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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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Friday, 28 June 24
INDIAN POWER STATIONS STOCKED WITH BUMPER COAL SUPPLY AS TRANSPORT WOES EASE - BUSINESS STANDARD
Even as power demand has touched a historic high of 250 gigawatts (Gw) amid sweltering heat this June, India’s power stations are stocked wit ...
Friday, 28 June 24
INDIA'S CY23 COAL USE LARGER THAN NORTH AMERICA, EUROPE COMBINED - THE HINDU
For the first time, India’s coal consumption surpassed that of North America and Europe combined in the calendar year 2023, said Energy Insti ...
Monday, 24 June 24
PLN'S FINANCIAL SUSTAINABILITY RESTS ON ACCELERATED COAL RETIREMENT AND RENEWABLES DEPLOYMENT - MUTYA YUSTIKA
On 28 May 2024, Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), released its financial report for 2023. Althoug ...
Monday, 24 June 24
INDIA'S COAL-BASED POWER DEMAND AT ALL-TIME HIGH, GOVERNMENT SAYS - REUTERS
India’s demand for coal-based power has risen by 7.3% this fiscal year to an all-time high, the government said in a statement on Wednesday.
...
Monday, 24 June 24
CHINA'S COAL INDUSTRY TURNS GREENER THROUGH INNOVATIVE APPROACHES - PEOPLE'S DAILY
At an opencast mine operated by Inner Mongolia Pingzhuang Coal Group Co. Ltd., a subsidiary of CHN Energy Investment Group (CHN Energy), a 14-meter ...
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- Thai Mozambique Logistica
- Agrawal Coal Company - India
- Indika Energy - Indonesia
- Standard Chartered Bank - UAE
- Posco Energy - South Korea
- Rashtriya Ispat Nigam Limited - India
- Sojitz Corporation - Japan
- ASAPP Information Group - India
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- IHS Mccloskey Coal Group - USA
- GVK Power & Infra Limited - India
- Madhucon Powers Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Larsen & Toubro Limited - India
- Toyota Tsusho Corporation, Japan
- Mercuria Energy - Indonesia
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- Electricity Authority, New Zealand
- IEA Clean Coal Centre - UK
- Chettinad Cement Corporation Ltd - India
- Africa Commodities Group - South Africa
- The Treasury - Australian Government
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- Edison Trading Spa - Italy
- ICICI Bank Limited - India
- Aboitiz Power Corporation - Philippines
- Coalindo Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Indian Oil Corporation Limited
- Ceylon Electricity Board - Sri Lanka
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kobexindo Tractors - Indoneisa
- Ministry of Mines - Canada
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Maharashtra Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Tata Chemicals Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Bhatia International Limited - India
- Aditya Birla Group - India
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Port Waratah Coal Services - Australia
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Karaikal Port Pvt Ltd - India
- Coal and Oil Company - UAE
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Bulk Trading Sa - Switzerland
- Global Green Power PLC Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- Bahari Cakrawala Sebuku - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indian Energy Exchange, India
- Metalloyd Limited - United Kingdom
- Maheswari Brothers Coal Limited - India
- Romanian Commodities Exchange
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
- Dalmia Cement Bharat India
- Bukit Asam (Persero) Tbk - Indonesia
- Grasim Industreis Ltd - India
- Meenaskhi Energy Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Bukit Makmur.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Parry Sugars Refinery, India
- Eastern Energy - Thailand
- Renaissance Capital - South Africa
- Krishnapatnam Port Company Ltd. - India
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Central Electricity Authority - India
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
- The University of Queensland
- Australian Coal Association
- Bharathi Cement Corporation - India
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Holcim Trading Pte Ltd - Singapore
- Merrill Lynch Commodities Europe
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- PTC India Limited - India
- Meralco Power Generation, Philippines
- Essar Steel Hazira Ltd - India
- VISA Power Limited - India
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Binh Thuan Hamico - Vietnam
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karbindo Abesyapradhi - Indoneisa
- LBH Netherlands Bv - Netherlands
- Power Finance Corporation Ltd., India
- Lanco Infratech Ltd - India
- Borneo Indobara - Indonesia
- Energy Development Corp, Philippines
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- Eastern Coal Council - USA
- Rio Tinto Coal - Australia
- Kumho Petrochemical, South Korea
- Sical Logistics Limited - India
- White Energy Company Limited
- Jindal Steel & Power Ltd - India
- European Bulk Services B.V. - Netherlands
- GAC Shipping (India) Pvt Ltd
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- GMR Energy Limited - India
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- Ambuja Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Finance - Indonesia
- Bhushan Steel Limited - India
- Globalindo Alam Lestari - Indonesia
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Commonwealth Bank - Australia
- SMG Consultants - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- McConnell Dowell - Australia
- MS Steel International - UAE
- Gujarat Sidhee Cement - India
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Riau Bara Harum - Indonesia
- New Zealand Coal & Carbon
- Georgia Ports Authority, United States
- Directorate Of Revenue Intelligence - India
- Uttam Galva Steels Limited - India
- Trasteel International SA, Italy
- Therma Luzon, Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Sindya Power Generating Company Private Ltd
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Altura Mining Limited, Indonesia
- Thiess Contractors Indonesia
- Indonesian Coal Mining Association
- Kaltim Prima Coal - Indonesia
- Orica Australia Pty. Ltd.
- PowerSource Philippines DevCo
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Bukit Baiduri Energy - Indonesia
- London Commodity Brokers - England
- Anglo American - United Kingdom
- Vedanta Resources Plc - India
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- PNOC Exploration Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Pipit Mutiara Jaya. PT, Indonesia
- Mercator Lines Limited - India
- The State Trading Corporation of India Ltd
- Planning Commission, India
- Formosa Plastics Group - Taiwan
- Star Paper Mills Limited - India
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- Malabar Cements Ltd - India
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