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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, 26 January 23
AUSTRALIA'S CORONADO GLOBAL SEES COAL PRICES RISING ON RESUMING CHINA IMPORTS - REUTERS
Australia’s Coronado Global Resources said on Tuesday resuming metallurgical coal imports to China would likely push sea-borne coal prices hi ...
Monday, 23 January 23
CHINA'S MAJOR COAL-PRODUCING PROVINCE ACCELERATES DIGITAL TRANSFORMATION - XINHUA
At Chindata Group’s big-data industrial park in Lingqiu County of Datong City, hundreds of thousands of servers are running round-the-clock t ...
Monday, 23 January 23
CHINA'S COAL-RICH PROVINCE SEES COAL PRODUCTION INCREASE IN 2022 - XINHUA
North China’s coal-rich province of Shanxi saw its coal production hit 1.31 billion tonnes in 2022, up 8.7 percent year on year, local author ...
Wednesday, 18 January 23
MARKET INSIGHT - INTERMODAL
From Feb 5, another price cap will be introduced to Russian fuels and oil products, adding to the one for crude oil, already in place from Dec. 3. ...
Tuesday, 17 January 23
FRAUD IS THE BIGGEST THREAT TO CARGO LOSSES - TT CLUB
The almost exclusive use of online facilities to process business transactions allows a myriad of fraudulent pursuits to find opportunities within ...
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- International Coal Ventures Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Australian Coal Association
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Price Waterhouse Coopers - Russia
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Intertek Mineral Services - Indonesia
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- European Bulk Services B.V. - Netherlands
- Attock Cement Pakistan Limited
- Anglo American - United Kingdom
- Videocon Industries ltd - India
- Neyveli Lignite Corporation Ltd, - India
- IEA Clean Coal Centre - UK
- SMC Global Power, Philippines
- Bukit Baiduri Energy - Indonesia
- Carbofer General Trading SA - India
- Meenaskhi Energy Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Mintek Dendrill Indonesia
- Mercuria Energy - Indonesia
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- Australian Commodity Traders Exchange
- MS Steel International - UAE
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Planning Commission, India
- New Zealand Coal & Carbon
- Dalmia Cement Bharat India
- Parry Sugars Refinery, India
- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- Thai Mozambique Logistica
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- Independent Power Producers Association of India
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Kalimantan Lumbung Energi - Indonesia
- Central Electricity Authority - India
- Eastern Energy - Thailand
- Jaiprakash Power Ventures ltd
- Minerals Council of Australia
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Edison Trading Spa - Italy
- London Commodity Brokers - England
- The State Trading Corporation of India Ltd
- Krishnapatnam Port Company Ltd. - India
- VISA Power Limited - India
- Global Coal Blending Company Limited - Australia
- Ministry of Transport, Egypt
- PTC India Limited - India
- Coastal Gujarat Power Limited - India
- Commonwealth Bank - Australia
- Kapuas Tunggal Persada - Indonesia
- Aboitiz Power Corporation - Philippines
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- Larsen & Toubro Limited - India
- Agrawal Coal Company - India
- Vizag Seaport Private Limited - India
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- Romanian Commodities Exchange
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- Latin American Coal - Colombia
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Africa Commodities Group - South Africa
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- Petron Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Gujarat Sidhee Cement - India
- The University of Queensland
- Madhucon Powers Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Star Paper Mills Limited - India
- Sical Logistics Limited - India
- Rio Tinto Coal - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Banpu Public Company Limited - Thailand
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Maheswari Brothers Coal Limited - India
- PowerSource Philippines DevCo
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- SMG Consultants - Indonesia
- Mjunction Services Limited - India
- Renaissance Capital - South Africa
- TeaM Sual Corporation - Philippines
- Uttam Galva Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sree Jayajothi Cements Limited - India
- Marubeni Corporation - India
- Bhatia International Limited - India
- Orica Australia Pty. Ltd.
- Pendopo Energi Batubara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Samtan Co., Ltd - South Korea
- Jindal Steel & Power Ltd - India
- Malabar Cements Ltd - India
- Ambuja Cements Ltd - India
- Georgia Ports Authority, United States
- Xindia Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Eastern Coal Council - USA
- Tamil Nadu electricity Board
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Merrill Lynch Commodities Europe
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- Savvy Resources Ltd - HongKong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- Bangladesh Power Developement Board
- Formosa Plastics Group - Taiwan
- Indian Energy Exchange, India
- The Treasury - Australian Government
- GAC Shipping (India) Pvt Ltd
- Altura Mining Limited, Indonesia
- Electricity Generating Authority of Thailand
- Orica Mining Services - Indonesia
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- Bayan Resources Tbk. - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sakthi Sugars Limited - India
- Ind-Barath Power Infra Limited - India
- Timah Investasi Mineral - Indoneisa
- Barasentosa Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- Global Green Power PLC Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- Standard Chartered Bank - UAE
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Binh Thuan Hamico - Vietnam
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