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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 February 23
PAKISTAN PLANS TO QUADRUPLE DOMESTIC COAL-FIRED POWER, MOVE AWAY FROM GAS - REUTERS
Pakistan plans to quadruple its domestic coal-fired capacity to reduce power generation costs and will not build new gas-fired plants in the coming ...
Saturday, 18 February 23
2023 MARINE FUEL MARKET PREDICTIONS - JOHN BERGMAN, AURAMARINE
The drive for decarbonisation we witnessed in 2022 has continued into 2023, demonstrating the shipping’s industry positive strides in the fas ...
Saturday, 28 January 23
COAL GROWTH BLIP NOT TO BE REPEATED - BALTIC EXCHANGE
As 2022 drew to a close, global coal demand looked set to end the year just 1.2% up on the previous year. But that small increase was enough to pus ...
Thursday, 26 January 23
CHINA'S COAL OUTPUT INCREASES IN DECEMBER 2022 - XINHUA
China’s raw coal output posted stable expansion in December 2022, official data showed.
The country produced 400 million tonne ...
Thursday, 26 January 23
COKING COAL NARROWS THE GAP ON THERMAL AS CHINA REOPENS - REUTERS
The premium of high-grade thermal coal over coking coal in Asia is shrinking as China’s re-opening and ending of a ban on imports from Austra ...
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- Savvy Resources Ltd - HongKong
- IEA Clean Coal Centre - UK
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- VISA Power Limited - India
- McConnell Dowell - Australia
- Kumho Petrochemical, South Korea
- Billiton Holdings Pty Ltd - Australia
- Parliament of New Zealand
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- CNBM International Corporation - China
- Star Paper Mills Limited - India
- Grasim Industreis Ltd - India
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Meralco Power Generation, Philippines
- Pendopo Energi Batubara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Bhoruka Overseas - Indonesia
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- Binh Thuan Hamico - Vietnam
- The State Trading Corporation of India Ltd
- Mercator Lines Limited - India
- Coastal Gujarat Power Limited - India
- Central Java Power - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- GMR Energy Limited - India
- Bukit Makmur.PT - Indonesia
- SMC Global Power, Philippines
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- Singapore Mercantile Exchange
- London Commodity Brokers - England
- Cement Manufacturers Association - India
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Kobexindo Tractors - Indoneisa
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Agrawal Coal Company - India
- Edison Trading Spa - Italy
- Coal and Oil Company - UAE
- Indian Oil Corporation Limited
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Latin American Coal - Colombia
- Bhatia International Limited - India
- CIMB Investment Bank - Malaysia
- Africa Commodities Group - South Africa
- Romanian Commodities Exchange
- Power Finance Corporation Ltd., India
- Mjunction Services Limited - India
- Coalindo Energy - Indonesia
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Australian Commodity Traders Exchange
- Wood Mackenzie - Singapore
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Renaissance Capital - South Africa
- Cigading International Bulk Terminal - Indonesia
- The Treasury - Australian Government
- International Coal Ventures Pvt Ltd - India
- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Planning Commission, India
- India Bulls Power Limited - India
- Ind-Barath Power Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Thiess Contractors Indonesia
- Kideco Jaya Agung - Indonesia
- Simpson Spence & Young - Indonesia
- Straits Asia Resources Limited - Singapore
- SN Aboitiz Power Inc, Philippines
- GVK Power & Infra Limited - India
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Maharashtra Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- Bharathi Cement Corporation - India
- Bulk Trading Sa - Switzerland
- Sakthi Sugars Limited - India
- Siam City Cement PLC, Thailand
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- South Luzon Thermal Energy Corporation
- Global Green Power PLC Corporation, Philippines
- Commonwealth Bank - Australia
- Siam City Cement - Thailand
- ICICI Bank Limited - India
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- TeaM Sual Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Medco Energi Mining Internasional
- Krishnapatnam Port Company Ltd. - India
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Indonesian Coal Mining Association
- Central Electricity Authority - India
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- Videocon Industries ltd - India
- Attock Cement Pakistan Limited
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Essar Steel Hazira Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- MS Steel International - UAE
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- White Energy Company Limited
- Makarim & Taira - Indonesia
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Kepco SPC Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Finance - Indonesia
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- Carbofer General Trading SA - India
- Rio Tinto Coal - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- Sinarmas Energy and Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Sical Logistics Limited - India
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- Indo Tambangraya Megah - Indonesia
- SMG Consultants - Indonesia
- Ministry of Transport, Egypt
- Eastern Coal Council - USA
- Holcim Trading Pte Ltd - Singapore
- Uttam Galva Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Independent Power Producers Association of India
- Bangladesh Power Developement Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sree Jayajothi Cements Limited - India
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Iligan Light & Power Inc, Philippines
- Borneo Indobara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Australian Coal Association
- Energy Development Corp, Philippines
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
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