries ltd - India
- Parliament of New Zealand
- Electricity Authority, New Zealand
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Central Electricity Authority - India
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Wilmar Investment Holdings
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- Meralco Power Generation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- Energy Development Corp, Philippines
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Sarangani Energy Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Coastal Gujarat Power Limited - India
- CNBM International Corporation - China
- Thai Mozambique Logistica
- The University of Queensland
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- Indian Oil Corporation Limited
- Kohat Cement Company Ltd. - Pakistan
- Kepco SPC Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Binh Thuan Hamico - Vietnam
- IEA Clean Coal Centre - UK
- Baramulti Group, Indonesia
- Central Java Power - Indonesia
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Posco Energy - South Korea
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